Corruption Risk for Multinationals in India

India’s government has been pushing economic growth by going after foreign investment, lowering barriers to doing business and addressing corruption. However, it will take time before a robust Indian enforcement regime is in place. Meanwhile the U.S. government’s global anti-corruption efforts, through enforcement of the Foreign Corrupt Practices Act, is filling the void. This summer, for example, a New Jersey based global construction management firm reached a settlement with the DOJ for paying bribes to government officials in the Indian state of Goa.

India has consistently been at or near the top of the charts for the number of whistleblower complaints globally. India enacted its own whistleblower statute, the Whistle Blowers Protection Act, in 2011, but unlike Dodd-Frank it applies only to reports about a public servant’s conduct, does not provide a monetary incentive, and has no anti-retaliation provisions.

U.S. regulators’ focus on India is across industry sectors, including manufacturing, infrastructure, energy and consulting. Penalties have ranged from a few hundred thousand dollars to more than $50 million. Companies, when faced with allegations of wrongdoing in India – specifically whistleblower complaints – should have a mechanism in place to hear grievances, acknowledge the complainant and assess allegations. Determine if there is a need for review conducted internally or by outside counsel. Outside counsel should have insight into government enforcement practice, local language capabilities, cultural familiarity and subject matter expertise to help make the very difficult self-disclosure decision.