According to the news on FCPA media site fcpablog.com, Oracle Corporation agreed to pay a $2 million civil penalty to the SEC to settle FCPA charges arising from a slush fund in India used to pay bribes.
FCPA investigations are extending beyond the American Borders and have reached the Indian shores. Oracle is not the first company to settle the case with SEC. For the FCPA consultants it has become a big challenge to investigate the FCPA violations in India.
A key element of the FCPA due diligence is effective screening of all parties related to overseas business activities. To assist the parties in due diligence, Department of Justice has outlined some “red flags”. I am endevouring to elaborate the same based on Riskpro’s experience in assisting the FCPA investigations across the globe.
- A history of corruption in the country – India ranks low on the rankings and the recent media breakouts show that the corruption is rampant in India. Corruption in India dates back to 1948 when Independent India’s first corruption scam broke.
- Unusual payment patterns or financial arrangements – In India unusual trend was observed in the corruption scandal of commonwealth games. The sports equipments which could have been bought at Rs.100 were rented from few companies for Rs.110.
- Unusually high commissions – The FCPA prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a government official. Foreign companies ask for the intermediaries to conduct the sales to Government. In India, having a sole proprietor distributorship helps the companies as the person involved in paying the bribes often fails to maintain the records.