Charitable donations that are intended to influence a foreign government official, and which are part of a corrupt quid pro quo, must not be given.
Donations to charities that could entail ABC risks may be categorized in two groups: (1) donations to a charity or entity claiming to be a charity that actually serves as a pass-through for a government official; and (2) donations to a bona fide charity.
Donations falling into the first category can usually be prevented by due diligence that examines the purpose of the charity, the qualification of its directors and senior management, the amount and type of donation to be given, the location of the charity’s bank account, whether the account is in a country in which the charity operates, and whether any government official, or friend or family member of a government official, is significantly involved with the charity or requested the donation.
With respect to the second category, even after determining that the charity is a legitimate charitable organization, the company should still examine the proposed donation for red flags indicating a potentially corrupt purpose. The SEC has settled enforcement actions with companies based on donations to bona fide charities where other circumstances indicated that a corrupt intent and benefit were present. Based on those settlements and publications by the SEC and the DOJ, a company should consider the following factors before making a contribution to a bona fide charity:
- whether the donation was solicited by a government official;
- whether the charity refuses to issue documentation, such as a receipt, for the contribution;
- whether the donation is to be made in honor of a government official or a person identified by a government official;
- whether a government official, or a family member or close friend of a government official, has a significant role or association with the charity (i.e., is a member of the board of directors or senior management for the charity); and
- whether there is any indication that the donation is being made in exchange for business with a government official or government entity.
The UK Ministry of Justice Guidance suggests “[a]dopting company-wide policies and procedures about the selection of charitable projects or initiatives which are informed by appropriate risk assessments.”1 The company should keep written records that properly account for the donation and document the approval process and the type and amount of the donation. The donation should not be unusually large or of an uncommon type compared with donations regularly received by the charity, and with donations made by the company. Any charitable donation should be made transparently and not anonymously.
1 Ministry of Justice, The Bribery Act 2010 Guidance, at 40 (2011).