Both houses of India’s parliament adopted amendments to the country’s main anti-corruption legislation that expand the definition of bribery and who’s subject to the law.
The Prevention of Corruption Act (Amendment) Bill 2018 was introduced in parliament five years ago and passed (pdf) on July 24.
The amendment is an important step for India towards criminalizing alternative forms of bribery (i.e. undue advantage, which may not be measurable in value) and bringing commercial organizations under the purview.
The provisions of the amendment also align to commitments of India for the United Nations Convention against Corruption and the G20 Anti-corruption working group.
Notable changes to existing law in the amendment include the following:
- Bribe givers are also made liable, and bribe givers also now include third party intermediaries involved in the process.
- Bribes exclude extortionate transactions where the bribe giver was forced to give the undue advantage.
- The definition of bribe is revised to include “Undue Advantage” instead of “Valuable thing.” This recognizes the need to explicitly bring out issues where there may be no measurable / valuable thing that is transferred to the public official.
- Commercial organizations are brought under the purview of the Act. Commercial organization and their representatives (managers/ directors) can be punished for awareness and involvement in an offense.
- Commercial organizations covered by the Act now include companies and partnerships. Bringing partnership under the enforcement / compliance umbrella is a big step because previously those business forms weren’t well regulated.
- Criminal misconduct for public officials can also emerge from indications of misappropriation of property or holding property which is disproportionate to the known source of income.
These amendments are welcome. They also raise some questions and concerns.
Enforcement. India has lagged in anti-corruption enforcement efforts compared to our Asian counterparts. While there are instances of corruption related prosecutions, the extensiveness of such efforts are yet to be seen.
Penalties. The size of potential penalties are a big driver towards compliance for commercial organizations. For example, compliance efforts across the globe for GDPR was due in large part to potential penalties of 4 percent of global revenues. In India, the amendment to Prevention of Corruption Act does not reflect potential penalties that would necessarily stimulate a high compliance rate.
Consistent multi-agency enforcement. India has traditionally faced the challenge of multi-agency regulatory efforts against corruption, which are not always unified or consistent. Aligning the efforts of regulatory agencies would strengthen potential enforcement efforts.
The amendment makes the commercial organization liable under the Act if people associated with the organization give or promise to give any undue advantage for obtaining or retaining business or for an advantage during the course of the business.
Such liability is applicable even in instances where the primary offense of giving or promising to give undue advantage is alleged and not prosecuted.
Commercial organizations can have a defense provided they are able to demonstrate that they had in place adequate procedures and processes for compliance to prevent such conduct. Specific expectations for adequate procedures aren’t set out at this point and may evolve over time.
But taking cues about compliance from the DOJ’s FCPA Guidance and the UK Bribery Act, commercial organizations in India should create a framework for domestic anti-corruption compliance that includes at a minimum policies and procedures, due diligence, feedback channels, and stakeholder training, among other things.
Sundar Narayanan, pictured above, is a forensic accountant based in India. He currently leads the forensic services of SKP Business Consulting LLP. He can be reached at [email protected].
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