Governance Takes No Holiday: Giving Corporate Gifts Without Bribery Risk

To lower their bribery risk, businesses should scrutinize corporate gift-giving before they close the books for the year. But about one-fifth of companies don’t, according to a Deloitte poll of more than 1,600 accountants, auditors, and finance officials, many of them at multinational companies.

These respondents were among those who were watching a 2015 Deloitte webcast, “Gift-giving and Corruption Risk: Stress-Testing Your Compliance Program for the Holidays.”

Give only gifts with company logos and that reflect the company’s products. And make sure gifts are intended only for official, not personal, use

In many high-income countries in North America and Europe, businesses give gifts during the winter holidays as a token of appreciation, said Bill Pollard, a Deloitte partner and regional FCPA (Foreign Corrupt Practices Act) practice leader.

But in some countries in Asia, Eastern Europe, and sub-Saharan Africa, including China, Russia, and Indonesia, bribery is a form of currency to create certain behavior, he said. “The concept of quid pro quo is attached more closely in particular countries.”

Don’t Give Money

Instead of coffee mugs or business card holders, gifts intended as bribes might include gift cards, luxury accessories, or a stay at a five-star hotel. Bribes that get reported in the books may be hidden as research-and-development expenses or donations.

“Once you start peeling back the gift-giving, the intent becomes clear,” Pollard added.

According to Deloitte, leading practices to prevent and detect corruption in corporate gift-giving include:

  • Setting ground rules clearly. Describe the nature and type of acceptable gifts, payments, travel, and entertainment. Escalate all gifts for government officials to compliance for review. Create an approval process with aggregate dollar limits, and define the disciplinary process for non-compliance.
  • Acting globally. Ensure rules are consistent not only with US FCPA and other laws, but also rules and customs in other countries. Translate guidance into all languages in which the company operates.
  • Giving only gifts with company logos and that reflect the company’s products. And make sure gifts are intended only for official, not personal, use.
  • Making gifting inclusive. Gifts should be given publicly and transparently, and should involve teams, not individuals.
  • Prohibiting cash gifts. It is not advisable to gift money or cash equivalents.

Year-Round Vigilance

The holidays are also an opportunity for companies, particularly multinationals, to consider lowering bribery risk year-round. Pollard recommended these key steps:

Undertake an anti-bribery risk assessment. To identify where the risk resides, conduct an enterprise-wide assessment that includes distributors, agents, and third parties.

Determine where in the company interactions with government officials are most likely to take place, and check controls to mitigate bribery risk. Repeat the assessment at least once a year and when the business has undergone a significant change.

Customize anti-bribery training based on the risk assessment. Once you know where the risk resides, pinpoint areas where specialized training is necessary.

Use tools to test and monitor. Internal auditing tools used to test for fraud are also effective to check for signs of bribery.

High-risk areas internal auditors have traditionally paid little attention to marketing expenses, research and development, and donations. Analytics now allow companies to continually look for patterns and anomalies and monitor for bribery risk.

New analytical tools are also becoming available, such as a tool that combines data with emails.

Learn from problems. How a multinational disciplines bad behavior can support or undermine a zero-tolerance policy. Also, remediation of detected acts of bribery should include a root-cause analysis to learn from the problem.

About the Author

Sabine Vollmer is a Senior Editor at CGMA Magazine, a publication of the Association of International Certified Professional Accountants, which offers the Chartered Global Management Accountant (CGMA) professional designation. The association is a joint venture of AICPA in the US and CIMA in the UK. Click here to subscribe to the weekly newsletter CGMA Magazine Update.

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