Global Regulation, Local Solutions Emerging Themes 2020 - Page 67



FINANCIAL CRIME AND INVESTIGATIONS
EMERGING THEMES 2020
CONCLUSION
With the Tokyo Olympics just around the corner,
corporates should ensure that they do not
inadvertently run afoul of anti-corruption laws
when they provide hospitality to their clients in
connection with such major sporting events.
This issue is certainly on the radar screen of US
enforcers – perhaps more so than many firms
realise. In May 2019, the US SEC extracted more
than $4 million from Telefônica Brasil for the way
it handed out tickets and hospitality to the 2014
World Cup and the 2013 Confederations Cup.
$500k
93
$4m
$100k
34
66/
$25m
176
US SEC fine to
BHP Billiton for
2008 Beijing
Olympics
hospitality
invited
officials
World Cup
tickets
government
officials
US SEC fine
to Telefônica
Brasil for 2014
World Cup and
2013 Confederations
Cup hospitality
Confederations
Cup tickets
government
officials
Before that, in 2015 the SEC fined BHP Billiton
$25 million for its hospitality programme
associated with the 2008 Beijing Olympics.
In each case, relying on the US Foreign Corrupt
Practices Act’s (“FCPA”) prohibition of bribing
“foreign officials”, the US government focused
on the company’s lack of internal controls
to ensure that such hospitality was not used
to provide incentives for “foreign officials” to
conduct business with the company.
In the Telefônica case, the company gave more
than $500,000 worth of World Cup tickets
and related hospitality to 93 government
officials and more than $100,000 worth of
Confederations Cup tickets and hospitality to
34 officials. In the Billiton case, the company
invited 176 government officials and 60
attended. The nature of the hospitality was also
important. In many cases spouses were invited
and business class air fare included. For the
Beijing Olympics, the total excursion package
(without air fare) was valued between $12,000
to $16,000 per person, and included sightseeing
tours and luxury hotel accommodation.
The UK Serious Fraud Office has not brought
any prosecutions of this nature to date.
However, because the scope of the Bribery
Act is much broader than the US FCPA – its
prohibitions include purely commercial bribery
not involving foreign officials – the SFO could
well jump on the enforcement bandwagon with
respect to this issue.
The UK Ministry of Justice addressed the
specific issue of corporate hospitality, in its
Bribery Act 2010 Guidance issued shortly after
the enactment of the UK Bribery Act (as the UK
was preparing for the 2012 London Olympics).
According to the Ministry:
“Bona fide hospitality and promotional, or other
business expenditure which seeks to improve
the image of a commercial organisation, better
to present products and services, or establish
cordial relations, is recognised as an established
and important part of doing business and it is
not the intention of the Act to criminalise such
behaviour.”
It appears from this that there may be more
leeway in the UK’s attitude toward corporate
hospitality than the attitude demonstrated in
the US. However, it remains a grey area and one
in which corporates frequently seek advice.
Premium sporting events can be
great client relationship building
events. Corporate hospitality is not
prohibited. Yet that hospitality must
be reviewed in the context of the
US FCPA and the UK Bribery Act.
Establishing bespoke internal
procedures for each such event
that follow the above guidelines
should help institutions steer
clear of potential government
investigation.
Yet under both regimes, a corporate should
be prepared to demonstrate that its use of
expensive hospitality was not done in violation
of applicable anti-corruption laws. The best
way to do so is for the corporate to set up a
specific procedure that will govern all hospitality
related to the event. Compliance and legal can
then ensure that the hospitality will not violate
various anti-corruption laws and the corporate’s
own anti-corruption policy and procedures. In
the context of these premium sporting events
we recommend that the corporate creates
specific compliance procedures before making
corporate hospitality available for the event,
which include:
X
Compliance and legal personnel involvement
in the approval process of all hospitality for
the event
X
Appropriate training for those giving the offers
and those reviewing and approving the offers
X
Identification of risks involved in inviting
“foreign officials”
X
Determination of whether the institution has
any pending business with each potential
invitee (not only at the time of the invitation,
but also at the time of the event)
X
Ability to update information in the approval
process where business circumstances evolve
X
Review of the proportionality of the hospitality
X
Proper accounting of the hospitality.
MUKUL CHAWLA QC
Partner,
London
JENNIFER MAMMEN
Counsel,
Washington DC
/67

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