A gift policy is a document through which a company seeks to regulate the receipt and delivery of gifts and invitations to its stakeholders, in order to reduce the risk of incurring in a crime such as corruption or bribery, as well as to avoid conflicts of interest, thus protecting employees and the company.
FCPA Best Practices: Gifts, meals and entertainment
The exchange of business courtesies, such as gifts, meals and entertainment, is a welcome practice if used properly, as it can help strengthen existing relationships, foster new opportunities and convey respect and appreciation for business partners.
However, under the Foreign Corrupt Practices Act (FCPA), if these cross the line into conduct that could qualify as bribery, companies risk significant fines and penalties.
Therefore, companies should understand the potential risks of gifts and entertainment.
What is allowed under the FCPA?
Although there are no clear rules, in general, business courtesies are permitted, provided they are modest in value, reasonable in scope, and are not given or received in the expectation of obtaining or retaining business, as a reward for doing so, or as a means of inducing a breach of trust or fairness.
It is also important that the giving or receiving of gifts or courtesies not taint business or official judgments, and that they do not represent and appear to be a conflict of interest.
In general, the FCPA prohibits offering, paying, promising to pay or authorizing the payment of money, gifts or anything of value to a foreign official:
(a) to influence any act or decision of the official.
(b) to induce the official to use his or her influence to affect any act or decision.
(c) to seek any improper advantage to assist the enterprise in obtaining or retaining business.
The FCPA covers payments made directly or indirectly, including those made through third parties with knowledge that all or part of the payment would be made to a foreign official.
What a Gift Policy should include?
- Internal Regulation: Regulate or provide criteria that cover both the giving and receiving of gifts and/or invitations and how they are managed.
- Scope of application: it must be defined to whom the policy applies since it should not only cover permanent employees but all those who perform functions on behalf of the company.
- Definition of gift: it must be established what constitutes a gift.
- Training: It must be disseminated and known throughout the organization. If this point is not met, the policy would be meaningless, as it would be very difficult to enforce compliance.
- Local legal context: It is recommended to implement strict and globally applicable limits for gifts and entertainment to ensure that no national laws are violated.
- Monitoring: Constantly measure whether or not the policy is being complied with, and determine whether or not it is actually being complied with.
Some suggestions that will help to ensure compliance with the FCPA:
- The gift should be provided as a token of esteem, courtesy or in return for hospitality.
- The gift should be of nominal value but in no case greater than $250.
- No gifts in cash.
- The gift shall be permitted under both local law and the guidelines of the employer/governmental agency.
- The gift should be a value which is customary for country involved and appropriate for the occasion.
- The gift should be for official use rather than personal use.
- The gift should showcase the company’s products or contain the company logo.
- The gift should be presented openly with complete transparency.
- The expense for the gift should be correctly recorded on the company’s books and records.
When a gift is properly recorded in the business’s books and records and is given merely as a token of esteem with no ulterior motives, the gift is proper and permissible by law.
Some examples of expenditures that would be considered impermissible under the FCPA:
- A US $12,000 birthday trip for a Mexican government decision-maker, which included dinners and visits to vineyards.
- US $10,000 in dining, beverages and entertainment expenses for a government official.
- A trip to Italy for eight government officials that consisted primarily of sightseeing and included $1,000 in “pocket money” for each official.
- A trip to Paris for a government official and his wife, which consisted primarily of sightseeing activities by chauffeured vehicle.
- When giving or accepting a gift, it is always good to have record-keeping mechanisms in place.
- Never give gifts to government officials on behalf of an organization.
- If the other party insinuates that you need an incentive to continue the deal, report it.
- The policy should apply to every member of the organization equally, with no exceptions.
- In case of any doubt, it is always best to contact your company’s Crime Prevention Officer or Compliance area, who can give you specific guidance.