FCPA Due Diligence is becoming important in the wake of growing enforcement. Walmart divorced Bharti over the foreign corrupt practices act. American Multinational Retail Firm – Walmart paid millions of dollars of bribe in India mostly in the form of innumerable small payments to low-level local officials to “help move goods through customs or obtain real-estate permits.”
Oracle Corporation agreed to pay a $2 million civil penalty to the SEC to settle FCPA charges arising from a slush fund in India used to pay bribes.
New Jersey-based Louis Berger, which in a US court in July this year, admitted to paying bribes of around USD 976,000 (Rs. 6.3 crore) in India to win a water and sewerage consultancy project which was executed
FCPA investigations are extending beyond the American Borders and have reached the Indian shores. Oracle is not the only company to settle the case with SEC. There were many other companies which settled the cases with SEC for bribing Indian Government officials.
For the FCPA consultants it has become a big challenge to investigate the FCPA violations in India.
A key element of the FCPA due diligence is effective screening of all parties related to overseas business activities. To assist the parties in due diligence, Department of Justice has outlined some “red flags”.
A history of corruption in the country
India ranks low on the rankings and the recent media breakouts show that the corruption is rampant in India. Corruption in India dates back to 1948 when Independent India’s first corruption scam broke.
Unusual payment patterns or financial arrangements
In India unusual trend was observed in the corruption scandal of commonwealth games. The sports equipments which could have been bought at Rs.100 were rented from few companies for Rs.110.
Unusually high commissions
The FCPA prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a government official. Foreign companies ask for the intermediaries to conduct the sales to Government. In India, having a sole proprietor distributorship helps the companies as the person involved in paying the bribes often fails to maintain the records.
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