India and the Foreign Corrupt Practices Act
For companies eager to do business in India, compliance with the Foreign Corrupt Practices Act (FCPA) is an increasingly urgent priority as regulators around the world step up enforcement efforts. The FCPA prohibits making, and offering to make, payments to foreign public officials, including members of political parties, to further business interests. It also requires that accurate books and records be kept for all transactions. The importance of mounting an effective offensive against FCPA fraud when operating in corruption-prone countries, such as India, is highlighted in a recent article by the Deloitte Forensic Center. Edition 10 of ForThoughts discusses the increasingly tough stance of regulators around the world in regard to the FCPA and the particular vulnerability to violations for companies operating in India. The article also describes several steps companies can take to implement strong compliance programs, including:
- Conducting due diligence
- Establishing strong internal audit functions
- Implementing strong training and education programs
- Delineating clear and concise FCPA policies and procedures
As a prerequisite for early detection and prevention, the article stresses that multinational companies may want to make sure they fully understand the FCPA and its ramifications before expanding into India.
"It can be crucial to determine the pre-existence of any FCPA violations since parent entities can be held responsible for the actions of their subsidiaries – even if the subsidiary has gone to great lengths to conceal the illegal activity and the parent company is unaware of the activity, or the behavior occurred prior to a partnership or merger,” says Kerry Francis, partner and chairman of the board at Deloitte Financial Advisory Services LLP.
Adding to the pressure for FCPA vigilance is the fact that there is no threshold for the dollar amount of infractions, and even small bribes can result in big penalties, especially if FCPA problems are systemic.
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