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Managing Risk | Maximising Opportunity
GREY PRACTICES:FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
TABLE OF CONTENTSFOREWORD 1
INTRODUCTION 2
GREY PRACTICES 3
Shell companies 3Opaque ownership and management structures 4Benami (no-name) transactions 4Offshore entities 5Cash generation schemes 7
WHAT DOES THIS ALL MEAN? 9
Going from grey to black 9A changing regulatory context 10
PREVENTION STRATEGIES 11
Prevention is the best cure 11Time to get proactive 13
CONCLUSION 14
THE TERMINOLOGY OF CORRUPTION IN INDIA 15
AUTHORS 17
1GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
GREY PRACTICES: FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
FOREWORD
It is widely acknowledged that India is an extremely complex market in which to operate – a commercial landscape littered with legal, regulatory and reputational obstacles that is not for the faint-hearted. Navigating this environment and the risks involved can be a Sisyphean task, but for those with the courage and integrity to persevere, the rewards can be impressive.
Control Risks has been assisting our clients to manage such risks in India for upwards of two decades, and our experience and understanding of the local operating environment is second to none. In an effort to share some of the insight we have gained over this time, our experts have developed this white paper to address the thorny issue of so-called ‘grey practices’ in India, which are increasingly causing problems for both domestic and international companies, as well as attracting the scrutiny of foreign regulators.
As our paper outlines, there are two distinct forms of corporate malpractice in India: those that are clearly illegal (the black practices) and those that are less clear-cut and fall into a grey area where legality is ill-defined (though integrity and morality are often not). These grey practices are the schemes – often highly innovative in themselves – that in turn tend to fuel fraud and corruption on a far grander scale that can pose serious legal, commercial and reputational risks to companies that are not alert to the dangers.
With the enforcement of both domestic and extra-territorial legislation against corruption and financial crime only expected to increase, few companies can afford to overlook this issue any longer. This paper will help organisations to understand the threat from grey practices in India, and also how to go about developing resistance strategies to mitigate those threats and ensure the success of their commercial operations. It is essential reading for legal counsels, compliance officers and risk managers, but also recommended reading for almost everybody else who is looking to operate successfully and ethically in India.
James McAlpine, Managing Director Control Risks India & South Asia
2 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
INTRODUCTION
Ten years ago, discussion of regulatory compliance was largely confined
to the board rooms of US law firms and a handful of international
companies, but the landscape of the modern business world has
changed. Today, companies from all corners of the world need to
respond to tighter regulations and more proactive law enforcement if
they are to attract international investment, engage in joint ventures or
invest in an overseas market.
India is an exciting but challenging place to do business. Big rewards
can await those who have the patience, dexterity and tenacity to
navigate one of the world’s most vibrant and aspirational markets. But
equally, big pitfalls exist for those who underestimate the complexities
of operating across India’s vast, varied and still largely-untapped
landscape. This applies not only to uncertain first-time investors, but
also to experienced foreign and domestic companies that are well-
used to doing business in the country.
Many foreign and Indian companies make the mistake of thinking that
they can adopt a uniform strategy for their operations across the
country. This tends not to work in India, a vast and varied country of
1.2 billion people where if Uttar Pradesh, a northern Indian state the
size of Michigan, declared independence it would be the fifth-most
populous nation on earth, with more people than Brazil. Social,
cultural, linguistic and family bonds vary from state to state, making
India no more a single investment destination than the European
Union might be to a Japanese or US executive. Add religious, caste
and tribal differences to the mix and it starts to become apparent why
India can stimulate but perplex in equal measure.
Setting up a business in the pro-investment, low red-tape state of
Gujarat is poles apart from doing the same in India’s “red corridor”, a
swathe of territory in mineral-rich central and eastern India, where
Maoist militant groups (locally known as “Naxalites”) regularly demand
extortion payments from companies. That said, the states of Bihar,
Chhattisgarh, Odisha and Madhya Pradesh may exist well beyond the
commercial hinterland of south and west India, but for those CEOs
with a healthy risk appetite they present new market opportunities
where many of their peers are yet to venture.
Unlike in many other emerging economies, there is no power vertical
running from top to bottom in India, where many states are run by
regional parties. India’s pluralistic political system only looks set to
evolve as the landscape becomes increasingly fragmented, with
more parties creating a political culture often driven by state or
local-based issues. India’s decentralised and often chaotic politics
also allows, if not encourages, a close nexus between big business
and the political elite.
The decentralised and regional basis of Indian politics means that
local personalities and political dynasties very often tend to dominate
at a state level, making it harder for foreign and Indian companies to
unpick the informal networks of politicians and bureaucrats who
ultimately call the shots, many of whom have business interests in
the region themselves. This can result, for example, in state-level
politicians mounting spurious complaints (often based on trumped
up environmental or tax violations) against an “outside” company if
it is competing with his or her often barely-concealed interest. Highly
coordinated, behind-the-scenes lobbying also enables big business
groups to manipulate, shape and influence laws to suit their
interests. This helps – across many sectors – to create an
uncompetitive commercial landscape that advantages those
companies with the biggest muscles to flex and, in turn, encourages
those with less clout to bend the rules in order to try to compete.
This begins to make the risk-reward equation look more troubling.
The underlying strengths of the Indian economy – growth,
innovation and huge human capital potential – transcend state
borders and, despite its apparent plurality, India’s boisterous
political system does hold together one of the most diverse
democracies in the world.
Above all, there is a common culture in India that believes that anything
is possible and, by hook or by crook, can be achieved. The improvisation
at the heart of this reveals itself in India’s seemingly endless capacity to
make healthcare, education and consumer products affordable to
millions of people. Jugaad, a Hindi-Urdu word with no literal translation,
captures this concept of creative innovation for a quick and affordable
solution. Similarly, chalta hai, another Hindi phrase frequently heard on
the streets of India, denotes the belief that “anything goes”. Jugaad has
in many ways been India’s enabler, but for all its positive repercussions
there are also negative implications. It is jugaad that also justifies
circumventing the rules for a quick or profitable outcome, and ultimately
fuels and supports opaque business practices.
Corporate malpractice exists in two distinct forms in India: the
easily recognisable and clearly illegal practices and the more
ambiguous, hard to identify grey practices, which sometimes exist
simply to help a company or individual “get the job done” or indeed
survive in a tough economic environment. However, over time many
of these practices have increasingly turned from grey to black,
concealing serious and illegal acts that can pose significant
reputational and regulatory risks for companies operating in India’s
opaque business environment.
Grey practices are the schemes that thrive on this opacity, fuelling
much of the fraud and embezzlement that exists in the Indian business
environment. Grey practices are common to many markets, but their
ubiquity in India is testament to an opaque business and political
environment, and a culture of creative improvisation that can actually
make life more not less difficult for companies.
3GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
GREY PRACTICES
Ironically, it was India’s culture of excessive red tape and
bureaucratic hurdles, colloquially known as the “licence Raj”, that
helped to create the conditions in which grey practices have
flourished. The robust and time-consuming system of approvals
originally designed to keep malpractice in check have, in many
ways, only encouraged businesses to circumvent the rules and
exploit loopholes. As with any system that does not work as
intended, people look for ways to get round it. Couple this with
weak implementation of law and a complex and often inadequate
regulatory context, and you have a challenging business
environment.
A challenging legal context
India’s legal system is generally seen as fair, particularly in the
higher courts; however court cases can still be lengthy,
dragging on for years, partly due to the sheer volume of
litigation and partly a result of corruptible individuals willing to
be incentivised to find in favour of a particular party, or indeed
delay the proceedings in the hope that the case will never be
heard. It is often only the wealthy and well-connected who are
able to fast-track the proceedings and, as such, it has been
argued, the threat of legal repercussions does not serve as
much of a deterrent to those engaging in low or mid-level grey
practices as it might.
Grey practices are particularly prevalent in companies interfacing
with government officials, whether they are collecting stock from
customs, moving goods over state borders, or applying for a
licence or a permit. The use of brokers or “local fixers” to navigate
onerous red tape and expedite the often lengthy delays experienced
at India’s ports is particularly troublesome for companies, especially
for those who turn a blind eye to the grey practices that these
brokers are often engaged in on their behalf. Not least because the
US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act
(UKBA) make no distinction between a company paying a bribe
directly or via an intermediary.
Getting to know your partners
In recent years several high-profile companies have come
under scrutiny from both domestic and international regulatory
bodies for misuse of local intermediaries or “middlemen” in
India. This includes Rolls Royce, which in early 2014 became
the subject of Central Bureau of Investigation (CBI) enquiries
into its use of middlemen to secure lucrative deals with a state-
owned aviation company, Hindustan Aeronautics Ltd., an illegal
practice in the defence sector. This underlines the need for
companies to obtain a comprehensive, sector-specific
understanding of local and international guidelines when
conducting business in India, not least because the use of such
intermediaries can be the default setting for simply “getting
things done” in the country.
Ultimately grey practices are adopted by an individual to gain
advantage by deceiving a regulator, commercial partner, or even his
or her own company. While they may not always be illegal in their
own right, many are designed to conceal or enable illegal activities
that ultimately grease the wheels of corruption, perhaps the single
biggest topic dominating India’s national agenda. The following
sections will now examine some of these specific grey practices in
closer detail.
Shell companies
Shell companies can be manipulated to hide commercial wrongdoing,
obscuring the link between the beneficiary and the actual fraud. They
come in many guises and flourish in markets such as India where it
is not mandatory for some categories of company to register with the
authorities. Many simply exist as money-routing vehicles, with no
physical address or employees to their name; their official existence
amounts to a single signature – often fake – on a legal document
somewhere but can enable the beneficiary to evade tax, commit
fraud or manipulate a tender.
The ability to detect a shell company is therefore crucial for
compliance and legal officers and business development heads
seeking to win new deals. Warning signs can be straightforward to
identify – basic media research, examination of corporate filings,
site visits and discreet enquiries for example can help answer the
following types of questions:
• Is the company using a legitimate address?
• Is the company registered at a residential rather than business address?
• Have stolen identities been used to register the company?
• Does the company lack contact details and a website?
• Does the company have any employees?
• Is it a partnership or proprietorship company?
Ultimately grey practices are adopted by an individual
to gain advantage by deceiving a regulator, commercial
partner, or even his or her own company.
4 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
Answering in the affirmative to some of these questions is not
necessarily proof of wrongdoing, but it can indicate wider
malpractice. For example, registering a company as a partnership
or proprietorship in India does not necessarily denote unethical
practice – unlike private and publicly limited companies, partnership
or proprietorship firms do not have to register with the Ministry of
Corporate Affairs (MCA), India’s ministry responsible for regulating
enterprises. Instead, they are only required to register with the
Registrar of Firms which holds limited, incomplete and often
unreliable information. Unlike other categories of company, they are
also not required to submit annual returns, balance sheets or
shareholding information. However, the innate opacity associated
with such a category of company can be easily manipulated to
conceal political or criminal ownership, or be used to mask activities
that would otherwise be brought to light if it were formally registered
with the MCA.
Asking the above kinds of questions as part of an overall risk
assessment (as outlined in ‘Prevention strategies’) therefore is a first
step in helping a company to spot a potential grey practice scheme
that could have much more serious implications.
Manipulating tenders
One common use of shell companies is to manipulate tender
bids. In this scenario, several shell companies are set up to
participate in a tender, in which only one company is real.
Colluding with an employee, the management or promoters of
the tendering company, the individual will ensure the bids of the
shell companies are deliberately higher, guaranteeing the real
company wins the contract.
Opaque ownership and management structures
Indian companies are often family owned and managed, with the first-
and second-generation owners still active in the company; these are
locally known as “promoter-driven companies” in which the beneficial
owner is also the ultimate decision maker. Some have professional
management teams in place; others openly retain operational control;
and some – including many of India’s largest conglomerates –
maintain the pretence of professional management but are in reality
still controlled by family members (these are colloquially known as
“lala companies”).
Another legally accepted concept in India is that of the Hindu
Undivided Family (HUF), a legal entity formed under the leadership of
the family patriarch to manage jointly-owned family assets. Originally
intended to facilitate inheritance and provide financial security to
family members, HUFs are now often used by promoters or individuals
or businesses to hide assets and money. The HUF records are not
disclosed and thus it is relatively easy to hide money in the accounts
of an HUF and transfer them outside India. We have come across
multiple cases where this method has been used to siphon money
from international investors and joint venture partners.
Family ownership can make getting to know these companies a
long drawn-out process. It can also lead to personality-driven
decisions, where key family interests are involved in crucial questions
relating to strategy, as well as the utilisation and tapping of company
funds. When disputes arise, it can also result in large amounts of
intractable law suits that only serve to complicate decision-making
for concerned investors, especially when the litigation has actually
been initiated deliberately to conceal other wrongdoing or to drive
off a rival investor.
Many family-owned companies in India are extremely well-run;
however the blurring of ownership and management makes it
difficult, especially for a foreign investor, to determine whether a
hidden agenda is influencing the way in which a company is
managing the relationship, defining its strategy or conducting a
transaction. It can also manifest itself in non-transparent accounting
practices and parallel book-keeping, where manipulation of
accounts or financial window-dressing is carried out in order to
protect or benefit one or more family members. These kinds of
practices are not always easy to detect, masked by a complex and
opaque ownership structure designed to obscure the malpractice.
The question of succession planning in a promoter-driven company
can also often be disruptive, divisive and emotionally charged,
encouraging ad hoc and short term decision-making. It is for this
reason that, as we set out in more detail in ‘Prevention strategies’,
investors should really do their homework on who they are
partnering with.
Unpicking ownership structures
Among numerous other similar examples, a client of Control Risks
suspected a conflict of interest in its JV between its Indian partner
and a local vendor company in Maharashtra. A review of the JV
and vendor company’s corporate filings revealed that a number of
the JV’s current employees were former shareholders and
directors in the vendor company, and that the owner of the vendor
was the brother-in-law of the JV’s managing director. Mapping all
the interlinked directorships and shareholdings of the family
revealed the extent of the familial cross-ownership that existed
between the partner, the JV and a range of other vendor
companies; it also revealed that at least one state-level politician
was, alongside our client, a shareholder in the JV.
Further intelligence gathering revealed that the credentials
provided by the vendor were false and that it was essentially being
used as a mechanism to channel the profits generated by the
contracts it was servicing for the JV back into the pockets of the
promoter family. Evidence for this was obtained through computer
forensic work carried out on the laptops of JV employees.
Benami (no-name) transactions
Put simply, Benami, a Persian word meaning “no name”, is the term
given to transactions in which the real beneficiary is not the one
whose name features on the contract. Benami transactions are
widespread in India, as in other emerging markets, and are used for a
variety of reasons, such as to obscure political investment, mask
illegally-acquired money, evade tax or channel black money.
We have come across multiple cases where
HUFs have been used to siphon money from
international investors and joint venture partners.
5GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
Benami originated as a means to hold more property than was legally
permissible, as outlined in the conditions set by the Land Ceiling Act
of 1976. Today, they are used in transactions relating to more than
just land and property, revealing themselves frequently in the
acquisition of shares, companies and almost any movable or
immovable asset. The Benami Transactions (Prohibition) Act of 1988,
as well the updated bill of 2011, still focus on prohibiting their use in
property transactions, ignoring their widespread use in a range of
other transactions.
In a typical benami scheme, the real beneficiary will make the
transaction in the name of a dead relative, non-earning family member,
child, trusted personnel or a shell company, in other words anyone or
anything that will conceal their true identity. In India, the system of
registering births and deaths is not yet electronically managed, and
not linked to any other system such as banking or a national identity
records. This means that, if a person dies and his death certificate is
issued, it is not uploaded to a central registry; as such, his identity
could continue to be used to conduct business transactions or to
hold equity for family members in such a way that they avoid paying
the requisite taxes. However, with the advent of internet banking,
these practices are becoming more complicated. Moreover, there are
valiant attempts being made to remedy this situation such as the
Unique Identity Card project – an initiative to scan every Indian
citizen’s retinas and issue a 12-digit identification number – will deter
identity theft in the future.
After a benami transaction, despite not being named in formal company
registration documents, the real beneficial owner will exercise
considerable control, while remaining “off the radar” to domestic and
international regulators. There is also no formal record of the money trail
in a benami transaction, meaning that it is very hard for businesses,
regulators and law enforcement to identify the malpractice. It is
imperative, therefore, that an investor conducts robust due diligence in
order to obtain clarity on the ultimate beneficial ownership.
Technology as an enabler
Technology is being employed in imaginative and often
game-changing ways. The Unique Identity Card project has
the power to transform the way public services are delivered.
This project, among other advantages, will mean for example
that a woman living in rural India will be able to receive her
state benefit straight into her own bank account without the
involvement of an invariably corrupt middleman. Other
initiatives such as India’s 2005 Right to Information Act,
which decrees that any citizen has the right to request
information from any public authority and to receive a
response within a maximum of 30-45 days, is slowly making
the public sector more transparent. This, in turn, is supporting
the wider trends of holding both government officials and big
business to account.
Offshore entities
Offshore entities are used by some of the biggest companies in the
world, often for legitimate tax advantages. Others, however, use offshore
entities to evade tax, conceal ownership (such as the stake of a
government official) and to channel funds abroad, distancing the funds
from their criminal origins. They are another way in which a company
deceives a partner or a regulator for unentitled commercial gain.
Tax treaties between India and other countries allow for easy flow of
investment funds into India. However loopholes within them are often
exploited to route money in an illegal way. The illicit money transferred
outside India may come back to India through various methods such as
hawala (see page 7), mispricing, foreign direct investment (FDI) through
beneficial tax jurisdictions, raising of capital by Indian companies
through global depository receipts, and investment in Indian stock
markets through participatory notes.
In a typical benami scheme, the real beneficiary will
make the transaction in the name of a dead relative,
non-earning family member, child, trusted personnel or
a shell company
6 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
Shareholder
7%
Shareholder
7%
Wife of Promoter 1
Company registered in India
Company X registeredin the Cayman Islands
Company Y registeredin the Cayman Islands
Company A registered in Mauritius
Company Cregistered in Mauritius
Company B registeredin Mauritius
Publicly listed entity in India
Promoter 1
Promoter 2
Wife of Promoter 2
Shareholder
74.2%
Shareholder
77.59%
Shareholder
40%Shareholder
46%
Shareholder
100%
Shareholder
10.54%
Shareholder
51.32%
Shareholder
100%
Shareholder
15.29%
Shareholder
100%
It is not unusual for the ownership of a company to be hidden behind multiple layers of companies registered in offshore jurisdictions. In one case, a Singa-pore-based investment bank asked Control Risks to establish the ownership of a publicly listed Indian power company in which it was seeking to make an invest-ment. It turned out that offshore companies located in jurisdictions as diverse as the Cayman Islands, the Seychelles and Mauritius owned stakes in the Indian company. It also emerged that the Indian company, as well as the offshore entities owning stakes in it, were themselves subsidiaries of a private Indian company promoted by the directors of the publicly listed entity. The ownership scheme was designed, in this particular case, for re-routing funds back to India without incurring taxes and obfuscating the beneficial ownership.
Complex offshore ownership structures
7GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
It is possible, for example, for both individuals and corporates to
launder mostly untaxed income by channelling it through tax havens,
only for it then to be “round-tripped” back to India in the form of
legitimate investments. The lack of regulation and low disclosure
requirements of well-known tax havens such as Mauritius, Cyprus
and the British Virgin Islands facilitate this round-tripping. It is
estimated that between 2001 and 2011, over 40% of foreign direct
investment (FDI) into India came from Mauritius, a significant
proportion of which had exited the country as “black cash” and re-
entered as “legitimate” FDI. This not only presents challenges to those
doing business in India, but has much more significant and
longstanding repercussions for India’s national economy.
Cash generation schemes
Cash generation techniques are often used by companies in India to
minimise their tax exposure and to facilitate fraudulent and corrupt
schemes. They help companies to generate additional revenue
streams which, during a downturn, can be especially tempting for
those driven by tougher economic conditions to focus on cash
collection and protect their bottom lines. Typical cash generation
schemes include:
One rationale behind cash generation schemes is to generate black
cash, which is used to pay salaries and other company expenses off
the books, fuelling a parallel “cash economy” which deprives the
government of huge undeclared revenues. This is particularly the
case in a downturn, when cash constraints and bottlenecks in
supply chains result in many local companies relying even more
heavily on these practices to maximise their revenue and minimise
their financial reporting.
Pitfalls in real estate
The Indian real estate sector has long been known for the
propensity of cash - or part cash - payments for the
purchase of property, which has the potential to criminalise
a large group of otherwise honest members of society in a
way that only benefits the developers or owners, by
reducing their tax burden, and leads to further grey
practices. With proportions of the transaction being paid in
cash, property valuations are distorted and do not reflect
the true market rate. As a result, the sector is increasingly
cash-heavy and this can sometimes be associated with
hawala money. Hawala is money that has been transferred
in a way that exists outside the formal, institutionalised
banking system. Hawala has a long history in India and
forms a large part of the country’s informal or ‘underground’
economy. However, the hawala system is illegal and
associated with money-laundering and tax avoidance.
Black cash is generated through undeclared transactions, such as
where a third party is paid in excess of the service they have
provided, or where disbursements are made to vendors to which
they are not entitled, creating a cash fund for the third party and its
in-house employee “contact”. An investigation will often find
warning signs that at first may seem innocuous but in reality
present significant potential financial and reputation costs to a
company. One indicator that a compliance officer should never
accept at face value is a “special” or “long-standing partner”
discount assigned to a particular vendor or distributor in its
business; the discount might be legitimate but it can also be used
to pass on excess cash to the vendor. Such practices do not
always hold up to closer scrutiny.
Reviews of process and controls very often find warning signs hidden
in the detail, such as the difference that sometimes exists in the
number of retail stores documented in a company’s accounting
system vis-à-vis its actual sales data. Some compliance officers
would, perhaps understandably, put this down to “incorrect data
entry” and not take it further. In doing so they could be opening
themselves up to one of many different scenarios, such as where an
employee charges expenses against these fictitious stores and then
siphons off the resulting funds. It is almost impossible to catch every
internal fraud, but being aware of the potential schemes and regular
monitoring of processes will give a company a pre-emptive advantage.
• Over-invoicing, creating a fund at “select” vendors, dealers and distributors
• Recording fictitious expenses and adjusting the amount in bank reconciliations
• Paying a salary to fake employees and non-existent third parties
• Paying a bribe and recording it under multiple legitimate accounting categories
8 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
Bank 3 Associated partyin Hong Kong
Associated partyin Thailand
Polished diamonds
Bank 1
Bank 2
Associated party uses the value of the diamonds to access credit from another financial institution
Party uses the value of the diamonds to access new credit from different financial institution
Polished diamonds
Used to acquire polished diamonds
Associated partyin UAE
Black money
Same diamonds re-sold to another associated party
Sells in retail market
Group of People 1
Re-sells polished diamonds to another foreign associated party
Associated party uses the value of the diamonds reflected in turnover to access credit
Company Aregistered in India
Circular trading" is particularly prevalent in India's diamonds sector, where diamonds are often exported around the world multiple times in order to register an inflated turnover. The access of diamond companies to credit is turnover-based, and so based on this increased turnover, the companies can obtain additional financing. However, because they are often only re-exporting the same product, and thus obtaining multiple strands of finance, they run the risk of becoming over leveraged and defaulting further down the line.
Circular trading in the diamonds sector
9GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
WHAT DOES THIS ALL MEAN?
Going from grey to black
Jugaad might appear a reasonable, socially acceptable, way of
circumventing rules for a quick or profitable outcome, a symptom of
necessity as opposed to criminal intent. However, the grey practice
schemes that are born out of this culture exist not simply as a reaction
to an opaque, complex and over regulated business environment, but
rather a means to facilitate or conceal serious malpractice. And it is in
this way that the deception involved in these schemes can very
quickly turn from grey to black – such as when opaque ownership
structures are used to conceal conflicts of interest, political
beneficiaries or to mask corrupt payments.
Local practices with global implications
In recent years there have been numerous high-profile
cases of serious corporate fraud in India which have
attracted the attention of the international media. They were
ultimately enabled by a culture that tolerates, to an extent,
the existence of grey business practices and have involved
both large domestic and foreign companies. Not only did
they cause big losses to shareholders, but they drew the
attention of regulatory agencies in India and abroad.
One such instance of when grey practices have been used
for ‘black’ or criminal intent to defraud a company can be
seen in a case involving Reebok’s management in India.
The scheme included setting up fake warehouses to
siphon goods and then, in order to boost cash, the
executives ran a “franchisee referral programme”, through
which they collected INR 88.11 crores (USD 14.6m) from
60 high net-worth individuals, promising interest of 16-
20%. The total loss is estimated to be USD 144m by
overstating profits and falsifying assets over years. With
local and international regulatory and law enforcement
investigations ongoing, the company has now put in place
effective measures to ensure that this kind of malpractice
does not occur again.
Pharmaceuticals: a harder sector than most
Some sectors are also more prone to malpractice than
others, with much of India’s laundered money channelled
through banks and financial instruments and invested in real
estate. Despite being highly regulated, India’s pharmaceutical
sector is particularly susceptible to black practices.
Common examples include: intellectual property theft
leading to the production of counterfeit and generic
medicines; local agents, sales officers and distributors
setting up non-existent medical centres to receive
subsidised medicine, which is then sold on the open market
for personal profit; financially incentivising doctors and
pharmacists to prescribe certain drugs; and paying retailers
to manipulate their sales targets. Often the payments
involved in these schemes are disguised as business
development expenses, which are often very difficult –
particularly for the unwary foreign investor – to identify.
In short, every stage of the supply chain is vulnerable to
corrupt practices. Receiving government permission in this
highly regulated sector can be time consuming and
expensive; as such, it can give rise to corruption in order to
speed up the procedure and obtain the necessary licences.
During a drug’s development, conducting bona fide clinical
trials in India can also be challenging. The most common
difficulties faced by a foreign sponsor who has commissioned
a clinical trial operator is to ensure that they are not bribing
or coercing enrolees or engaging in improper patient
recruitment techniques and data falsification. Local sales
agents and distributors often engage in fraudulent practices,
further complicating an already complex procurement
process. This is compounded by India’s inherent gift culture,
where physicians’ and pharmacists’ expectations for
prescribing certain drugs can be predicated on a financial
incentive. India’s demographic realities and public health
needs make the country’s pharmaceutical sector an
extremely lucrative market. However, it is also one fraught
with challenges, not least given increasingly regulatory
scrutiny in both India and abroad.
Grey practices lie at the heart of some of India’s most serious economic
crime, a key ingredient in multi-million dollar embezzlement and frauds, as
well as in money-laundering, organised crime and even terrorist financing.
It is for this reason that companies doing business in India – and elsewhere
– should be asking searching questions of their own business, including
those of their partners. Grey practices are not necessarily themselves
illegal. But the same mechanisms used to legitimately reduce a company’s
tax burden can also be employed by criminals to launder the profits of
their illegal activities, making it difficult for a company to determine
whether the origin of funds of a business partner are genuine or illegal.
And there are likewise different shades of grey turning to black
practice. For example, there is a difference between the partner of a
foreign investor who sends money to a one-day company to generate
off-the-books cash to pay employee salaries, and one who obtains
this cash through criminal means and is now seeking to muddy the
trail linking this cash to his or her criminal activities. Both are illegal,
but arguably one more so than the other.
India is a member of the Financial Action Task Force (FATF), an
intergovernmental body set up to combat money-laundering and terrorist
financing, and has at its disposal enforcement bodies such as the
Directorate of Enforcement and the Economic Offences Wing of the
Central Bureau of Investigation. These are, in turn, supported by the
Financial Intelligence Unit, the Central Economic Intelligence Bureau, the
Economic Intelligence Council, and the Serious Fraud Investigation Office.
It is quite an array of sometimes overlapping, occasionally competing and
contradictory agencies. And, despite taking the issue of money-laundering
seriously, Indian legislation in this area is still fairly embryonic.
10 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
A changing regulatory context
Change is very much part of the zeitgeist in India. It will not come about
quickly or particularly easily, but the rules of the game are slowly starting
to change. Whether the catalyst is popular indignation against bad
governance, a tightening in domestic anti-corruption legislation, or the
example being set by some of India’s multinational brands, the
overarching goal seems to be one of greater accountability. India’s
leading corporate brands are fast becoming more and more active on
the world stage, with “blue chips” such as Tata, Bharti and Birla investing
heavily in Europe and the US. Promoting higher levels of corporate
governance has raised the bar for their domestic competitors, many of
whom are similarly looking to compete for contracts in these tighter
regulatory markets. The question is whether the same high standards
will be applied by Indian companies looking to invest in resource-rich
Sub-Saharan Africa, the former Soviet Union and in rapidly “emerging”
South-East Asian economies such as Vietnam, Indonesia and Myanmar.
At home, Indian businesses are also facing a tougher regulatory
environment, which is supported by a greater sense of
accountability that is permeating the corporate world. Although
Indian companies still tend not to fear prosecution under the
domestic Prevention of Corruption Act (1988), a busy legislative
agenda is changing attitudes. The enactment of the Companies
Act (2013), for example, defined ‘fraud’ for the first time and gives
specific penalties, requires higher standards of corporate
governance, and is empowering India’s Serious Fraud Investigation
Office (SFIO) to take a more active role in detecting and prosecuting
white-collar crime.
And so there is a reputational and financial imperative to uncover
the practices outlined in this paper. Failing to root out a one-day
entity concealing illicit transactions or criminal ownership can
undermine shareholder and market trust, and can prove financially
damaging. Tighter domestic and international regulation in the
form of extraterritorial anti-corruption legislation, such as the FCPA
and UKBA, is also increasing the regulatory risk, with the US
authorities in particular focusing more and more on high-risk
sectors in India, such as pharmaceuticals, construction,
engineering, infrastructure and liquor.
Shaken and stirred: the challenges of India’s liquor sector
With the growth of a progressively brand-conscious middle
class, India’s retail sector is becoming an increasingly
competitive arena for international brands. The liquor sector
is no different, but is particularly prone to criminal practice.
With more “Black Label” consumed in India than is produced
in Scotland, the problem of counterfeit is a sizeable one. In
the world’s largest whisky market, a large proportion of
alcohol produced is illicit and effectively exists outside of
governmental control. Transporting alcohol between states
and the levying of ‘import taxes’ means the supply chain is
especially vulnerable to forced bribes, while local unions
have also been known to demand that contracts be awarded
to them under the threat of violence. The sector is also highly
politicised, in our experience more so than most others. The
challenges facing companies operating in this sector are
thus manifold, and have already led to several international
brands being investigated under the FCPA.
This is relevant for Indian companies working with foreign partners
in domestic and cross-border investments and when raising
capital on foreign exchanges. It is also relevant because domestic
Indian legislation is getting tougher.
Indian law gets tougher
The Companies Act of 2013 is changing the “rules of the game”,
bringing Indian company law closer to global standards and
regulating areas ranging from incorporation to corporate social
responsibility, mergers, corporate governance, auditor rotation
and investor protection. The Act is increasing the reporting
framework and requires more auditor accountability, strengthening
the system of internal controls to prevent and investigate fraud. It
also requires the annual directors’ report to include a risk
management policy, which in principle should include measures to
address the risk of fraud and corruption, and requires companies
to establish a ‘vigilance mechanism’, whereby employees can
report legal and ethical concerns without fear of reprisal. Of note,
the Companies Act also includes a provision to prevent ‘layering’, a
common way to obscure beneficial ownership and evade tax.
Starting to mirror trends elsewhere, there is more emphasis being
placed on prosecuting those who pay rather than those who receive
bribes in India, even if for now this is stronger on rhetoric than
substance. The challenge, as ever, will be whether India’s law
enforcement agencies can implement and then enforce stricter anti-
corruption and governance legislation. This is a big question but – at
least for now – there is a real sense among Indian company compliance
and legal officers that these laws are starting to change attitudes.
And this is the reason why now – more than ever – companies need to
focus on their strategy and operations in India. This is not easy, given
that many of the grey practice schemes that lead on to wider fraud and
corruption lurk beneath the surface and are not always clearly or
explicitly illegal. However, companies can go a long way to meeting
this challenge if they put in place a system – and a culture – that
enables them to better detect and then act on the warning signs
associated with grey practices.
Grey practice schemes exist not simply as a reaction
to an opaque, complex and over regulated business
environment, but rather a means to facilitate or
conceal serious malpractice
11GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
PREVENTION STRATEGIES
Prevention strategies start with risk assessment. Every company doing
business in India should assess the unique ways in which its sector,
footprint, projects and day-to-day transactions expose it to varying
levels of risk.
For long-term business success in India, not only is it critical to be
assessing the risks that you are exposed to – “what others may do to us”
– but also to ascertain the impact that your business has on others. An
impact assessment will help to answer questions such as “will our project
affect the environment and local communities?”; “what are the human
and social rights implications?”; “who are the winners and who are the
losers?”; and “will it connect or divide people?” Addressing these issues
from the outset – given the potential for land, labour and environmental
disputes to disrupt business operations (sometimes for decades) – is of
utmost importance, particularly for those operating in high-risk and
politically volatile areas. Those involved in the development of train lines
in Jharkhand, mines in Bihar and dams in Kashmir for example – all high-
impact projects – should be particularly aware of the need to conduct
this kind of assessment as part of their prevention strategy.
Prevention is the best cure
Putting in place a robust risk management programme requires a
company to understand both the risks to and the impact of its
operations. International anti-bribery and corruption best practice is
typically based on the guidance set out in the FCPA and the UKBA –
and in particular from two documents: “A Resource Guide to the US
Foreign Corrupt Practices Act”, jointly issued by the US Department
of Justice and the Securities and Exchange Commission in November
2012, and the “Bribery Act 2010 Guidance” published by the UK
Ministry of Justice in March 2011. The key tenets that form this best
practice are illustrated in the adjacent diagram.
Top-level commitment, often known as tone from the top, is crucial.
An engaged chief executive will make all the difference in articulating
the right values and behaviours, empowering managers at a
company’s HQ in Mumbai through to business developers in Tamil
Nadu to send the right message, including to those officials seeking
to extort a bribe.
Top-levelcommitment
Due diligence and screening
Proportionateprocedures
Monitoringand review
Riskassessment
Culture,communication
and training
Oversight, autonomyand resources
Confidential reportingand investigation
3rd partydue diligence
Risk assessmentTraining and
continuing advice
Code of conductand policies
Incentives anddisciplinary measures
Commitment fromsenior management
US GUIDING PRINCIPLES OF ENFORCEMENT
UK ADEQUATE PROCEDURES
BESTPRACTICE
Anti-corruption best practice
12 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
The next step is developing strong policies and codes of conduct that
are tailored to the business but also proportionate to the risks it faces.
Many companies have excellent policies. The challenge is how to
apply them to the realities of doing business in India, both at a strategic
level (choosing the right partners and acquisitions) and operational
level (navigating the complexities of dealing with government
approvals, numerous licences and government officials at each stage
of the business lifecycle). After all, a private equity company investing
in a Bangalore-based IT software company will experience a very
different set of challenges from an infrastructure company seeking to
clear land for a hydro-power plant in the north-east.
Company policies also need to be updated to reflect changes in
legislation, market and commercial focus. The principles and values
enshrined in these policies should be communicated through regular
training at all levels of the company to ensure the gap that often opens
up between best practice policies and actual practice is minimised. It
is no good having world-class policies if company employees
continue to engage in fraudulent practices through vendors or third
parties. Likewise, a policy is only effective to the degree that
employees adopt it, which is especially the case in the context of
fraud and corruption, where a business relies heavily on its staff to
spot and report suspicious or risky behaviour. This is why middle
management buy-in is also crucial – setting the right tone from the
middle should not be ignored.
Risk assessment is the foundation for designing effective compliance
measures, helping a company to assess the likelihood of a risk
occurring, as well as the potential impact the risk will have on its
business operations. This assessment can be conducted at a
country, sector, transaction, business opportunity or relationship
level, and will lay the groundwork for the due diligence that a company
should undertake on its joint venture partners, subsidiaries, agents
and suppliers. Due diligence will help identify, for example, if a supplier
with whom the company is working is supplying goods in return for
money obtained through criminal means. An effective whistle-blowing
line can also ensure that malpractice in a company’s downstream
operations can be brought to the attention of the company’s
management. There is no shortage of whistleblowers in India, and
thus no lack of potential intelligence on cultural, HR, operational or
unethical practices within a company. The question is more how a
company can effectively respond to sometimes multiple daily
allegations, prioritising between those that need to be taken seriously
and those that can be discarded.
Companies cannot eradicate the risks of doing business in India, but
they can do a lot to reduce them. And not just by putting in place the
right internal controls. Identifying, mapping and monitoring the
vulnerabilities in its business will help a company to better anticipate the
day-to-day challenges of navigating customs and excise, moving goods
over state borders, obtaining licences, acquiring land and interacting
with government officials in India.
Staying clean in the customs house
As in many other developing markets, companies importing
goods into India, or indeed exporting them, face daily
challenges that make it tempting to circumvent what can at
times feel like an insurmountable bureaucratic system. Most
companies therefore hire licensed Customs House Agents
rather than dealing with the customs service directly. Drawing
on specialist advice is a legitimate way to address bureaucratic
problems, as long as the advisors operate in a legal and ethical
manner. But is that realistic, or is employing local intermediaries
just a case of transferring the problem? Don’t the agents simply
pay bribes on their customers’ behalf?
Central to ensuring that your company avoids violating any
international corruption or bribery laws is, of course, selecting the
right agent to handle your account. In a series of interviews with
Control Risks, a group of Indian Customs House Agents
acknowledged that bribery was widespread in their industry, but
insisted that they could not afford to take the risk of paying bribes.
If they wanted to work for reputable international companies, they
had to maintain their own standards. For their part, they noted
some key strategies for “staying clean”, including selecting the
right customers, managing client expectations, encouraging the
client to accept a level of responsibility for their cargo, and
informing employees of the zero tolerance approach to corruption.
While the findings of this research paint a positive picture, the
reality of interacting with any customs agent in India necessitates
a degree of caution. A company should not take these types of
claims at face value; verifying them by assessing the agent’s
reputation and track record before engaging them is critical.
Establishcontext
Assessrisk
Mitigate
Monitor
Risk management process
13GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
Time to get proactive
A proactive engagement strategy is also crucial. Companies should
clearly communicate their ethical position to key stakeholders, including
government officials (at a local, state or national level), anti-corruption
agencies, national embassies, public bodies (including NGOs) and
other private companies. It is easier to say “no” from the very beginning,
and such outreach – if conducted with the right people and institutions
– can pay dividends when assistance is required further down the line.
And rather than just anticipate, companies should put in place a plan of
how to respond to set scenarios. In extortion, this might be about
thinking through the root cause of the demand. This is never easy and
requires creativity, but – whether this is through capacity building or
traditional carrot or stick methods – it is possible to change the power
play and thus undermine the rationale behind the demand. Such steps
are not a panacea for companies doing business in India, but
brainstorming such scenarios can help a company to do what very often
seems the impossible in emerging markets: to adhere to zero tolerance
without incurring the seemingly inevitable resulting costs, delays and
setbacks to the business.
Developing effective resistance strategies
Control Risks was approached for assistance by an Indian
company experiencing localised opposition at a mining
concession it had been awarded in the central Indian state of
Chhattisgarh. Our initial business intelligence showed that the
opposition was being fuelled by a state-level union known for its
strong-arm tactics and opposition to private sector companies,
as well as a local competitor company seeking to gain access to
the concession.
To help our client develop a proactive engagement strategy, we
mapped all of the stakeholders with interest in and influence over
the mining concession, shedding clarity on their motives, the
nature of the links between them (known, informal and
concealed) and the coordination behind and sustainability of
their actions. Doing this enabled us to identify credible
stakeholders with whom the client could engage to reassure the
community and undermine the pressure being exerted by the
union and the local competitor, including those local officials
providing often barely concealed support to them.
We then worked with the client to map the scenarios to which
the company could be vulnerable as it started to scale up its
operations at the mine, helping it to work through a series of
strategies as to how it should respond to any further politically
and commercially motivated objections, and wider attempts on
the part of local officials to extort payments.Rather than just anticipate, companies should put in
place a plan of how to respond to set scenarios
14 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
CONCLUSION
India is a tough place to do business. The challenges of acquiring land,
navigating bureaucratic obstacles and unpicking often highly
interconnected business-political networks are all too familiar to local
and foreign companies alike. The pitfalls of getting caught up in a grey
practice scheme are, in contrast, often ignored or simply overlooked.
This is not surprising given grey practices tend to lie beneath the surface
of day-to-day business interactions in India, in many ways an accepted
part of getting things done in a working culture known for its high levels
of creativity and improvisation. However, this could prove costly. Their
existence – as the name itself suggests – might appear shady, but in
reality there is nothing unclear or indistinct about the ways in which they
facilitate deliberate attempts to defraud, launder money, pay bribes and
conceal conflicts of interest. Companies need to address their exposure
to grey practices, and to the fraud and corruption that they help to fuel.
Failure to do so can result in sizeable reputational and regulatory risks,
not to mention significant financial losses.
Yet all is far from lost. It may sound obvious that those companies that
get to grips with the nuances of doing business in India will stand a
better chance of making a success of their venture, but it is one that
rings true – not just in India, but in all complex markets. And this is
particularly the case for those companies that take the time to weigh
up the risk-reward equation, as well as look to the long term. India is a
land of great opportunity, but it is not the place to be if you want to
make a fast buck. Companies need to be smart about doing business
in the right way, to be part of the solution rather than the problem – and
now more so than ever. Change takes time in India – perhaps more
than in most markets. However, there is a real sense that developments
such as the introduction of tougher anti-corruption legislation, the
increasing use of technology to promote public and private sector
accountability, the growth of Indian business interests overseas and
popular indignation at bad governance – particularly from a vocal 300
million-strong middle class – is starting to have an impact, and not just
for the people of India but for domestic and foreign companies
operating there.
Achieving success in such a market takes time. This is why
conducting a risk assessment to understand the risks facing a
business is a crucial first step, whether those relate to a specific
sector or project, or to local or national-level political dynamics. The
implementation of a robust risk management system with policies
and codes of conduct proportionate to these risks is the logical next
step, especially one that articulates the values and behaviours that
can help bridge the gap between on-the-ground realities and
international best practice. And don’t forget the detail – companies
need to monitor their controls and get on top of the data that can tell
them so much about the potential financial, regulatory and
reputational risks to which they are exposed.
Last but not least, companies need to engage with their market. They
need to assess in a clear and dispassionate way the risks that face
them at a strategic and local level. Mapping all their stakeholders (and
opening up communication channels with allies in government, civic
society and the private sector is important. And so is the need to be
proactive, to plan ahead by developing solution-focused scenarios
that put the company on the front foot.
Patience, tenacity and commitment are all needed for a company to
succeed in India. Those companies that embrace these traits and
maintain a positive and confident outlook will give themselves a
much greater chance of success in one of the world’s most vibrant,
exciting and ultimately rewarding markets.
Companies need to address their exposure to grey
practices, and to the fraud and corruption that they
help to fuel. Failure to do so can result in sizeable
reputational and regulatory risks, not to mention
significant financial losses.
15GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
Many colloquial terms in Hindi for bribes and corrupt payments are
particularly revealing of local attitudes to these practices. In English,
euphemisms such as “kickbacks” and “facilitation payments” barely
conceal the unethical nature of these payments. In Hindi, however,
such terms, especially those denoting the payment of smaller, informal
bribes, are often couched in the apparently innocuous language of the
aam aadmi (“common man”) and imply that the recipient is only taking
money to fulfil their basic needs, rather than for excessive gain.
For example, some phrases draw on the vocabulary of food and
drink, e.g. chai-pani (“tea and water”) and kharcha pani (“basic
expenses”), as well as invoking the innocence of children, such as
mithai (“sweets”) and the particularly casual bacchon ke liye (“for
the kids”). These phrases indicate the perception that such
payments are both harmless and necessary, and also imply that
they are of low value, although that may often be far from the case:
they might range from a box of chocolates on the one hand, to a
suitcase of cash on the other. Some other words, such as “sifarish”,
have an ostensibly ‘ethical’ primary meaning, in this case, to
recommend one party to another to provide a service. However, by
extension the word has come to connote the more suspect practice
of using one’s connections, for example to get a contract for a
related party, or conversely to avoid paying for a service, and is
more closely akin to nepotism.
In some contexts, many of these words can also be translated
more explicitly as “tip”, and this highlights another ambiguity in
peoples’ attitudes to, and expectation of, these payments. For
example, the common Persian word bakhshish literally means
“gift”, and it is often used in India, as well as in many Middle
Eastern countries, to refer to what many Western cultures would
recognise as a legitimate tip. It can also refer to alms given to fakirs
or sadhus (holy men). However, at the heart of its cultural use is an
assumption that no service should be rendered without some
degree of financial reward, even in contexts that the international
community would not consider acceptable, such as the awarding
of government contracts.
Other interesting phrases include mutthi garam karna (“to warm
one’s fist”), and muh bharna, (“to fill one’s mouth”, and by
extension, “to shut somebody up”). Like chai-pani, on the one
hand these suggest that the recipient is only expecting to be
allowed to meet their fundamental needs (receiving heat and food,
respectively). At the same time, however, both phrases clearly
contain a secondary meaning which explicitly refers to the
understanding that these are bribes. The image of money “heating”
the palm in the case of the former, and of it “filling” somebody’s
mouth to the point of silence in the latter, highlight the ways that
these phrases often simultaneously refer to socially accepted
practices at the same time as they acknowledge that they operate
in the “grey area” of Indian business culture.
THE TERMINOLOGY OF CORRUPTION IN INDIA
The apparently innocuous language used to describe
bribery indicates the perception that such payments
are both harmless and necessary
16 GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
In contrast to the casual euphemisms described above that point to a
long history of acceptance, there are some recent examples of how
popular language is mirroring the wider shift in public attitudes
described throughout this paper. Inevitably, the tenor of this language
is explicit and confrontational, as it is consciously designed to
challenge the perceived status quo, and often takes the form of
rhyming slogans easily memorized and repeated by, especially,
supporters of a political party or charismatic figure.
For example, the Aam Aadmi Party (AAP), which was formed in
late 2012 and runs on an explicitly anti-corruption platform, chose
as its party symbol a broom, or jhadu. One of the party’s more
popular slogans is: Jhadu chalao, beiman bhagao (which loosely
translates as “use your broom to sweep away the corrupt”).
Another widely-heard phrase is sarkari lokpal dhoka hai, desh bachalo mauka hai (“the government ombudsman is a sham, now
is the time to save the country”).
Similarly, the supporters of Anna Hazare, the popular leader of the
earlier anti-corruption movement out of which the AAP emerged, also
chanted slogans with simple, direct messages. For example,
brashtachar jao jao, jan lokpal lao lao (“get rid of corruption, bring on
the public ombudsman”) and jo kala paisa rakhte hain, wo jan lokpal se darte hain (“those who keep ‘black’ money fear the public
ombudsman bill”).
Consequently, on the one hand popular language continues to reflect
widespread acceptance of corrupt practices, while on the other,
recent movements that are beginning to challenge the status quo are
harnessing new idioms that both express and drive the changing
attitudes towards endemic corruption.
17GREY PRACTICES
FUELLING FRAUD AND CORRUPTION IN THE INDIAN BUSINESS ENVIRONMENT
James Owen is the lead author of the white paper on Grey Practices in
India. He has lived and worked in India for several years, heading an
experienced team of Delhi and Mumbai-based consultants on risk
consulting assignments in India and the wider region. James delivers
business intelligence, investigative and anti-bribery and corruption
solutions to clients throughout their business cycles. He also acts as a
strategic advisor to leading Indian and international companies, often
on crisis-led problem solving tasks.
James joined Control Risks in 2006 and before moving to Delhi was
based in Moscow where he ran Control Risks’ corporate investigations
practice in the CIS, leading a wide range of integrity risk and investigative
assignments in Russia, Ukraine, Central Asia and the South Caucasus.
James came to Control Risks from the Foreign Policy Centre, a London-
based think tank, where he advised the British government, NGOs and
private sector clients on political and economic issues in Russia,
Central Asia and the Middle East. Prior to this, he worked for four years
at Accenture on a wide range of often cross-border strategy consulting
projects for multinational oil and gas, consumer goods, retail and
manufacturing companies based in China, Europe and the US.
He holds a Bachelor of Arts in Modern European History from York
University and a Master of Arts in Russian Politics from University
College London. James contributes to the media and writes for
publications on issues related to business and political risk in India
and Russia.
Kanupriya Jain is the co-author of the white paper on Grey Practices
in India. She is based in Mumbai and heads the company’s regional
litigation support and investigations team. The team undertakes a
wide variety of investigative and fraud risk management assignments,
including litigation support, anti-bribery and corruption (ABC)
investigations, asset tracing, computer forensics and general
problem-solving.
Kanupriya’s areas of expertise include both financial and non-financial
investigations. Examples of these include financial statement fraud,
inventory stuffing, kickbacks to employees, unauthorised transactions,
grey markets, compliance reviews, conflicts of interest, advertising and
marketing irregularities, abuse of position, revenue sharing, and
quantification of costs.
Prior to joining Control Risks, Kanupriya worked as a manager with
Ernst & Young in their core investigation team, and at KPMG India
providing specialist forensic accounting and investigation services. She
has led fraud investigations and litigation support engagements for both
Indian and international clients across a wide range of sectors in South
Asia, including oil & gas, information technology, consumer products,
agrochemicals, infrastructure & real estate, and financial services.
Kanupriya is a Chartered Accountant, and holds Bachelor of Law and
Bachelor of Commerce qualifications. She has also cleared the
Associate CIArb examination conducted by the Chartered Institute of
Arbitrators, UK.
AUTHORS
JAMES OWEN, DIRECTOR, CORPORATE INVESTIGATIONS, INDIA & SOUTH ASIA
KANUPRIYA JAIN, ASSOCIATE DIRECTOR,CORPORATE INVESTIGATIONS, INDIA & SOUTH ASIA
Written by James Owen – Director of Corporate Investigations, India and South Asia and Kanupriya Jain – Associate Director, Corporate Investigations, India and South Asia
Edited by Daisy Birch – Editor, Asia Pacific
Published by Control Risks, Cottons Centre, Cottons Lane, London SE 1 2QG. Control Risks Group Limited (‘the Company’) endeavours to ensure the accuracy of all information supplied. Advice and opinions given represent the best judgement of the Company, but subject to Section 2 (1) Unfair Contract Terms Act 1977, where applicable, the Company shall in no case be liable for any claims, or special, incidental or consequential damages, whether caused by the Company’s negligence (or that of any member of its staff) or in any other way.
Copyright: Control Risks Group Limited 2014. All rights reserved. Reproduction in whole or in part prohibited without the prior consent of the Company.
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