SAI INDIA COUNTRY REPORT THE IInd MEETING OF 10 ARP

CURRENT LEVEL OF CORRUPTION 1 Current characteristic level Serious and pervasive in most or all sectors 2 Level now with past yearAbout same as past years 3 Transparency International-Corruption Perception Index rank reflect reality No 4 Global Integrity Index rank reflect realityNo 5 Peoples' oppositionWeak

6 Governments' oppositionWeak 7 Corruption dealing Highly predictable and visible from certain pattern 8 Rank as per prevalence 1. Grand – misuse of entrusted power of politicians and Petty corruption – everyday at all levels 2. Enterprise Level 9 Main pattern in countryBoth in public and private entities 10 Petty corruptionSerious

11 Main petty corruptionMedium management/Supervisors 12 Main patterns of petty corruption Bribes paid for expediting public services and to avoid law. 13 Grand corruptionSerious 14 Main grand corruptionElected officials and their personal favorites 15 Common types1. Abuse of position/power; Bribery; Nepotism. 2. Influence peddling 3. Extortion 4. Kickback; 5. Criminal breach of trust 6. Embezzlement 7. Forgery

16 Most vulnerable sectors Customs; Law enforcement/police; Public service delivery; Taxation;. Education; Energy; Local Govt./Municipalities;. Judiciary;. State owned enterprise Legislature; Environment; Agriculture. 17 Greatest probability of occurrence in Govt. activity Procurement of contracts; Revenue (Taxes) collection; Licensing and franchising 18 Use of money/asset gained from corruption Acquiring assets; Invest in real estate; Leisure/social activities 19 Root cause Complicated and cumbersome administrative procedure; Unclear rules and loopholes for manipulation; Culture, customs and habits of giving bribes to get things done; Low salary; Lack comprehensive, effective and failure in legal system; Rapid population and economic growth; To become rich as quick as possible; Lack of rules and procedures; Absence of regulatory and legal system to combat corruption. 20 Whether grand and petty corruption is derived from patronage-client system Agree

21 Weak accounting practices including lack of timely financial management favor corruption Agree 22 As an enforcement agency, priority of monitoring corruption Not a priority 23 As an enforcement agency, priority of public complaints on corruption High priority 24 As an enforcement agency emphasis on whistle blower in corruption reporting Very important 25 Could whistle blower support complaints of corruption Strongly support

26 Extent of damage to State Budget in terms of economicVery serious 27 Extent of damage to firms in terms of economicSerious 28 Extent of damage to citizens in terms of economicSerious 29 “Corruption during budget formulation is primarily grand or political corruption and is influenced by the distribution of budgetary powers between the executive and the legislature.” (Quote by Martinez-Vazquez, Arze, and Boex 2004). Agree 30 “Unchecked and excessive executive discretion in the budget process tends to create opportunities for political corruption. Politician or senior level bureaucrats are able to provide subsidies or favourable tax treatments to favoured citizen groups or allocate budget resources to projects areas based on political connection.” (Quote by Martinez- Vazquez, Arze, and Boex 2004) Strongly agree 31 “Public Financial Management System weakness during budget formulation can increase the risk of administrative corruption during budget execution.” (Quote by Dorotinsky and Pradhan, 2007) Neither agree nor disagree

CURRENT STATUS OF MONEY LAUNDERING 1.Situation in the countrySerious 2. Tends to increase in recent years 3 Is more sophisticated over the years Strongly agree 4Pattern in the country Corruptive practices through money laundering mostly observed in private sectors 5Highest risk rankingReal Estate ; Finance, Banking; 6Common methods1. Business; Real Estate;2. Cash transaction;4. Stock Market;5. Money exchange; Project;8. Casino

7.Favorable environment - Bank and financial institutions do not have suitable supervision/control system to anti money laundering - Use of cash and illegal money transfer is dominant 8.Offences closely associated * - Corruption; - Production, buying and selling of illegal goods; - Drugs

Evaluation of Money Laundering Situation MethodsExperience levelNon experience level Use of Corporate vehicles and Trusts Often Use of GatekeepersOften Use of Domestic Financial Institution Sometimes Use of Offshore/Foreign jurisdiction Often Use of nomineeOften Use of cash and its placement into the financial system Often Reasons for criminals laundering- Becoming legitimate - Evading taxes - Hiding illegally accumulated wealth

11. Consequences * - Increased crime and corruption - Weakened financial institutions - Reduced government tax and revenue and weakened government control over the economy 12. Economic and social consequences Serious 13. Impact on national security, international reputation and economy Very serious 14.Significant incidences between 2007 – 2012 Allocation of Coal Blocks; Payment of Indian Officials by ORACLE (FCPA) Payments to Indian Officals by DIEGO (FCPA)