In April of 2019, the Department of Justice ("DOJ") released a Guidance Document1("Document") aimed at highlighting certain key factors for prosecutors to consider while conducting an investigation of a corporation, determining whether to bring charges, and negotiating pleas or other agreements. The key takeaway from this document appears to be that a 'one-size-fits-all' approach doesn't work with respect to enforcing the Foreign Corrupt Practices Act ("FCPA"). We have captured below some important issues that Indian businesses would do well to not lose sight of:
1 Necessity of a well-designed Corporate Compliance Program
Compliance programs need to not only contain a clear message that misconduct and breaches are not tolerated, but also ensure that the program is integrated substantively into the operations and workforce. Depending on the sector that a corporation is in, it is necessary to spend sufficient time deciphering the company's risk profile and areas that comprise its 'weak spots'. For instance, if a large amount of a corporation's business depends on government tenders, then its sales and bid representatives not only need to be given clear and unambiguous instructions, but the company also needs to have a program that their representatives can understand and feel comfortable with. While most Indian multi-national companies ("MNCs") do possess detailed compliance programs, the Document also stresses upon the importance of regular training sessions. Food for thought in this context would be that perhaps MNCs need to seriously start considering translating these programs into one or more regional languages.
Compliance programs also need to constantly evolve in order to accommodate new risks. If the compliance program is not dynamic and evolving, it loses relevance swiftly, thereby exposing the business to undue and unexpected risks at all levels.
Implementation of the Compliance Program
The success of any compliance program is whether its implementation is effective. A business may well have a seemingly impressive program but if nobody abides by it, there is no actual value that the program brings. This therefore means that an Indian company's duty does not automatically come to an end once the compliance manual has been rolled out – in fact, it is far from it. A key thing to remember in the context of India is that employees need to understand and see for themselves their employer's commitment to its anti-bribery and anti-corruption practices. This can only be achieved in India if it is apparent that the senior and middle management representatives visibly prove their dedication and allegiance to the program. Employers for their part have to also conclusively establish that irrespective of the seniority of the employee(s), no transgression will be accepted in any manner whatsoever and that any action taken would be without regard to the designation or 'value' of the employee in question.
3 Who holds the reins?
While the internal legal team or a compliance group may well be the custodian of the corporate compliance program, far too often we see in Indian businesses that the rest of the organisation does not feel accountable enough for ensuring that the compliance program is adhered to. In our experience, we have seen that, typically, in organizations where a large part of the organisation outside the legal and compliance groups do not take enough ownership, such organisations are more often than not exposed to significant risks as the compliance structure becomes academic and consequently simply falls apart.
Effectiveness of the Compliance Program
The last factor that prosecutors will take into consideration is the effectiveness of the program at the time of the offence, as well as at the time of the charging decision. This entails that Indian businesses must ensure that frequent internal audits take place and that investigations have been property scoped, conducted and documented. Moreover, the company's response to such internal investigations has to focus on the root cause of the misconduct, the system vulnerabilities and accountability lapses. Even if misconduct occurs, prosecutors generally keep an eye out for any remedial steps that the company has taken, including what disciplinary measures have been meted out to employees responsible for misconduct, and any other additional steps that demonstrate recognition of the seriousness of the misconduct.
While most Indian MNCs already have compliance programs in place, a lot more is required to be done to ensure that such programs are truly effective. Compliance programs in Indian businesses not only need to have more teeth, they also need to be the conscience that guides the company and its employees on the ways and manner to do business with all parties and across all sectors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.