As the outbreak of the coronavirus (COVID-19) pandemic continues globally, multinational companies and individuals are joining the fight against the virus, donating money and medical supplies, and providing necessary services. However, when making these charitable donations, either domestically or globally, companies should consider appropriate anti-corruption compliance procedures under applicable anti-bribery laws such as the US Foreign Corrupt Practices Act to ensure the donation is used for the intended charitable purpose. Any donation should be carried out in an open and transparent fashion, be based on fair and objective criteria, be accurately and completely documented, and be consistent in all respects with the principles of the company’s code of conduct and anti-corruption policies.
Some practical compliance safeguards include:
- Donations should be made only to recipients that can be relied upon to use the donation in the legitimate manner intended by your company;
- Donations should be described accurately and in reasonable detail in the books and records of your company; and
- Donations that improperly or disproportionately benefit a public official or other recipient who has regulatory oversight over or who can improperly influence your company’s business should not be made.
Proper due diligence is critical for any charitable giving. Unless the intended recipient of the donation is a well-known reputable organization that you previously vetted, proper, risk-based due diligence should be done on the new recipient organization. In addition to typical background information on the recipient, useful information includes not only the legitimate purpose for the donation in question, but also information on any previous involvement or support by the company to the same recipient; and whether the recipient’s officers and employees are affiliated with any foreign government or are connected with the company’s current or potential business.
The key here is to ensure the donation will be used for the intended charitable purpose, and not for the improper benefit of public officials. Some typical questions to ask include:
- Is the proposed recipient or is any employee, officer, director, or other individual affiliated with the recipient a present or former public official, a close relative of such public official or someone in the public or private sector who can influence your company’s business?
- Did anyone external to your company, including any public official, recommend, solicit or endorse this proposed grant in an improper manner?
- Will anyone such as a public official who can influence the company’s business or close relative of such a public official benefit disproportionately?
- Does the donation fit within the company’s internal charitable giving guidelines and procedures?
After the due diligence review is done, when making donations, it is important to structure the donation in a manner that minimizes diversion risks and ensures the donation will be used as intended. For example, in-kind donations often are lower-risk than monetary donations, particularly if the items are not of a kind that can be diverted for personal benefit. Any monetary donations should be made by wire transfer or traceable instrument to verified accounts belonging to the intended recipient entity. Companies might also consider making more significant donations in tranches, with later tranches disbursed only upon appropriate verification that earlier tranches were used as intended. Written agreements with provisions specifying the use of funds or other items for the intended charitable purpose and requiring monitoring of and reporting and/or certifications regarding the use of the donated funds or items are highly recommended. Receipts should be obtained for any charitable donation made. Transparency measures – such as publication on the donor entity’s website or in the press – also reduce risks. And, of course, each donation should be completely and accurately documented in the company’s books and records.
Making charitable donations and investing in the communities in which we operate are an important part of corporate social responsibility. Such donations help create and maintain links with local communities, which benefits your company as well as the communities. Accordingly, many companies are committed to making charitable donations or investing in worthwhile community projects in a transparent and accountable way. We hope this summary describes steps that can be taken to facilitate compliance with applicable anti-corruption laws.