Ground Rules for Corporate Gift Giving to Avoid Breaking the Law

Deloitte is advising corporate clients to be careful about their holiday gift giving so they don’t run afoul of laws like the Foreign Corrupt Practices Act.

In a recent poll, Deloitte found that 20.4 percent of companies don’t assess their employee gift-giving corruption risk, even though 43.4 percent of the survey respondents expect anti-corruption enforcement to rise next year. Of all the organizations that indicated they do monitor compliance, only 8.4 percent use visualization and data analytics tools to support their anti-corruption efforts.

“The awareness for multinational companies has continued to increase,” said Deloitte Advisory partner Bill Pollard. “I’d say five years ago the awareness was starting to really pick up as the government focused on this particular topic and you saw an increase in enforcement actions. Over the ensuing five years plus, many multinationals got their act together and started putting in programs, policies and procedures to address the risk. What we’re actually seeing now is a whole new wave of companies that maybe previously were not global—or their operations are now expanding more globally—having a renewed interest in this area. The government’s attention hasn’t really waned, but will probably increase going forward.”

Deloitte’s poll results indicate that anti-corruption policies for giving gifts to non-U.S. government officials vary widely. While 18.2 percent of the survey respondents said their company maintains a no-gift policy and provides no gifts to customers, 16.4 percent give only small company logo items, 15.7 percent restrict the gift value, and 6.1 percent use separate policies for non-U.S. government officials as opposed to other customers and third parties.

“The practice of giving gifts in general is changing,” said Pollard. “In certain cultures, either as a way of introduction or as a courtesy or a show of good faith in building a relationship, gift giving is still a common practice. Multinational companies are attempting to do a better job of understanding the risk associated with those common cultural practices and then identifying ways to mitigate that risk. Some companies are making the decision not to give gifts at all, whereas others just want to understand the risk and then, based on their understanding of the risk, make sure that there are the right kinds of controls and policy and procedure in place to address the risk.”

Pollard pointed out there is already some official guidance available for what companies can give, and he believes accountants can help their companies and clients comply.

“The SEC and DOJ came out with a document in 2012 providing guidance to companies in a number of areas, including gift giving,” he said. “Where accountants are the most effective is in a few different areas—helping companies put in the proper controls to address the risks, making sure there’s enough visibility into who is and isn’t a government official, what types of gifts are being given, how those gifts are being recorded in the books and records, and tracking and monitoring type mechanisms around gift giving, assuming companies choose to do that. That’s on the front end, and then on the back end there’s the ability to test and monitor those policies and procedures, going in and actually mining transaction data and looking to see if what’s reflected in the expense reports of a salesperson is consistent with the policy or the procedure that they are expected to comply with. Those are the types of activities that are well suited for accountants to play a role in.”

Some leading practices recommended by Deloitte to prevent and detect corruption in 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. Define disciplinary process for non-compliance.

• Act globally: Ensure rules are consistent not only with U.S. laws but local laws and customs.  Translate that guidance into all appropriate languages in which your organization operates. 

• Keep gifts corporate: Give gifts with company logos, reflect the organization’s products and ensure they are intended for official—not personal—use (such as a business card holder).

• Make gifting inclusive: Give gifts publicly and transparently, and involve teams as opposed to individuals (such as specialty baked goods for a team to share).

• Prohibit cash gifts as well as gift cards.