The PCA also incorporates a defence for a commercial organisation to avoid liability, by proving that it had put in place adequate procedures to prevent associated persons from undertaking corrupt conduct.

Therefore, while the amended PCA imposed stricter standards of liability on commercial organisations, these amendments were also aimed at incentivising Indian corporates towards improving their existing compliance mechanisms, so as to be able to demonstrate that they have adequate procedures for preventing corruption.

Interestingly, the PCA amendments also provide that the corruption prevention procedures to be put in place by commercial organisations, are required to be in compliance with guidelines to be prescribed for this purpose by the central government in consultation with the concerned stakeholders.

This is a welcome reform, in line with similar requirements under other jurisdictions e.g., the UK. These guidelines would provide clarity and help businesses to bolster their existing compliance programmes, while also helping improve the ease of doing business.

It is therefore surprising that, while July 26 this year marked three years of the PCA amendments of 2018, the corruption prevention guidelines have not been prescribed to date. There appears to be limited information in the public domain as to when such guidelines will be released.

The government may also be facing a veritable Catch-22 situation, against the backdrop of the ongoing COVID-19 crisis and the ensuing economic slowdown, resulting from frequent lockdowns and other restrictions on economic activity.

Prescribing such corruption prevention guidelines at a time when the government is expected to ease the economic pressure on corporates, may not be received favourably by corporates, as these corporates may be required to incur additional expenses for comprehensively overhauling their compliance systems.

At the same time, further delays in prescribing such guidelines may only give impetus to corporate frauds and corruption, thereby negating the objectives of the PCA amendments.

The economic hardships manifested by the COVID-19 crisis has resulted in an exponential rise in corporate frauds and corruption.

Further, the large-scale implementation of the vaccination programme has further exacerbated the issue of fraud and corruption.

Organisations such as the United Nations, OECD and Transparency International have also recognised the heightened risk of corruption in light of the fight against COVID-19.

We are hopeful that the government is also cognizant of this heightened risk of corruption and the need to constantly improve the ease of doing business and will release the guidelines for corporates for implementing adequate procedures for preventing corruption, at the earliest.

Meanwhile, even in the absence of such guidelines in India, good corporate governance requires that corporates should look to revisit their compliance programmes to ensure that they remain robust in these times of heightened risks.

Businesses may also look to seek guidance from global best practices in this respect, such as the guidance available under the UK Bribery Act, 2010 and the US Department of Justice’s guidance on the evaluation of corporate compliance programmes.

This article was originally published in Business Today on 13 August 2021 Co-written by: Alina Arora, Partner; Apurva Zutshi, Principal Associate. Click here for original article

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