Giving corporate holiday gifts without the bribery risk

The holiday season raises the risk that a corporate gift given to a government official is seen as a bribe, especially in economies generally perceived as prone to corruption.

To lower their bribery risk, businesses should scrutinise corporate gift-giving before they close the books for the year, but about one-fifth of US companies don’t, according to a Deloitte poll of more than 1,600 accountants, auditors, and finance officials, many of them at multinational companies. Of those who do, only 8.4% use visualisation and data analytics tools to support anti-corruption efforts.

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, CPA, a Deloitte partner and regional FCPA practice leader. But in countries in Asia, Eastern Europe, and sub-Saharan Africa, including China, Russia, and Indonesia, bribery is a form of currency to create certain behaviour, Pollard said.

“The concept of quid pro quo is attached more closely in particular countries,” he said.

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:

• Set 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 noncompliance.
• Act globally. Ensure rules are consistent not only with US laws but also local laws and customs in other countries. Translate guidance into all languages in which the company operates.
• Give only gifts with company logos and that reflect the company’s products. Make sure gifts are intended only for official, not personal, use.
• Make gifting inclusive. Gifts should be given publicly and transparently and involve teams, not individuals.
• Prohibit cash gifts.

The holidays are also an opportunity for 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.
 
Customise anti-bribery training based on the risk assessment. Once you know where the risk resides, pinpoint areas where specialised 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 include marketing expenses, research and development, and donations. Analytics 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 behaviour 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.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.