presentation_corruption risks in india
TRANSCRIPT
Managing Corruption and Bribery Risks in India
Jasmeet Wadehra General Counsel International Paper – India
Introduction
Doing business in India
Corruption in India
Anti-corruption laws in India
Trends in enforcement (India & abroad)
Channels to seek redress
Practical tips to deal with bribery demands
New Delhi
“We owe a lot to the Indians, who taught us how to count, without which no worthwhile
scientific discovery could have been made.”
……… Albert Einstein
Fact File:
• Second largest population (1.27 b growing @1.28%)
• 7th largest by area (3.28 m square km)
• World’s largest democracy with stable political
establishment
• Highest growth rate projected in FY’16 by IMF
• USD 338 b foreign exchange reserves
• USD 2 trillion economy – third largest in PPP terms
0 50 100 150 200
2009
2010
2011
2012
2013
2014
Countries
Ranking
Source: Corruption Perception Index of Transparency International
1948 – V K Krishna Menon in Jeep scandal (USD 130K)
1956 – BHU misappropriation (USD 80K)
1958 – Mundhra scandal (USD 190K)
1960 – Teja Loan scandal (USD 3.6 m)
1987 – Bofors (USD 10.3 m)
1992 – Harshad Mehta (USD 887 m)
2001 – Telgi Stamp Paper scam (USD 3.23 b)
2010 – 2G (USD 28.4 b)
2012 – Coal Mining scam (USD 173 b)
…………………… And it goes on
Demographic dividend (50% + population < 25 yrs)
Young country with a median age of 30 years by 2025
Total labor force of nearly 530 million (cost competitive)
Working age group (15-59) likely to increase to 64% of population by 2021
Large skilled manpower – strong knowledge base and English speaking population
India's economy will grow fivefold in the next 20 years (McKinsey)
Economic liberalization and globalization since 1991
Foreign investment in FY15 expected to cross USD 60 b
India ranks 142 out of 189 countries on World Bank’s Ease of Doing Business Index
British legacy – Indian bureaucracy
License raj
Overregulation
Judicial delays and lack of enforcement
Cultural dimensions
Indian Penal Code, 1860
Prevention of Corruption Act, 1988
The Benami Transactions (Prohibition) Act, 1988
Income Tax Act, 1961
Prevention of Money Laundering Act, 2002
The Lokpal and Lokayuktas act, 2013
India has signed Mutual Legal Assistance Treaties in Criminal Matters
with 34 countries, is a member of the Interpol, has Extradition Treaties
with 37 countries and Extradition Arrangements with 8 countries
India ratified UN Convention Against Corruption on May 1, 2011
(signed Dec 9, 2005). Under UN convention, Prevention of Bribery of
Foreign Public Officials and Officials Of Public International
Organisations bill, 2011 was introduced in Lok Sabha
Public Interest Disclosure and Protection to Persons Making the
Disclosure bill, 2010 (whistleblower protection law) passed by Lok
Sabha in Dec 2011 pending in Rajya Sabha
Possibly on the cards .. Private sector anti-corruption law
Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015
Public Procurement Bill, 2012
Indian Penal Code (Amendment) Bill, 2011
Right of Citizens for Time bound Delivery of Goods and Services and
Redressal of their Grievances Bill, 2011
Electronic Delivery of Services Bill, 2011
Judicial Standards and Accountability Bill
Broad definition of “fraud” as a criminal offence
Serious Fraud Investigation Office (SFIO) empowered to investigate and make arrests (can involve other prosecuting agencies such as Income Tax)
Auditors to report fraud directly to SFIO
Imprisonment – 6 months to 10 years
Disgorgement and fines upto 3 times
Independent directors also made liable
Whistleblower/Vigil mechanism mandatory
Increasing enforcement actions overseas :
• Electronic Data Systems Corp (2007)
• Dow Chemical (2007)
• Westinghouse Air Brake Technologies (2008)
• Control Components (2009)
• Pride International Inc. (2010)
• Diageo plc (2011)
• Oracle Corporation (2012)
• Tyco (2012)
• Walmart’s Internal Investigation (2012 – 14)
• Anheuser-Busch InBev NV Internal Investigation (2013-present)
• Finmeccanica (Augusta Westland) Investigation (2013-present)
• Sony Corp leaked memo (2014-15)
Frank – Dodd Act Whistleblower tips received from India in 2014 –
69 out of 446 (most after 70 from UK)
Right to Information Act 2005
Escalation channels:
• Police/Central Bureau of Investigation
• Vigilance department of SOEs
• Central Vigilance Commission
• Private party criminal complaint
Set right (internal) expectations on licenses/ permits
Statutory Compliance Management : Pull up socks
Use ‘deemed approval’ routes
Use electronic filing options (where permitted)
Choose states to do business in (not always a choice) – single
window clearance system
Strong ethics and compliance program
Q & A