Several Holidays are Around the Corner. Cue the Gift-Giving.
Hard to believe, but it is almost that time of year again. Several important holidays are just around the corner including Diwali (1 November), Christmas (25 December), Hanukkah (25 December – 2 January), Lunar New Year (29 January 2025), and Eid al-Fitr (30 March 2025). Each of these holidays involves customary gift-giving. Executives, sales and marketing teams and other departments at companies worldwide, including yours, will prepare for the festivities in their usual way by ordering gifts to be distributed to clients, customers and business partners.
In fact, they may order even more than last year. According to some research polls, corporate gift giving increased by as much as 60% during the pandemic. Companies were eager to maintain strong business relationships in those fully remote WFH times, and the trend has not slowed in our brave new hybrid-working world. Compliance Officers naturally want to stay ahead of the risk that gift-giving presents (yes, pun intended). Here are three suggestions to help:
Send a Policy Reminder. Now, before the gifts are ordered, is the time to remind employees about the company’s gifts, entertainment & hospitality policy. Work with your senior leaders to send an email alert to their teams clearly stating the policy’s gift amount limits and approval process, to use the automated gift clearance system (if you have one), and to contact Compliance if any government official or agency is on the recipient list. An email (that you help ghostwrite) sent by the regional, country or department leader should get the attention of employees this topic deserves. The email sets an ethical tone from the top and serves up bite-size training – a win-win for compliance.
Confirm the Gifts and Recipient Lists. Visibility into and an ability to approve (or not) the planned gifts and recipient list(s) by way of an automated gift clearance system can be ideal, so long as employees use it. Many companies do not have such a system, and if that describes your company then walk both the carpeted and digital hallways to confer with managers who order or approve gifts to get the detail you need to evaluate the risk. If you hear crickets or are not confident about the data you are receiving, ask the procurement or accounts-payable teams what’s been ordered and by whom.
Focus on Government Officials. It will not come as a surprise that some of the planned gift recipients are government officials. From your internal client’s perspective government clients and customers should be shown the same appreciation as others. You can’t really argue with that. Well, unless your company policy prohibits providing gifts to any government official under any circumstance. The relevant guidance from UK and U.S. enforcement agencies, however, does not completely prohibit holiday gifts to government officials. The Serious Fraud Office (SFO) announces a commonsense approach on its website: “Bona fide hospitality or promotional or other legitimate business expenditure is recognised as an established and important part of doing business.” Also, the FCPA Resource Guide (second ed.) states that providing small gifts to government officials is appropriate “when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only to reflect esteem or gratitude, and permitted under local law.”
If your company policy allows gifts to government officials, take these precautions:
Check Local Law. Check restrictions under the law of the country where the government official is from to ensure she legally may accept a gift. TRACE members have free access via the Resource Center to ‘Gifts & Hospitality Guides’ for 138 countries. These are authored by local TRACE partner law firms and updated annually. Each Guide answers key questions such as “Are there any restrictions on the value of gifts that can be given to government officials?” Otherwise, check with of your company’s usual outside counsel for that jurisdiction to ensure that a gift may be accepted and any limitations under local law.
Timing is Everything. . . in love, comedy, and even gifting. To avoid any appearance of impropriety, if any part of your company (i) currently is in negotiation with a government client or customer on a specific transaction or (ii) recently has received a benefit from a government official or agency, then gifts should not be provided on the upcoming holiday to such government official(s).
Spread the Joy. Address the gift to the government office, not the top person. A gift that can be shared amongst several people is best. Everyone loves holiday sweets.
Sameness is Good. Check that government gift recipients are not receiving a gift that is more elaborate or of higher value than other company gift recipients will receive.
An Accompanying Statement. No, not an audit opinion letter! A card or other communication included with the gift should convey only best wishes for the holiday and gratitude for their partnership generally. Ask employees to avoid referring to a specific transaction or other matter with the government agency.
Record Accurately. Of course, any expenditures on gifts must be recorded accurately so they truthfully and fairly “reflect the transactions and dispositions of the assets of the issuer.” 15 U.S.C. § 78m(b)(2)(A)(the FCPA’s ‘books and records’ provision).
The above steps will help protect your company from any gift-giving missteps. You might even choose to save a link to this post in your calendar so that it pops up on this date (or sooner) next year as a reminder to prepare. Ideally, the above steps will save you time that is better spent with family and friends on whichever holidays you celebrate!
General Counsel