Checklist: Charitable and political donations and gifts, travel, entertainment compliance (USA)

Introduction

This checklist provides in-house counsel, private practitioners, and compliance teams with guidance on how to develop a donations compliance policy, and a gifts, travel, and entertainment (GTE) compliance policy, as part of an overall FCPA compliance program.

The checklist addresses the following steps:

1. Conduct research on acceptable and unacceptable GTE expenses
2. Conduct research on acceptable and unacceptable donations
3. Draft your GTE and donations policies
4. Implement and train on donations and GTE policies
5. Overall best practices for donations and GTE

The checklist is presented as a list of requirements that you can tick off as they are addressed. At the end of the document there are both general explanatory notes, and topic-specific notes corresponding to the relevant step in the checklist.

Good donation and GTE policies demonstrate that a company is making a good faith effort to prevent and avoid corrupt practices. There is no single solution, so your policies should be tailored to your organization’s specific circumstances and business.

This checklist can be used in conjunction with the following How-to-guides: How to protect your company from violations of the United States Foreign Corrupt Practices Act and Checklists: Anti-bribery risk assessment and What to include in an FCPA compliance program.

Step 1 - Conduct research on acceptable and unacceptable GTE expenses  

Step 2 - Conduct research on acceptable and unacceptable donations

Step 3 - Draft your GTE and donations policies

Step 4 - Implement and train on donations and GTE policies

Step 5 - Overall best practices for donations and GTE

Explanatory notes

General notes

GTE and donations are a great way to promote positive business relationships by conveying respect and appreciation. The US Foreign Corrupt Practices Act (FCPA) prevents only GTE and donations that have the underlying purpose of corruptly influencing foreign officials. (Often, bribes are disguised as GTE or donations.) See How-to guide: How to protect your company from violations of the United States Foreign Corrupt Practices Act. Donations and GTE are valued under the ‘anything of value’ definition of prohibited forms of payment and, therefore, must be carefully scrutinized to ensure they are not perceived as bribes. When building an FCPA compliance program, it is important to create and implement a donations and GTE policy to outline what is and is not acceptable and set out the process to handle requests for and facilitation of these payments.

The FCPA does not specifically address in legislation what is an acceptable and unacceptable donation or GTE expense.  This creates uncertainty for organizations when determining how to protect against potential violations.

It is important to note that a violation may occur if a payment is made directly by an organization or member, indirectly through a third-party intermediary, or to a third party that has influence over the government official.

The best way to prevent an FCPA violation when making GTE payments or donations is to do so openly and transparently and record them in your organization’s books and records.

Well-designed donations and GTE policies assist organizations in identifying various legal and compliance risks and provide an opportunity to prevent possible FCPA violations.

Your donations and GTE policies should sit within a larger FCPA compliance program. See How-to guide: How to protect your company from violations of the United States Foreign Corrupt Practices Act and How to protect your organization from third party liability under the FCPA and Checklists: Anti-bribery risk assessment and What to include in an FCPA compliance program.

Notes on specific requirements

Step 1 – Conduct research on acceptable and unacceptable GTE expenses

The Department of Justice (DOJ) evaluations are very case specific. Conduct pre-research of opinion procedures from the DOJ and case law to establish a broad set of guidelines on what is acceptable and unacceptable.

1.1 Identify clearly acceptable gifts, travel and entertainment

Since the FCPA does not delineate what is an acceptable GTE expense, use examples of clearly acceptable expenses to help understand what guidelines to put in your GTE policy.

1.1.1 Acceptable gifts

• Nominal value items alone, such as cab fare or coffee;
• Items with a company logo, as it is a clear promotion of the organization;
• Infrequent gifts that are properly and openly documented; and
• Bona fide gifts, which are those given as an act of appreciation.

1.1.2 Acceptable travel and entertainment

• Bona fide travel, meaning for a business purpose; and
• Moderate business class travel with the purpose to view and inspect a manufacturer’s facility, for example.

These are just some examples of acceptable GTE expenses. It is not an exhaustive list.

1.2 Identify clearly unacceptable gifts, travel and entertainment

Since the FCPA also does not specifically address what is an unacceptable GTE expense, look to enforcement actions and use examples of clearly unacceptable GTE expenses to prohibit in your organization’s policy. For example:

1.2.1 Unacceptable gifts

• Cash (instead pay vendors or organizations directly); and
• Large, expensive gifts.

1.2.2 Unacceptable travel and entertainment

• Sporting events (and spending money);
• Spending money, especially when lodging and travel are previously paid;
• Trips primarily for sightseeing (and spending money);
• Aggregation of expensive items;
• Millions of dollars over time spent on travel to a location for the purpose of training where there were no facilities;
• First class flights to a place with no facility; and
• Paid vacations and personal bills for significant others or family.

1.3 Review general guidance on gifts, travel, and entertainment

The following guidance on gifts, travel, and entertainment is based on the examples of clearly acceptable and unacceptable gifts, travel, and entertainment set out in 1.1 and 1.2.

1.3.1 Gifts guidance

Consider gifts that:

• are of nominal value;
• are for official use/agency use and not personal use; and
• are promotional items that have the organisation's logo on them, such as cups or tote bags.

1.3.2 Travel guidance

• Provide economy class airfare, generally consistent with that you provide to your employees;
• Provide travel for only the official and not their family;
• Create a list of preapproved airlines and travel agencies; and
• Send employees to make clear it is not just a personal trip for the foreign official.

1.3.3 Entertainment guidance

• Do not give additional spending or pocket money;
• Pay the service provider directly, not the official; and
• Do not include leisure activities, such as sightseeing.

Step 2 – Conduct research on acceptable and unacceptable donations

Donations can be humanitarian or charitable donations and political donations. The FCPA does not provide for a maximum threshold for the value of a donation. However, the DOJ and US Securities and Exchange Commission (SEC) look more to the intent and use of the donation than its value, and their evaluations are case specific. Research opinion procedures from the DOJ and use case law to establish a general set of guidelines on acceptable and unacceptable donations.

2.1 Identify clearly acceptable donations

Since the FCPA does not delineate what is an acceptable donation, look at examples of clearly acceptable donations to help understand what guidelines to put in your donations policy.

Examples of acceptable donations include:

• donations made directly to a government entity rather than a government official (see here also);
• donations to a foreign official with no decision-making authority; and
• nominal or low donation amounts made for humanitarian reasons.

For example, an organization wishes to market its state-of-the-art hearing aid in a new market. Rather than writing a check to cover all fees related to the governmental testing of the product, the business might instead donate a certain number of devices free of charge to the department responsible for testing the efficacy and safety of the device prior to sale.

2.2 Identify clearly unacceptable donations

Since the FCPA also does not specifically address what is an unacceptable donation, look to enforcement actions and examples of clearly unacceptable donations.

Examples of clearly unacceptable donations include:

• compensation to board members;
• excessive improper payments to political figures, see example here where a company had to pay $30 million dollars for improper payments;
• payment of personal bills with the intent to influence the official;
• excessive donations not linked to a legitimate business purpose;
• donations made to shell charities or organizations that lack transparency regarding their use of funds;
• contributions made on the condition of receiving a specific business advantage or favorable treatment; and
• payments disguised as charitable contributions but intended to funnel money to government officials or their relatives.

Step 3 – Draft your GTE and donations policies

3.1 Draft GTE and donations policies incorporating guidelines from Steps 1 and 2 and linking it to your overall FCPA compliance program

Once you have reviewed acceptable and unacceptable GTE and donations, draft your GTE and donations policies and link them to your FCPA compliance program, explaining how they relate to each other. A few examples of policies include the General Motors Global Integrity Policy on Gifts, Entertainment and Anti-Corruption, and the Pacific Life Gifts and Anti-Bribery Policy.

3.2 Write a clear statement of policy principles

One of the most important parts of any policy is a clear statement of principles. Write the rules and regulations in clearly understandable and relatable terms, tailored to your organization’s area of business. Avoid leaving any room for confusion of what is allowed and not allowed. When there is confusion, there is the possibility of an FCPA violation. For example, it is not sufficient to state, ‘Payment for meals may be provided.’ Payment for whose meals? Is there a monetary cap?

3.3 State who the policies apply to

Clearly state the applicability of the policies to prevent a particular group of individuals within the organization from thinking they are exempt. GTE and donations policies usually apply to all executives, management, directors, employees, agents, joint venture partners, and other third parties. A copy should be provided upon hire to all of the parties listed herein, with records kept regarding when and to whom the policy was given. Consider that some employees of third parties may be better suited to receiving the information than others. 

3.4 State general prohibitions regarding anti-corruption

Because the GTE and donations policies are a part of a larger FCPA compliance program, add a statement in the beginning of your policies that shows that your organization prohibits and will not tolerate any violation of anti-corruption laws. Add a clause in your policies that clearly prohibits bribes or the receipt of kickbacks and include termination of relationship provisions as well.

3.5 Define all key terms

Be sure to define all key terms within your GTE and donations policies to avoid confusion or misunderstanding. This could include specific terms for GTE expenses and donations, or other terms related to the FCPA. For example, political donation, GTE, charitable donation, ‘thing of value’.

3.6 Define different types of GTE and donations

Laying out specific examples of GTE and donations and whether they are acceptable gives substance and relatability to the policy. See Steps 1 and 2 above for specific examples of GTE and donations.

3.7 Include a statement that donations or GTE from personal accounts are prohibited

Include a statement that a donation or GTE from a personal account is prohibited. Payments made from personal accounts, rather than through the organization, give the appearance of impropriety or potential corruption.

3.8 Include limitations on GTE and donations

Consider setting either a disallowance of donations or GTE to foreign public officials or limit the amount and circumstances in which an expense can be made to a foreign official. Including limitations is highly recommended.

Some examples include:

• Frequency - limit the number of times either a certain employee and/or your organization as a whole can donate or provide a GTE expense for either certain parties and/or period for the year.
• Cost - limit the cost either a certain employee and/or your organization can donate or provide a GTE expense for either certain parties and/or period for the year.

Set a threshold with annual limitations to provide for the lowest risk for your organization. For example, no donations, gifts, travel, or entertainment can exceed $250 in a single transaction or $1,000 annually.

Limiting your donations and GTE payments will reduce the appearance of impropriety or potential corruption by a particular individual or to a particular party or group. This is a good practice if your organization has many GTE or donations transactions.

3.9 Develop an approval process for each type of payment: political donation, charitable donation, gift, travel, or entertainment

The clearest way to prevent a potential FCPA violation due to GTE or donations expenses is to develop an approval process for each type of payment, ie, donations, gifts, travel, and entertainment. The more eyes on the payment review with prior approvals, the less chance of a FCPA violation.

It is important to have an approval process based on the type of payment: political donation, charitable donation, gift, travel, or entertainment. Gather employees and managers from multiple departments to form an approval team. This process should be implemented in line with your company’s available resources. The chosen employees should work collectively to approve such expenditures.

3.9.1 Example approval process

• employee fills out a written request for approval;
• employee sends to the first responder of GTE or donations request;
• first responder approves or denies based on guidelines from the policies;
• first responder sends to two others for review;
• reviewers approve or return with recommendations;
• original employee receives approval or denial with a chance to appeal to the approval team; and
• if accepted, facilitate payments from a certain department separate and apart from the department making the original request.

3.10 Require offer of donation or GTE letter to Employing Government Agency

Another important inclusion in your GTE and donations policies is to require an offer of donation or GTE letter. The letter should include the purpose of the GTE or donation, the itinerary, and the amount of the donation or GTE. The higher the amount of the donation or provision of GTE, the more senior the signatory of the letter.

The purpose of this letter is to publicly disclose and advise of the purpose and amount of the GTE or donation to the receiving party in case the DOJ later questions the offered payment. Note that although the offer letter may state the purpose of the donation or provision of GTE, that does not provide safe harbor from FCPA liability if the underlying purpose is actually corrupt in nature. It is only a way to outline the fact that the donation or GTE is not being used to bribe or gain an unfair advantage in any way. It is also a good way to show the receiving party your organization’s zero-tolerance policy for corruption.

3.11 Request confirmation or certification that donation or GTE request is allowable under foreign country’s laws, where relevant, and under its Anti-Corruption statute

After the offer letter is sent or within the offer letter itself, request and receive confirmation that the proposed donation or GTE expense is allowable under the rules, regulations and laws of the foreign country. Remember, the ‘local law defense’ is one of the two affirmative defenses available in an FCPA investigation. See How-to guide: How to protect your company from violations of the United States Foreign Corrupt Practices Act.

Additionally, require that the offer letter includes a request for written confirmation by the recipient confirming compliance with the local Anti-Corruption statute.

3.12 Require that donations or GTE be given to the governmental entity itself, where relevant, instead of a specific individual

Include in your donations and GTE policies the requirement to give the payment to the agency itself instead of a specific individual. Making a donation or GTE to a governmental agency reduces the chances of the payment getting in the hands of an individual foreign official, thus reducing the chance of an FCPA violation. See here for a DOJ opinion procedure release where the DOJ did not intend to take action when a payment was made directly to an agency and not an individual.

3.13 Consider adopting special rules per location

In certain circumstances, your organization may want to consider adopting special rules for a particular location, depending on the local legal framework and if the organization conducts business there frequently. In some instances, GTEs and donations made to entities in particular geographic locations may pose a higher or lower risk in terms of the potential for an FCPA violation. Thus, it is important that the organization’s policy accurately reflects the different risks involved depending on the location and clearly outlines the appropriate procedures related to GTEs and donations for these locations.  

3.14 Require audited financial statements of charitable recipients

Consider requiring audited financial statements of the recipients of charitable donations. See here where the company required audited financial statements from the recipient, including details of the disposition of funds donated.

Auditing the charitable recipient’s financial statements would allow your organization to ensure that the expenses and donations were spent appropriately and without violating any laws or influencing the recipient in any way.

Step 4 – Implement and train on donations and GTE policies

4.1 Implement donations and GTE policies

Implementation includes the general policies and best practices as created from the steps above. Once the policies are implemented, the employees should be put on alert that donations and GTE are an important area to monitor for your organization, which helps affirm the principle that corrupt behavior will not be tolerated.

4.2 Conduct due diligence on recipients of donations and GTE

Conduct due diligence on the recipient of the donation or GTE. Look at organizational documents that show the structure and makeup of board members and key employees, as well as financial statements and tax returns. See an example, here, where the DOJ did not intend to enforce an action on an organization that performed due diligence of the recipient of the donation. The same opinion suggests staggering payments for large sums in order to provide continuous monitoring. See also here for a SEC enforcement action where the SEC found that the organization did not do proper due diligence on the recipient and relied on the types of internal controls the organization had to prevent a violation of the FCPA. See Checklist: FCPA due diligence of third-party intermediaries.

4.3 Maintain openness and transparency

Always be open and transparent about donations and GTEs made to foreign officials. Payments that are made without transparency, or that are not properly recorded within the organization’s books and records, are an automatic red flag to the enforcement agencies that there is bad intent underlying the payment. Best practice is to keep records of such expenditures separate from your standard accounting or day-to-day operations. 

4.4 Review contracts with foreign counterparties to ensure donation or GTE is not prohibited

Although foreign law or your organization’s policies may allow for certain donations or GTE expenses, be sure to review contracts with foreign counterparties to ensure that the payment is not prohibited contractually. Any contractual prohibition would still prevent that donation or GTE expense, regardless of any internal policies or foreign laws.

This detailed review should include scrutinizing all clauses related to payments, gifts, and anti-corruption, as well as any specific annexes or schedules that might outline permissible or impermissible financial transactions. Be aware that contracts might contain broader ‘compliance with law’ clauses that indirectly prohibit donations if they violate other applicable regulations, even if not explicitly stated as a donation prohibition. If any ambiguity exists, seek legal counsel to clarify the terms before proceeding with any donation or GTE expense. 

4.5 Seek ethics or legal guidance if unclear

If anyone from your organization is unclear about the content of what is an acceptable donation or GTE, or any of the processes, they should seek guidance from either the ethics or legal department. This will help ensure that the relevant parties within your organization are clear about their obligations regarding donations, GTEs, and the prevention of FCPA violations. 

4.6 Provide employee training on donations and GTE policies

After the donations and GTE policies are implemented, provide both initial and ongoing training to all employees and anyone else with the authority to make such donations or GTE expenditures. Initial training should be conducted to notify employees of the new policies and procedures in place. This can be done separately from the FCPA compliance program training so that it is not lost within the overall training program.

Training on these policies has to be ongoing. Consider training as often as necessary (eg, when a significant change occurs like a merger or when a contract is formed between the organization and a new foreign client) and at least annually. It may be best to include a donations and GTE component in your FCPA compliance training. See Checklist: What to include in an FCPA compliance program for more information.

4.7 Explain employee role and responsibility in preventing violations

During training and implementation of the policies, explain and emphasize to employees their responsibility to prevent any violations of the law, which means they must follow the approval processes for donations and GTE expenses and ask questions when things are unclear. Clear communication of expectations and processes related to donations and GTEs can assist the organization in controlling such contributions, as well as in deterring improper contributions and protecting the assets of the organization. 

4.8 State employee reporting requirements regarding violations

Each employee must understand their reporting requirements for any violations. This includes training on what to report and how to report it. Include these requirements in the policies and training and also consider offering annual refresher training.  Should an issue ever arise, documented annual training may be helpful in proving to a governmental auditor that ensuring FCPA compliance is an important, ongoing part of your organization's policies and practices. 

4.9 Create separate forms for donations and GTE

Create separate forms for the approval of donations and GTE to track requests and expenses. This will help to ensure your policies are implemented effectively.

Relevant information to include in the form includes:

• recipient;
• employee requestor;
• amount/type;
• business purpose; and
• whether an offer letter or letter confirming adherence to local law was obtained.

The most important of the information above is the business purpose, which should be addressed in detail. How-to guide: How to protect your company from violations of the United States Foreign Corrupt Practices Act.

4.10 Create pre-agreement or statement consisting of other FCPA compliance terms

Contemplate entering into a pre-agreement or producing a statement prior to the release of a donation or GTE expense. This might be a requirement for certification of compliance with donations and GTE policies, restriction on the use of funds, or other important FCPA protection compliance terms. See Checklist: What to include in an FCPA compliance program for more examples. See here, where the DOJ did not intend to enforce an action on an organization where the organization used certifications to state their purpose of a charitable donation as one means to reduce the possibility of a violation.

4.11 Obtain legal opinions and consult foreign counsel or outside counsel for donations or GTE expenses that are close calls

In cases that are not clear cut, consult foreign counsel or local outside counsel when necessary. Obtain standing legal opinions from foreign counsel on what is acceptable for each type of donation or GTE in their jurisdiction. Use outside counsel to review all materials, analyze the expenditures, and make the final pre-approval decision. Keep opinions and findings on file and make them readily available in the event of an audit or government investigation. This will also demonstrate to enforcement agencies that you have taken a proactive approach.

Conduct regular reviews of the opinions and update them as necessary to ensure they remain current with any changes in foreign laws, regulations, or enforcement trends. The legal landscape surrounding donations and government interactions can evolve, and what was permissible last year might not be today. Maintaining an ongoing relationship with foreign and outside counsel for these updates helps ensure your compliance program remains robust and adaptive. This proactive vigilance further strengthens your defense against potential allegations, showcasing a commitment to continuous compliance rather than just a one-time effort. 

4.12 Conduct internal monitoring and review

There should be regular, documented internal monitoring and review of your policies. The documentation should be detailed enough to determine the purpose of the donation or GTE expense, who received the donation or GTE, and the amount and nature of the donation or GTE.

When monitoring, look for patterns to determine whether there are consistent payments being made to a particular organization or for a particular purpose. Consider using data analytics to monitor donations and GTE, although in some situations the employment of a full-time forensic accountant may be beneficial, though also very costly.

Periodically review your donations and GTE policies and make updates in response to organizational change or issues uncovered through internal monitoring to ensure they are robust and up to date.

Step 5 - Overall best practices for donations and GTE

5.1 Issue public statement on openness and transparency

Release a public statement on your organization's internal and external websites relaying that its ideals include openness and transparency for all donations and GTE transactions. Openness promotes receptivity and growth and transparency promotes accountability. See here for an example where the DOJ did not intend to enforce an action in relation to a potentially corrupt payment of medical bills for a foreign official’s family member because the parties involved were proactive, open, and transparent. See, eg, the public statements issued by Goldman Sachs and Principal regarding their anti-bribery and corruption policies.

5.2 Maintain proper documentation of purpose on books and records

Document the purpose of the donation or GTE expense on your organization’s internal books and records. A lack of documentation or misstating the true purpose of a donation or GTE transaction could be used as proof of bad intent and lead to a possible FCPA violation.

5.3 Ensure consistency across recipients of basic donations and GTE expenses

To prevent the appearance of impropriety and corrupt intent, it is important to have consistency across recipients of donations and GTE. Consider having a standard donations, gift, travel, and entertainment expectation for all recipients. For example, if an employee flies in coach class for domestic flights, then a foreign official should fly coach; if a third party stays in the Hilton standard two bedroom, then the foreign official should stay in the same. Retaining consistency among recipients can be an important defense in showing that your organization lacks intent for corruption.

5.4 Use technology to automate and flag risks

Historically, the best way to ensure a donation or GTE expense would not lead to an FCPA violation was to track each transaction by paper and require a pre-approval of the transaction, but this can be very time consuming and inefficient. Based on the size of your organization and the number of donations and GTE transactions, it may be wiser to invest in technology to automate and flag risks.

Consider implementing new technology software that automates solutions and provides consistent monitoring on a real time basis. The areas to track specifically include, but are not limited to:

• employee facilitating the request;
• name of the recipient;
• location of the recipient;
• where/how the funds will be used;
• employee who approved the donation; and
• overall amount spent/donated.

Have this information in one designated location for ease of access and so the software technology can catch automated wording such as ‘permit’, ‘government’, and ‘please put this through as’. The technology can also determine if a certain employee is sending too many requests or if there is a certain recipient who is receiving too many donations or GTEs.

If your organization chooses to employ such software, document it in your FCPA compliance policies and ensure that your information technology department is aware of its obligation to keep it up to date as well.

Additional resources

Opinion Releases Index – DOJ opinion releases that list by category, including categories for charitable contributions and GTE
FCPA resource guide – DOJ and SEC guidance on the FCPA, with a section on GTE and donations
DOJ Enforcement Actions – all DOJ enforcement actions in regard to the FCPA
SEC Enforcement Actions: FCPA Cases – recent SEC enforcement actions taken for violations of the FCPA

Related Lexology Pro content

How-to guides:

How to protect your company from violations of the United States Foreign Corrupt Practices Act
How to protect your organization from third party liability under the FCPA

Checklists:

Anti-bribery risk assessment
What to include in a FCPA compliance program
FCPA due diligence of third-party intermediaries

Reliance on information posted:

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