As the holiday season is coming closer, it is quite common to give or receive treats. Thus, the challenge of handling gifts and invitations, as addressed in the webinar in July 2020, is more relevant than ever. Small gifts demonstrate appreciation and maintain a good relationship. In a business context, however, they may lead to uncertainty. Gifts must be distinguished from the attempt of bribery. While giving or receiving “simple gifts” is a welcome opportunity to initiate and foster business relationships, bribery is punishable almost globally. Its practice is considered undesirable, harmful and, in some cases, even destructive. Hence, the question that arises is: where does the fostering of a good relationship end and bribery begin?
Reasonable promotional gifts of minor value such as drinking bottles with the logo of the business partner printed on the side or chocolates around Christmas, but also a simple invitation for lunch, are ordinary in business dealings. Thus, they are generally not an indication of corruption. However, should such favours take on a certain regularity, be granted just before important contractual negotiations or involve unusually high values, the personal judgement of employees or business partners may be affected. Is the acceptance of a golden pen with the name of the business partner engraved thus permissible? Or should bi-weekly invites for lunches that usually last until dawn be accepted?
In Switzerland, bribery and granting of advantages on the part of both government officials and private individuals are prosecuted by law (except minor cases involving private individuals). Not only the actual wrongdoer, but also the company itself may be held responsible if the bribe cannot be attributed to a specific offender due to poor internal organisation. In addition, foreign legislation may also apply to a Swiss organisation when doing business internationally, such as the US Foreign Corrupt Practices Act (FCPA) with its extraterritorial reach. It applies to all US persons and also to foreign firms and persons who cause, directly or through agents, an act in furtherance of a corrupt payment to take place within the territory of the United States. The US takes an expansive approach to this definition (e.g. use of emails that touch a US-based server, US bank account, payment in US dollars and phone calls made in the US). On the other hand, there is the UK Bribery Act (UKBA) that applies to any company, no matter where it is incorporated or located, if it “carries on a business, or part of a business, in any part of the United Kingdom”. Its territorial scope is extensive, and it introduces a new crime of “failure to prevent” bribery.
An organisation should set an appropriate policy that defines rules and processes and forms the basis for handling gifts and invitations professionally. The policy should define the scope and different forms of appearance of corruption and set boundaries between acceptable and prohibited practices in the context of gifts and invitations. Its goal should be to reduce the risk of active as well as passive corruption and to protect the company and its employees from criminal prosecution and loss of trust.
However, before such a policy can be developed, an organisation should have a clear picture of the following issues.
- What scope should the policy have? What kind of gifts and invitations are covered? It is advisable to internationally address all staff. Furthermore, the company should have a clear picture about what kind of gifts and invitations are common in standard operations (e.g. advertising materials, generous events, gift vouchers, invitations to meals in restaurants or fairs) and how they should be handled in the future. Ideally, the various scenarios should be illustrated with practical examples.
- How should roles and responsibilities be allocated? Clear processes need to be defined and documented. It is of utmost importance to know who to address in which situation. Does a certain issue need to be handled at a headquarter or a regional level? Does the management or compliance function decide on the next steps?
- How should socially acceptable gifts be dealt with? Local traditions and customs definitely need to be considered and put into the overall context. In Western culture, giving presents around Christmas is common. In certain Asian countries, generous gifts are offered at weddings or upon the birth of a business partner’s child. In certain African countries, it is common to present a cow as a gift on special occasions. Are these practices in line with the global organisational culture?
- Are there types of gifts or invitations that should be absolutely prohibited? This is usually the case with cash or payment methods similar to cash, which are also often prohibited by law in many jurisdictions.
- Is the organisation involved in governmental activities and are gifts to public officials essential? When contributions are to be made to government officials, greater caution is required and a separate approval process is therefore highly recommended.
Unfortunately, the adoption of a policy is not enough to prevent organisational failure. In order to prevent bribery or corruption and minimise the risk of corporate liability, practical implementation, appropriate communication and training, as well as continuous monitoring and reporting, are required. For this purpose, it may be useful to use tailor-made software solutions that exist especially for handling gifts and invitations from a compliance point of view. Web-based systems make life much easier for employees than the manual approach (e.g. online forms with automatic check for need of approval, automatic initiation of process).
As with any compliance measure, it is crucial that top management leads by example (“tone from/at the top”). Furthermore, it is vital that all employees receive appropriate training and information on why such measures are absolutely necessary and what is expected. It is, however, key to let them know who to contact in case of questions or uncertainties.
Compliance with the respective policy should be checked regularly. Finally, reporting gifts and invitations plays a central role in identifying trends and potential risks that require compliance attention.
Need for action
Appropriate policies and processes for handling gifts and invitations are indispensable to prevent criminal behaviour and reputational damage. However, it is not as simple as just drawing a line between “simple gifts” and bribery. When it comes to what exactly should be regulated, every company should follow an individual tailor-made approach, depending on their business activities. Moreover, it is advisable to use a technical solution for practical implementation to make the approval process more comprehensible.
Do you need assistance with the implementation of a compliance framework, or would you like to learn more about gifts and invitations? Contact our experts at PwC. We are happy to answer your questions and support you in any way we can!