Managing corruption risks when making charitable donations
United Kingdom | Video | November 2020 | 05:12
Video Details
| Andrew Reeves | I’m Andrew Reeves, counsel in our London investigations and compliance team. I am joined today by Jeff Cottle, a partner in our team that splits his time between DC and London, and Ed Malcolm, an associate in our team that specialises in bribery and corruption issues. Today we’re going to be talking about how to manage the bribery and corruption risks arising out of charitable donations, and many companies have made really significant contributions to ongoing pandemic relief efforts, and those are of course to be applauded, but we think it’s really important that companies are assessing and managing their bribery and corruption risks relating to donations, particularly in emerging markets. And companies of course need to think about their due diligence processes and their approval processes around donations, but we think it’s really important that companies also ask some fundamental questions about the substance of the request and that will help not only to assess and manage the risks, but also it will help to flush out any further red flags. Ed is going to kick us off with talking about some of the key questions that legal and compliance teams need to be asking about charitable donation requests. Jeff is then going to talk about some of the process and the governance points around this. |
| Edward Malcolm | Thanks Andrew – I think there are three different types of questions that need to be asked. The first one of these, is whether the request itself is permitted. It’s really important to check your policies, your community donations plan and relevant contracts, as well as trying to make sure the donation is permitted under relevant laws and procurement rules. Secondly, you’ll want to ask the relevant due diligence questions. Considering what’s known about the requestor, why they’re requesting a donation now, what connections and influence the requestor may have, and how that links to your business. Jeff will come on to this in more detail in a bit. Third, there are then questions to try and flush out, to see if there is an issue with the substance of the request and whether there is in fact an ulterior motive. These can be trying to work out whether the donation can be structured in another lower risk way, for example through the provision of services rather than money or goods that can be easily converted into cash. If there’s a particular push back as to this, then this may be a red flag. Secondly, what’s the requestor’s position when you try to impose controls and governance around the payment. Are they resistant to that? Finally, and fundamentally, what would be the impact if the company said no? If there’s a real concern from the business about the way that the requestor would respond, and what the consequences would be, then that in itself is often a red flag. Jeff, do you want to pick up and talk about some of the points about process and governance? |
| Jeffrey Cottle | Thank you Ed, there are a number of points to be aware of around process, and I will cover a few of the main ones now. First of all, approvals should be clearly recorded and donations should be subject to formal invoicing as well as financial oversight before being accurately recorded in the companies’ financial accounts. Some points to consider around due diligence include where the request for the donation has come from and the purpose for which the donation will be used. The particular charities status, its reputation, its past projects, who owns and manages it, any connections of the charity with government or public officials, the relationship between the donation and the donating companies current or potential business operations and finally, whether the donation has any associated tax relief benefits. For verification purposes, companies should ask the named bank for any financial donations to independently and directly confirm in writing the details of the bank account into which the funds will be paid. The company should if at all possible, have processes for assuring that the funds are spent for their approved purposes and any in-kind donations actually reach their intended destination. Finally contractual protection should be put in place, donations should be recorded in a written agreement allowing the donating company to monitor and/or audit the use of the funds or the donated goods, and to suspend any future payments or terminate the agreement for any reason. |
Global Co-Head of Investigations, Partner
Email
andrew.reeves@nortonrosefulbright.com