Anti-bribery and anti-corruption policies in companies are critical, not just from the perspective of legal compliance, but also for ensuring publicity management. This is especially important for foreign companies looking to enter India, or who have recently set up their business in India, as the regulatory environment would naturally be more unfamiliar to their management. Even an accidental (and, on the face of it, apparently minor) non-compliance may have a negative impact on a company’s reputation (if allegations become public), in addition to the penal consequences.

 

In India, the law relating to corruption is broadly governed by the Prevention of Corruption Act (PCA).

 

Under the PCA, both giving and/or receiving any kind of ‘undue advantage’ are offences, punishable with imprisonment of a term of 3 to 7 years and/or fine.

 

'Undue advantage' is defined as any gratification (i.e., monetary, or non-monetary) other than the salary of a public servant.

 

The PCA also prescribes liability of commercial organizations which includes companies, firms, etc. for any non-compliance by its employee, agents, associated third parties or subsidiaries of such commercial organization.

 

If an employee bribes a public servant to obtain or retain an advantage in the conduct of business, then fine may be imposed on the commercial organization employing such employee.

 

However, the commercial organizations may prove that they have in place ‘adequate procedures’ in compliance of such guidelines as may be prescribed to prevent persons associated with it from undertaking such conduct and use it as a defence.

 

Further, if it is proven that the offence was committed with the consent or connivance of any director, manager, secretary, or any officer, then such employee may face imprisonment of up to 7 years and/or a fine.

 

To mitigate such risks, it is imperative for commercial organizations to conduct internal trainings on prevention of bribery and corruption, formulate clear and detailed policies and procedures.

 

In the subsequent paragraphs, we have briefly discussed the key considerations to be borne in mind while formulating an Anti-Bribery and Anti-Corruption Policy (“ABAC Policy”).

 

1.  The ABAC Policy should clearly define as to what constitutes bribery and corruption. 

 

Bribery is offering, giving, or receiving anything of value with the intention of inducing a person to act or to reward a person for having acted. The ABAC Policy should broadly define as to what constitutes bribery. The PCA also prohibits payment of any kind to facilitate a normal governmental function, such as to expedite processing paperwork, etc.

 

Although receiving and giving gifts is a common phenomenon, but such instances could also be perceived as acts of bribery or invite suspicion of bribery. Thus, there should be certain checks and balances on the gifts or hospitality extended by the company.

 

 

2.  The ABAC Policy should provide a whistleblowing mechanism for employees to raise concerns, if they come to know of any act of bribery or corruption within the organization, to the top management. 

 

The organisation should establish adequate mechanisms for employees and representatives to anonymously report concerns of any behaviour that raises suspicion of corruption to higher officials. The employees and representatives who report concerns in good faith, should be protected by a whistle-blower policy.

 

 

3:    Vendor due diligence and payment monitoring systems should be established.

 

Since many bribes are paid indirectly, via third party agents, including sales representatives, logistics agents, etc. it is essential to ensure that appropriate third-party monitoring systems are put in place, such as conducting a compliance due diligence at the time of on-boarding vendors, adequate indemnities and undertakings from vendors, instructing and sensitising employees and ensuring no facilitation fee etc are allowed to be accepted by employees etc.