India Orders Probe Against Wal-Mart On Foreign Exchange Rule Violations

India has ordered a probe into the alleged foreign exchange rule violations by Wal-Mart Stores Inc. in the country, according to media reports which quoted law enforcement officials.

Wal-Mart has been accused of “clandestinely and illegally" investing $100 million in India’s retail market through its wholesale joint venture partner Bharti Enterprises from 2010. India opened up its market for foreign direct investment in multi-brand retail two months ago.

On the complaint from a lawmaker who alleged that Wal-Mart invested in the domestic frontend units of its Bharti Enterprises by violating the Foreign Exchange Management Act (FEMA), the authorities have launched a probe into the violations by the U.S. retail giant.   

"Yes, the Enforcement Directorate has initiated an investigation into the allegations against Wal-Mart," said an official, who declined to be named. "The probe is at an early stage and therefore (it is) difficult to say what the outcome will be," he added, according to Reuters.

Wal-Mart has denied the allegations and announced that it is in full compliance with the rules in the country.

"We are in compliance with India's FDI laws. All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India (RBI)," a Wal-Mart spokesman said, according to Reuters.

However, on Thursday, Wal-Mart announced that the company was investigating the allegations of the corrupt practices against it in foreign markets, including India.

"We have inquiries or investigations regarding allegations of potential FCPA [Foreign Corrupt Practices Act] violations in a number of foreign markets where we operate regarding FCPA allegations, including but not limited to Brazil, China and India. This is in addition to the ongoing investigation in Mexico," the company said in a statement on its website.

The investigations are part of a worldwide review of its policies and practices by the company to ensure compliance with the FCPA.

Wal-Mart announced last month its plans to launch the retail stores in the country in partnership with Bharti Enterprises following the government’s decision to allow FDI in multi-brand retail.