This week has seemingly turned into a series of blogs posts which are primers for areas which are still of concern under the Foreign Corrupt Practices Act (FCPA) and for compliance professionals.  I previously looked at facilitation payments, extortion payments. Today I provide a primer on charitable donations and political contributions. I will also provide primers on gifts and business entertainment and policies and procedures this week. So sit back and go back to the future to review some of the basics of every FCPA compliance program.

1. Charitable Donations

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 2020 FCPA Resource Guide regarding charitable donations. Your policy should begin by asking the following five initial questions:

1. What is the purpose of the donation?
2. Is the payment consistent with the company’s internal guidelines on charitable giving?
3. Is the payment at the request of a foreign official?
4. Is a foreign official associated with the charity and, if so, can the foreign official make decisions regarding your business in that country?
5. 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:

1. Will the donation recipients certify that they or the entity will comply with the requirements of the FCPA;
2. Will the recipient provide audited financial statements;
3. Will the recipient restrict the use of the donated funds to humanitarian or charitable purposes only;
4. Will the funds be transferred to a valid bank account; and
5. 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:

• What was the timing of the charitable donation or promise to make a donation in relation to the obtaining or retaining of business?
• 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?
• 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?
• Was the total amount donated to one charitable foundation out of proportion to the rest of the country or region’s charitable donation budget?
• Did the sales in one area, region or country spike after a pattern of charitable donations?

The information on the red flags from the Opinion Releases and the best practices, as set out in the 2020 FCPA Resource Guide, have been available for some time. From the Schering-Plough and Lilly enforcement actions, your policy should consider 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.

2. Political Contributions

The FCPA itself states, “The FCPA’s anti-bribery provisions apply to corrupt payments made to (1) “any foreign official”; (2) “any foreign political party or official thereof”; (3) “any candidate for foreign political office”; or (4) any person, while knowing that all or a portion of the payment will be offered, given, or promised to an individual falling within one of these three categories. Although the statute distinguishes between a “foreign official,” “foreign political party or official thereof,” and “candidate for foreign political office,” the term “foreign official” in this guide generally refers to an individual falling within any of these three categories.”

Government policies affect the commercial environment. A company is subject to legislation and regulation that affects how it conducts its business and generates value for its investors. Participating in the political process is part of a business strategy to protect a company’s interests.

Most international businesses have strategies to engage in the political process with a view to the long-term interests of the company and to promote and protect its interests. All political contributions and expenditures on behalf of your company as well as management reports on these political contributions and expenditures should be reported to the Board of Directors no less than annually. No political contributions should be made or promised unless written pre-approval has been obtained from the corporate compliance function.

Among the factors that influence which candidates merit political donations include:

• Candidate’s support for key company business and public policy priorities;
• Candidate’s voting record and leadership position;
• Candidate’s commitment to overall industry’s growth and ability to positively impact its goals; and
• Where there is support for you company’s assets or employees in a region or state represented by the candidate.

All political contributions should be made in accordance with all applicable laws and regulations and disclosed as required by law. Any requests for contributions to a political candidate, committee, or party must be addressed to the corporate compliance function and must include an analysis of the four factors above, as well as business justification for the request to support the particular candidate, committee, or party.

Additionally, no Company funds or other assets may be used for political contributions outside the U.S., unless expressly approved in writing by the compliance function. A company employee seeking approval for political contributions outside the U.S. must present your compliance function, in writing, with all relevant information to allow for a thorough and careful analysis. Among the information required by the compliance function should be:

• The name of the candidate, committee, or political party;
• The government agency with which the candidate is or has been affiliated;
• The candidate’s position on key issues that affect company’s business;
• The candidate’s voting record on the issues affecting the company;
• Whether company does business with the government entity with which the candidate is seeking a position and the amount of such business in the preceding 24 months;
• Any pending or recently awarded contracts with the government entity with which the candidate is affiliated or is seeking a position;
• Any pending or recently awarded contracts overseen or managed by the committee, party, or political entity for which the political contribution is sought; and
• The business justification for making the political contribution.

Your company policy should prohibit politically exposed persons (PEPs) from exerting pressure or undue influence over you employees, agents, consultants, or representatives to make personal political contributions.

Your policy should prohibit use of your company’s resources or assets, including work time, to support candidates or campaigns personally. In the course of employment, PEPs should be prohibited from engaging in any activity on a company’s behalf that is intended to influence legislation, rulemaking, or governmental policy or engage lobbyists or others to do so, without pre-authorization of the corporate compliance function.

Political contributions shall not be used to disguise a payment that is prohibited by a company’s Code of Conduct, anti-corruption policy, or other policies or procedures. If your company’s policies prohibit the payment in another form, it should not be made under the guise of a political contribution. No employee should utilize third parties or their own personal funds to make a payment that cannot be made under a company’s policies and procedures.

Finally, any exceptions should only be approved by the CCO, COC or Board of Directors.

[View source.]