CORRUPTION

SCHEMES
PRESENTATION BY
CORRUPTION
 CORRUPTION is a form of dishonesty or criminal activity undertaken by a
person or organization entrusted with a position of authority, often to
acquire illicit benefit, or, abuse of entrusted power for one's private gain.
Corruption may include many activities
including bribery and embezzlement.
 Corruption ranges from small favours between a small number of people
(petty corruption), to corruption that affects the government on a large
scale (grand corruption),
 Corruption is so prevalent that it is part of the everyday structure of
society, is one of the symptoms of organized crime.
 Corruption is a significant problem for any organization, particularly due to
the drive for growth in international markets.
 Despite the multitude of anti-corruption legislation and increased
enforcement efforts around the world, corruption is still prevalent
CORRUPTION SCHEMES
Bribery schemes

Kickback schemes

Bid-rigging schemes

Economic extortion schemes

Illegal gratuities schemes

Conflict of interest schemes

BRIBERY SCHEME
 A bribe is an illegal or unethical gift given to influence the recipient's
conduct.
 It may be money, goods, rights in action, property, preferment, privilege,
emolument, objects of value, advantage, or merely a promise to induce or
influence the action, vote, or influence of a person in an official or public
capacity.
 Bribery may be defined as the offering, giving, receiving, or soliciting of
corrupt payments to influence an official act or business decision.
 In the employment context, bribery involves a conflict of interest in which
the employee’s personal interest overwhelms his professional
responsibilities.
 Bribery involves collusion between at least two parties. Employees,
managers, or salespeople of a business may offer money or gifts to a
potential client in exchange for business.
BRIBERY SCHEME

BRIBERY SCHEME

OFFICIAL BRIBERY COMMERCIAL BRIBERY

BRIBERY SCHEME
OFFICIAL BRIBERY:
 Official bribery refers to the corruption of a public official to influence an
official act of government.
 The term official act originates from traditional bribery statutes that only
proscribe payments made to influence the decisions of government agents
or employees.

COMMERCIAL BRIBERY:
 Commercial bribery refers to the corruption of a private individual to gain a
commercial or business advantage.
 In commercial bribery schemes, something of value is offered to influence
a business decision rather than an official act, as is the case in official
bribery.
 Commercial bribery may or may not be a criminal offense
KICK BACK SCHEMES
 A kickback is an illegal payment intended as compensation for favourable
treatment or other improper services. They refer to the giving or receiving of
anything of value to influence a business decision without the employer’s
knowledge and consent
 Kickbacks occur when vendors make undisclosed payments to employees of
purchasing companies in order to enlist the employees in overbilling schemes.
These are some common kickback warning signs:
 No competitive bidding process (or lower bids are ignored).
 Lack of appropriate supervision during the purchasing process.

 Higher-than-average prices for goods or services.

 A vendor with frequent legal or regulatory problems.

 Employees are too friendly with vendors.

 Management pressures staff to use a particular vendor.

 Employees continue to use vendors that provide poor products or services.

 Delivery dates are repeatedly missed.
BID RIGGING SCHEMES
 Bid rigging which occur when an employee fraudulently assists a vendor in
winning a contract through the competitive bidding process.
 Bid rigging is an illegal practice in which competing parties collude to choose
the winner of a bidding process while others submit uncompetitive bids.
TYPES OF BID RIGGING:
i. Bid rotation: When bidders take turns at being the winning bidder, a form
of market allocation.
ii. Bid suppression: When some bidder sits out of a bidding process so
another party can win a bid.
iii. Complementary bidding: When uncompetitive bids are made to ensure
that a certain bidder is selected. Also called "courtesy bidding" or "cover
bidding."
iv. Phantom bidding: Employed in auctions to compel legitimate bidders to
bid higher than they normally would.
v. Buyback: A fraudulent practice in no-reserve auctions when a seller buys
the auction item to prevent it from selling at too low a price.
ECONOMIC EXTORTION SCHEMES
 Economic Extortion is a kind of fraud where the perpetrator (employee)
demands the payment from salesperson or vendor to influence or make the
decision in favour of that vendor.
 Extortion is defined as the obtaining of property from another, with the
other party’s consent induced by wrongful use of actual or threatened force
or fear.
 To constitute extortion, the threat must be the controlling reason that the
victim gives up a right or property
The following types of threats can constitute extortion:
i. Physical harm
ii. Property damage
iii. Accusing a person of a crime
iv. Disgracing a person
v. Public exposure
ILLEGAL GRATUITY SCHEMES
 Illegal gratuity is something of value that a person gives offers or promises
for the purpose of influencing the action of an official in the discharge of his
or her public or legal duties.
 An illegal gratuity is merely something that a party who has benefited from
a decision offers as a “thank you” to the person who made the beneficial
decision.
 At first glance, it might seem that illegal gratuities schemes are harmless
as long as the business decisions in question are not influenced by the
promise of payment. But most organizations’ ethics policies forbid
employees from accepting unreported gifts from vendors.
 Additionally, even though no outright promise of payment has been made
in an illegal gratuity, employees might direct business to certain companies
in the hope that they will be rewarded with money or gifts.
CONFLICT OF INTEREST
 A conflict of interest occurs when an employee or agent—someone who is
authorized to act on behalf of a principal—has an undisclosed personal or
economic interest in a matter that could influence his professional role.
 These schemes involve self-dealing by an employee or agent and can occur
in various ways.
 For example, a conflict might occur when an employee accepts
inappropriate gifts, favours, or kickbacks from vendors, or when an
employee engages in unapproved employment discussions with current or
prospective contractors or suppliers.
 In contrast to bribery schemes, where fraudsters are paid to exercise their
influence on behalf of a third party, conflict of interest cases involve self-
dealings by employees or agents.
CONFLICT OF INTEREST
The most common conflict of interest schemes
are:
Purchase schemes
Sales schemes
Delayed billings
Business diversions
Resource diversions
Financial interest in companies under
perpetrator’s supervision
Financial disclosures
OTHER CORRUPTION SCHEMES
Collusion

Methods of making Corrupt payments

Gifts, travel, Entertainment

Cash Payments: Checks and other financial
Instruments
Hidden Interest

Transfer Not at Fair market Value

Promise of Favourable treatment

ANTI-CORRUPTION LAWS
In India:
• Indian Penal Code, 1860
• Prosecution section of Income Tax Act, 1961
• The Prevention of Corruption Act, 1988
• The Benami Transactions (Prohibition) Act, 1988 to prohibit benami
transactions.
• Prevention of Money Laundering Act, 2002
In United States of America: 
• Foreign Corrupt Practices Act of 1977 (FCPA)
• Securities Exchange Act of 1934

In United Kingdom:
• The Bribery Act,2010
• The Proceeds of Crime Act,2002 (POCA)
CONCLUSION
 Corruption is an issue which adversely affects a country’s economy of
central, state and local government agencies.
 It not only holds the economy back from reaching new heights, but
rampant corruption will stun the country's development.
 Hence anti-corruption laws have been enacted in almost all the countries to
tackle the corruptions in the system.
THANK YOU