What should your compliance policy and procedures on charitable donations look like? What should you prohibit or even caution against? The starting point is the 2012 FCPA Guidance regarding charitable donations. Your policy should begin by asking the following five initial questions:

  • What is the purpose of the donation?
  • Is the payment consistent with the company’s internal guidelines on charitable giving?
  • Is the payment at the request of a foreign official?
  • Is a foreign official associated with the charity and, if so, can the foreign official make decisions regarding your business in that country?
  • Is the payment conditioned upon receiving business or other benefits?

There are additional inquiries based upon the DOJ Opinion Releases issued regarding charitable donations. Some of the protections a company can do to comply with the FCPA regarding charitable donations are as follows:

  • Will the donation recipients certified that they or the entity will comply with the requirements of the FCPA;
  • Will the recipient provide audited financial statements; and
  • Will the recipient restrict the use of the donated funds to humanitarian or charitable purposes only;
  • Will the funds be transferred to a valid bank account; and
  • Will the recipients, allow ongoing auditing and monitoring of the efficacy of the charitable donation program.

Based upon the Schering-Plough and Lilly SEC enforcement actions, there are some additional inquiries that should be specified:

  1. What was the timing of the charitable donation or promise to make a donation in relation to the obtaining or retaining of business?
  2. Did the company follow its normal protocol for requesting, reviewing and making a charitable donation or is there a pattern of unusual donations outside the protocol?
  3. Did any one person make multiple donations just below their authority level so that it did not have to go up the line for review?
  4. Was the total amount donated to one charitable foundation out of proportion to the rest of the country or region’s charitable donation budget?
  5. Did the sales in one area, region or country spike after a pattern of charitable donations?

The information on the red flags from the prior Opinion Releases and the best practices, as set out in the 2012 FCPA Guidance, have been available for some time. From the Schering-Plough and Lilly enforcement actions, your policy should consdier the timing of charitable donations to see if they are at or near the time of the awarding of new or continued business. Finally in managing the relationship, you now need to look at overall increases in sales to determine if they are tied to a pattern of charitable donations. By looking at the timing and quantum of charitable donations, internal audit may be able to ascertain that a spike in sales is tied to corrupt conduct.

Three Key Takeaways

  1. What are the basic inquiries to make around charitable donations?
  2. Use all of the communication tools the DOJ has provided; written guidance, enforcement actions and Opinion Releases to inform your charitable donation policy.
  3. Document Document Documents the basis of your charitable donations risk assessment.

 

This month’s sponsor is the Doing Compliance Master Class. In 2018 I am partnering with Jonathan Marks and Marcum LLC to put on training. Look for dates of one of the top compliance related training going forward.

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