FCPA Due Diligence is becoming increasingly important in light of growing enforcement. Walmart divorced Bharti over violations of the Foreign Corrupt Practices Act. The American multinational retail firm paid millions of dollars in bribes in India, mostly in the form of numerous small payments to low-level local officials to “help move goods through customs or obtain real-estate permits. This was one of the many notable incidences in India.
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 crores) in India to win a water and sewerage consultancy project which was executed
FCPA investigations are extending beyond the American Borders and have reached Indian shores. Oracle is not the only company to settle the case with SEC. There were many other companies that settled the cases with SEC for bribing Indian Government officials.
For the FCPA consultants, it has become a big challenge to investigate FCPA violations in India.
A key element of FCPA due diligence is the effective screening of all parties involved in overseas business activities. The Department of Justice has outlined some “red flags” to assist parties in conducting due diligence. These red flags are indicators that may suggest the potential for corrupt activities or violations of the FCPA.
By identifying these red flags during the screening process, companies can mitigate risks associated with potential FCPA violations and avoid being involved in corrupt activities. Some examples of these red flags include a history of corruption in the country, unusual payment patterns or financial arrangements, and unusually high commissions. Companies conducting overseas business activities should be aware of these red flags and take them into consideration when conducting their due diligence.
Unusual payment patterns or financial arrangements
In India, an unusual trend was observed in the corruption scandal of the commonwealth games. The sports equipment which could have been bought at Rs.100 was rented from a 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.
To know more about how Riskpro can help the companies in terms of FCPA Investigations, FCPA Compliance or FCPA Due Diligence please write to us on contactus@riskpro.co.in or call us on +91-9766594401