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India’s Vanishing Companies – Is Your Forensic Search On?
For such a computer literate country as India, on which many businesses around the world rely for skilled services, it comes as a shock to read in a Financial Times front-page story (July 15) that 121 companies have vanished there after violating filing rules. With the state of financial crime in India – let alone everywhere else – this is a salutary warning to business to link up without delay with forensic professionals who can help you avoid losing all your assets when such a company disappears into thin air.
Investigations by the Ministry of Corporate Affairs in New Delhi have revealed the identity of the 121 companies involved, which listed on the country’s stock exchanges during the 1990s. But there could be more. Those already uncovered will be prosecuted. The Ministry has also announced that India’s stock market regulator – the Securities and Exchange Board – has banned 100 companies and 378 directors from using the capital markets for five years.
Business people around the world were shocked in early January this year to learn of the Satyam scandal in India. A leading IT outsourcing company, with clients like General Electric and General Motors, the $US823 million fraud was the biggest in the country’s corporate history, causing the company’s share price to drop by 78 per cent and sending India’s benchmark Sensex Index down by 7 per cent. It was quickly nicknamed India’s Enron scandal.
As The Financial Times points out, lax regulatory standards in the 1990s facilitated serious market abuses, punishing investors who had placed money in initial public offerings. Of the several thousand companies that raised money as India liberalised its financial markets, some simply melted away. The latest prosecutions of disappearing companies again highlight the need for better corporate governance, tougher supervision and careful monitoring of the roles of independent directors, banks and auditors. But that’s not enough. If you want to be ahead of the game – and it will be embarrassing if it’s shown later that you weren’t – you must engage professionals who specialise in exposing financial crime. Sophisticated computer forensics are used in this highly skilled art and the weight of experience in both your business arena as well as internationally show their value soon after the job is under way.
The Financial Times quotes Kunal Kumar Kundu, an economist and head of client operations at Infosys, the IT outsourcing company, as saying, “There are quite a few regulators but they don’t regulate properly. What I feel is lacking is an early warning system to alert investors … People are waking up but there’s still a lack of deterrence among investment bankers and those others who are supposed to do due diligence.” Dharmesh Mehta, head of broking at Mumbai-based Enam Securities, says, “[Regulation] has definitely improved. We are not in the same jungle as in 1990.”
That’s well and good, but if you’re going to seriously tackle financial crime you need forensic experts who can bring you not only up to 2009 standards, but have you well ahead of the game – at least into the next decade.
