compliance
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India has seen a spurt of corporate scams and cases of corporate espionage. This has resulted in an urgent need for a strong corporate compliance function.

A Deloitte compliance survey of 2015 has the following insights :
• 62 % Indian organizations have a designated Chief Compliance Officer (CCO) as compared to 70 % global organizations.
• Only 26 % Indian respondents have a full-time CCO as compared to 58 % respondents globally. Also, 51 % companies have a staff of five or fewer employees. We expect companies would need to invest more in their compliance function. An increased number of companies will have a full-time CCO, given the heightened expectations under various laws.
• Only 14 % organizations outsource or co-source their employee and ethics hotline as compared to 39 % organizations globally. We see increasing trend for compliance needs outsourcing in India especially in compliance by third party service providers. This is triggered by growth of outsourcing in India consistent with global trend.
• Approximately 92 % respondents mentioned Code of Conduct as a key area of priority of the compliance function as compared to the global figure of 73 % . However, Indian companies still need to focus on compliance training, compliance strategy processes, and policy management as they are lagging behind in these areas as compared to global companies.

VComply
• The number of organizations who measure the effectiveness of their compliance programs continues to increase to 57 % but there is still a long way to go. The most common metrics used by CCOs to gauge effectiveness are internally focused: internal audits, analysis of self-assessment results, feedback from employee ethics survey, etc.
• Almost 16 % of respondents were not confident that their IT systems captured and reported all compliance data necessary to get a good sense of effectiveness. That might be because many compliance tasks—policy management, document management, risk assessments, regulatory reviews— still rely heavily on desktop software applications.

Bribery and corruption continue to pose significant challenges in India. Corporate India is now slowly taking steps in the right direction in principle but still not investing enough in practice. An effective compliance plan would ideally include more than just an increase in budget allocated. It would involve the establishment of leading global practices, policies and procedures. VComply makes it easy for an organization to have a robust compliance platform in place.

Accenture Facts Survey

Some recent (and important) regulatory and judicial efforts in this direction are:

Bribery and corruption:

The deterrence of bribery and corruption is one of the primary issues for governments worldwide. The US Foreign Corrupt Practices Act (FCPA), which prohibits businesses from bribing foreign officials and political figures, remains the most robustly enforced anti-bribery and anti-corruption (ABAC) legislation globally. The US Department of Justice and the Securities and Exchange Commission take the lead in its enforcement.

Taking a cue from the global community, ABAC enforcement has seen a significant traction in the past couple of years in India. This is coupled with action from the resurgent civil societies in India. Others include the new Indian Lokpal and Lokayuktas Act, 2013, which created a new ombudsman role to investigate allegations of corruption. Further, the Prevention of Corruption (Amendment) Bill, 2013, was introduced in Parliament to amend the Prevention of Corruption Act, 1988. It specifically covers the offence of giving a bribe to a public servant under abetment. It is yet to be passed in Parliament.

Comprehensive law on black money:

A recent report from the Organisation for Economic Cooperation and Development which relates to erosion of the tax base has noted that companies are using several complex financial structures as a strategy for tax evasion. The Global Financial Integrity Report, released in December 2013, shows that 60 % of black money generated in developing countries such as India takes place because of corporate tax evasion. With this in mind, the government proposes to bring the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, for curbing black money. This bill provides for prosecution and rigorous imprisonment of up to 10 years for those concealing income and assets and evading tax on foreign assets. Also, the recently enacted Goods and services tax is a step towards elimination of tax evasion.

Responsibility of Independent Director (IDs) to mitigate and detect fraud:

The evolving regulatory landscape has made IDs responsible for mitigating and detecting fraud. With this, the risk around non-compliance has increased significantly and organisations need to comply with global legislations such as FCPA and the UK Bribery Act 2010. For the first time, the Companies Act 2013 has defined fraud and outlines penalties for an act of fraud. It has enlarged the role, duties and responsibilities of IDs with respect to fraud prevention and detection. Additionally, it has also imposed heavy responsibilities on them for vigil checks and corporate governance.

Covering malfeasance in public procurement:

The government proposes to pass a law on public procurement which is consistent with the United Nations Commission on International Trade model. In India, they introduced Public Procurement Bill was in Parliament in 2012. Then, they sought to regulate procurement by ministries/departments of the central government. The objective was to ensure transparency, accountability and integrity in the entire procurement process. It was focused on fair and equitable treatment of bidders, promoting competition and enhancing efficiency. It also included safeguarding the integrity of the process and enhancing public confidence in public procurement. However, the bill was not passed by Parliament.

Non-interference of courts in arbitration proceedings:

According to the World Bank, there are a large number of pending cases in Indian courts and sluggish implementation of judicial reforms.  It is the key reasons for India’s low rank on the ‘Ease of Doing Business’ index.

In relation to international commercial arbitration, the Supreme Court adopted an interventionist approach in arbitration matters has substantially changed its stance. Post the decision in the case of BALCO vs Kaiser Aluminium (2012, Supreme Court), it has been seen that the Indian courts are now less keen to interfere in arbitration matters. Thus, they adopted a pro-arbitration approach.

Antitrust compliance:

India introduced the Competition Act in 2002  which is modeled on the modern competition law regimes.

Although relatively young in terms of its lifespan, the Competition Commission of India (CCI) has received more than 550 complaints alleging violations. This has been across both private and public sectors, and the number of complaints is increasing exponentially.

The CCI has initiated action against several companies. Till March 2015, it had already imposed penalties of about Rs 124 billion. Several Indian corporates are now taking serious steps in order to comply with the antitrust laws in the country.  80 % of Indian companies are not even aware about the existence of competition laws in India.

Conclusion

Today, there are an increasing number of governmental and judicial measures.  They build a business environment conducive to both foreign and domestic investors and entrepreneurs. But there is also a dire need to improve ways to conduct business while maintaining sound practices. These include protecting shareholders’ interests, eliminating archaic laws to open the country to foreign investments and supporting faster growth. Corporate India will now have to sit up and take notice of the necessity to sustain compliance structures. They also need to ensure that their business is not only profit-generating but also legally efficient.

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