Operational will over time minimize the likelihood of


In a
survey of International Attitudes to Corruption 2013 conducted by Control Risks,
76 per cent of Indian businesses think of request for operational bribes as one
of their two “significant concerns”. This shows the difficulty in getting work done
in the Indian market. Operational bribes are normally facilitation payments or small
bribes linked with supporting the smooth running of the business. Examples comprise
demands by tax investigators and handling brokers, officials processing licence
requests, offers by customs officers to accelerate the clearance of goods via customs,
and police officers frightening false fines. These payments many a times carry
the implicit concerns that non-payment may effect in difficulties for the

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attitudes to facilitation payments are revising, with companies going under growing
inspection from the UK Bribery Act, the US Corrupt Practices Act (FCPA), and
Australia’s anti-bribery regulation. While facilitation remittance may not be a
crime in some jurisdictions, there is an expanding crackdown on such actions.
India also has an program of legislative reform for corruption and bribery
which comprises the Companies Act (2013) which will force higher level of
corporate governance. In addition there is the pending Prevention of Corruption
(Amendment) Bill 2013 which will make it simple to convict companies paying
bribes, as well as the receiver of the bribes.

need to have a comprehensive policy to tackle this matter. Companies also need
to add clauses in contracts with consultants and subcontractors expressing that
they will not pay bribes for the organisation. But this can be hard. Expert guidance
from specialists such as customs house representative may be part of the solution,
as long as these do not work as bribe-paying outsiders.

As per the
report published by Control Risks on “International Business Attitudes to
Corruption: Focus on India – Survey 2013”, organisations may have to accept
delays – instead of bribes – as an expense for the business, expecting that launching
a policy of resistance will over time minimize the likelihood of demands for
bribes. Resisting such ‘systemic’ bribery demands will be possible according to
the report of The Control Risks.

to commercial agents and other intermediaries

organizations are educated on entering the Indian market that services of private
agent will be needed and 10 per cent is expected to be paid of the agreement value.
This remains a barrier, mainly for companies that may be running with a sizable
amount of outsiders across various parts of the business. There is no definite rule
to determine what level of commission is suitable. The key question to focus is
whether the payment is appropriate for the kind of services provided. For
example, a commission of 10 per cent is likely to be considered excessive on a huge
multi-million-dollar contract.

sure that the company has robust due diligence process in place for all outsiders
it works with, benchmark clauses related to anti-bribery in all contracts and
regular reviewing of relationships to ensure compliance are some of the strategies
which can be used to reduce the risk in this area.

The risk
of being asked directly for a bribe to get business has reduced in India thanks
to some big corruption prosecutions. Companies do need to be familiarized with more
subtle variations of bribery comprising being demanded to make a charitable
donation to a particular cause or sponsor a particular activity assisted by the
decision maker granting a contract. To make sure high standards of corporate
governance are maintained, the company needs at least to ensure that all
sponsorships and donations are made public and that the receivers have a valid social
purpose and publish their accounts. There should be no expectation of future
business resulting from the sponsorship or donation.

of legal issues

In those authorities
where there is an evidence of bribery within the legal system in order to impact
the result of commercial disputes companies are suggested to address this issue
upfront in their legal contracts. By mentioning an external court of
arbitration in agreements and contracts, companies can reduce the legal risks
involved. There is no need for Companies to be aware that decision of legal matters
in India can take time and think of arbitration external to the court system as
an option.

is better than cure

to Control Risks 2013 Survey, only 27 per cent of companies have anti-corruption
training for all. Comprehensive policies on corruption and bribery need to be strengthened
through regular training for all staff. Also, staff working in risky areas such
as senior management and sales need to have more exhaustive training which
outlines specific situations and how to tackle them. The relevance of training
should be reinforced from the top down so all employees understand the criticalness
with which corruption and bribery issues are addressed by the company.

whistle-blower mechanism which permits staff to confidentially raise issues about
corruption and bribery is another important tool that can be used by companies
to help stop problems before they occur.


Indian Government initiatives to help
combat bribery and corruption

of money laundering

Various Indian
Governments have publicized the Prevention of Central Vigilance Act, 2003,
Money Laundering Act, 2002, Right to Information Act, 2005, etc. as a discouragement
to persons who may       plan to involve in
acts of bribery. The Prevention of Money Laundering Act, 2002 applies to all
persons and may result to prosecution under the Indian Penal Code, 1860. Other
than these central legislations, different States Legislatures have formed
anti-corruption ombudsman organisations, known as Uplokayukts and Lokayukts,
for examination of administrative activities taken by or on behalf of the state
governments or some local and public authorities.

Supreme Court of India

highest judicial forum of India is Supreme Court of India. The Supreme Court is
the protector of the Constitution of India and the federal court.

The Second
Generation (2G) telecom spectrum case is a sample of the Supreme Court of
India’s part in minimizing the corruption in India.

The case
involved the Government using a ‘first come first served’ method, instead of a
competitive tender. This method resulted grants to successful companies worth billions
of dollars and resulted in charges of fraud and corruption against the minister
and other officials.

Supreme Court struck down all licences issued under this regulation and held
that an auction/competitive tender structure is the best practice for the state
to adopt when distributing public or natural resources. As a result of the abandoning
of licenses, big Indian corporates and their foreign JV partners have incurred huge

The result
has sent a strong message to foreign investors related to legal environment in
India and should lead to greater degree of probity in the coming years.

Central Bureau of Investigation

The foremost
investigating police agency in India is The Central Bureau of Investigation
(CBI). The CBI plays an important role in the prevention of corruption.

Anti-Corruption Division of the CBI has worked on cases against ministers,
chief ministers, secretaries to government, senior executives of banks,
officers of the All India services, financial institutions and public sector
undertakings in various cases of corruption.

CBI also works
cases of corruption and fraud perpetrated by public servants of all Central
Public Sector Undertakings, Central Government Departments and Central
Financial Institutions. The Supreme Court of India and different High Courts
have been managing the CBI to investigate into several corrupt practices. The
Supreme Court of India has recently directed the CBI to investigate issues such
as the coal tenement allocation and the Commonwealth Games project financing
and has been observing the development of these high profile cases on a regular

legislative initiatives

In 2011,
after India signed the United Nations Convention against Corruption, the Indian
Government moved to execute a strong anti-corruption legal framework. This included
the introduction of a series of new bills, comprising (i) the Public
Procurement Bill 2012, (ii) the Prevention of Bribery of Foreign Public
Officials and Officials of Public International Organisations Bill, 2011, (iii)
the Whistle Blowers Protection Bill 2011 and (iv) Lok Pal Bill 2012 as well as
the minor changes to existing laws to add bribery in the private sector as a
punishable offence.


International developed a tool called The Integrity Pact (IP) to support businesses,
governments and civil society to fight corruption in the field of public dealings.
IP initiates mutual contractual rights and obligations to mitigate the high
cost and distortionary effects of corruption in public contracting.

Indian government authorities at Centre and the State level have to embrace the
IP recommended by Transparency International while engaging with private
parties. IP is also embraced and suggested by the Central Vigilance Commission.
It is assumed that approximately 50 central Public Sector Undertakings (PSUs)
have selected the IP in their procurement procedure. IP has formed a mechanism
to bring in transparency to remove corruption in public contracting in future.
Companies which are planning to commence business in India can use IP to recognize
projects and partners which are obeying with its standards as one risk
mitigation strategy.



to mitigate risk for companies

Companies planning
to do business in India might want to examine the techniques used by
international companies in the market to reduce their risk. These include:

Setting the tone from the top. Company
management leads by example; by placing and actively encouraging a “zero
tolerance policy”.

Choosing comprehensive strategies and techniques
that set out the conduct anticipated from employees and outsider contractors.
The strategies should recommend escalation procedures, expenses, conflicts of
interest, gifts and hospitality, utilization of outsiders to gain business,
monitoring, whistle-blowing and analyze procedure and disciplinary sanctions
for any violation.

Presents and courtesy standards frequently
pose difficulties due to different cultural practices. In India business courtesy
and presents are widely accepted and even anticipated. Company strategies need
to explain the policy, create an approval procedure and the limits allowed to presents,
recreation, hospitality and travel. There should be procedures in place to monitor
all presents, recreation, hospitality and travel by employee and/or client.

Creation of a procedure for employees that
explains and stops facilitation payments.

Strengthening the procedures via
systematic training and transmission.

Drafting and executing strong financial
controls with requisite checks and balances by various stakeholders comprising compliance
or legal teams. Such structure should tackle dealings in cash and control political
and humanitarian donations.

Managing periodic risk evaluation.
Compliance instabilities should form an fundamental part of such assessment.
The risk evaluation should notify the growth of monitoring schemes, strategies and
procedures, training and running processes.

Managing a gap evaluation of current policies
compared with relevant legislation, laws and advise and make required improvements.

Initiating a whistleblowers mechanism
whereby employees can make confidential reports on issues related to bribery
and corruption.

Minimizing reliance on outsider
contractors and assuring that standard clauses related to the payment of bribes
are mentioned in all contracts. All outsiders should be reviewed regularly, subject
to thorough due diligence.

Assuring thorough due diligence is conducted
on all joint venture partners before any relationship is established.

Have an rational system in place for examining
suspicious acts of bribery and corruption by employees. This might comprise instructions
on information collection, assuring all required documents and electronic data
are maintained, self-reporting and termination procedures.