As more countries prioritize fighting corruption, many have adopted legal frameworks that empower them to hold those involved accountable. India, for instance, enacted the Prevention of Corruption Act (PCA) in 1988, which was amended in 2018, culminating in the present 13(2) PCA. This amendment introduces a new concept of corporate criminal liability, making corporates vicariously liable for acts of corruption committed by their employees.
Implementing the 13(2) PCA, however, presents several challenges. Here are some key issues to consider:
1. Identifying the Series of Persons: Corporates are classified as “persons” under the PCA, so determining who qualifies as a “series of persons” becomes a crucial issue. The courts have interpreted a series of persons as individuals sharing a common purpose, so the corporate must prove that the employees involved in the corrupt act acted outside the scope of their employment.
2. Corporate Criminal Liability and Due Diligence: The 13(2) PCA presents a new layer of corporate criminal liability in India’s legal system, holding companies accountable for the acts of their employees. This increase in accountability presents a challenge for companies to establish compliance policies and due diligence mechanisms to avoid such instances of corruption.
3. Compliance Burnout: Ensuring corporate compliance with the PCA is a demanding process, and compliance burn-out can lead to reduced attention and effort in implementing the necessary measures. This, in turn, can render compliance mechanisms ineffective, increasing the risks of non-compliance.
4. Accountability of Public Officials: The PCA aims to root out corruption amongst public officials, who often work with corporates in various capacities. Therefore, effective implementation should involve holding such officials accountable to the same standard as the corporate entities they work with.
5. The Burden of Proof: As per the 13(2) PCA, the burden of proof lies with the accused corporates who must demonstrate that the corrupt act was committed without their knowledge or approval. This means that corporates must implement robust internal control mechanisms and compliance mechanisms to monitor their employees and ensure transparency in dealings.
It is vital to recognize the implications that follow once the 13(2) PCA is implemented, particularly for corporates who are now officially held accountable for the acts of their employees. The challenges listed above are indicative of the complexity involved in ensuring effective compliance with this legislation while highlighting the need for more intensive efforts in compliance and due diligence. It is important to focus on the long-term goals of reducing corruption in business dealings, even if it means overhauling internal structures. Constructing a transparent and effective compliance framework may be challenging, but it is the need of the hour to foster integrity in business entities.
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