Investigation: US-based private investigation firms make foray into India

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When an Ahmedabad-based developer started looking for global investors in an industrial park, a Chinese conglomerate showed interest. But first, it was necessary to check the Indian firm.

The information had to be complete: political connections, ongoing investigations by local law enforcement, cases of bribery or corruption, and details of how the land was acquired for the park.

Among the first ports of call was the Tokyo office of a US-based private investigation firm headed by a former US Federal Bureau of Investigation (FBI) agent. He in turn contacted a former agent of one of the Indian intelligence agencies. He also called a friend who had previously worked for the Israeli intelligence agency Mossad, and who is now based in India, to carry out similar checks, so that he could corroborate the two accounts.

With increased scrutiny of overseas investments, the demand for such investigations has grown exponentially. That’s why more and more private investigation companies such as New York-based Mintz Group and California-based Berkeley Research Group are moving to India, joining well-established names like Pinkerton and Kroll. India has become a more attractive investment destination under the reform-oriented Narendra Modi government, which also attempted to root out corruption and crony capitalism.

“The current government’s focus on trade reforms and foreign direct investment has pushed foreign investors to accelerate their investment in India,” said Stuart Witchell, managing director, Asia-Pacific, for global surveys at Berkeley Research. Group (BRG). “We also believe that the crackdown on corruption will eventually have a major impact on the operations of foreign companies here and they will need help to comply with global and local governance standards.”

Keeping their noses clean is vitally important, not only because of India’s campaign against corruption, but also because the authorities in their country have become intolerant of corruption and other types of wrongdoing in India. ‘foreigner.

The need for such checks is twofold. Investors must ensure that their money is protected, but more importantly they must comply with strict international anti-corruption laws which impose stiff penalties for violations in any part of the world. Two American companies, Walmart and Mondelez, found out the hard way.

Both have been implicated in corruption allegations under the US Foreign Corrupt Practices Act (USFCPA). They have faced costly and protracted litigation with the US Department of Justice and, according to Bloomberg, Walmart could pay a $300 million fine to settle cases involving the company in Mexico and China, except from India.

Over the past couple of years, several Indian law enforcement agencies such as the Central Bureau of Investigation (CBI), Directorate of Law Enforcement and Serious Fraud Investigation Bureau, have used the services of private investigation firms to investigate financial crime as they step up their surveillance of offenders.

Regulators such as the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) have also outsourced sensitive investigations to third parties.

Although nearly half a dozen international private investigation firms operate in India, in addition to the big four auditing firms that also provide investigation services, new players are encouraged by unofficial estimates that predict that demand for these services will double over the next two years, creating a potential fee pool of $200 million.

New entrants rely on more nuanced techniques, nimble-footed franchises, and a modus operandi that relies heavily on connections within official global spy networks to differentiate themselves.

“The market is becoming extremely fragmented. We’ll have to wait and watch to see if everyone can survive,” an associate at one of the Big Four companies said on condition of anonymity.

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