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Gifts & Entertainment Compliance: 2020 Best Practices

By Matt Kelly (Updated )

Your gifts and entertainment compliance policy is probably less relevant now than it was at the beginning of 2020. Thanks to COVID-19, this year has been defined by an unplanned pandemic that has uprooted most, if not all, of our careful planning.

Every compliance officer I've talked to tells me that their company is under a travel freeze, not to mention assorted other budget cuts. The Global Business Travel Association published a survey of its membership in April that said virtually all of them had canceled all international business travel. Another 92% said they had done the same for domestic travel. It is probably the understatement of the year: things have changed and they have changed quickly.

At first glance, talking about best practices for gift, travel, and entertainment (GTE) policies in 2020 feels a bit strange. You might think that because of the massive decrease in business travel that the compliance team is off the hook for G&E. But not so fast.

Compliance professionals can’t let that feeling fool them. Business travel, business transactions, and regulatory enforcement risks will all be quite different as we emerge from the first waves of the crisis and as we do, your gifts and entertainment policies will need to keep pace. How should your compliance team address and adapt to these changes?

Gifts and Entertainment Compliance 101

First, you should have an actual policy, written and translated into other languages as necessary for your workforce. That’s always been a best practice, and most large companies already do have one—but the need for such policies has increased in 2020, because COVID-19 is spawning more questions about travel and entertainment issues. So even something as fundamental as having a policy becomes more absolutely essential.

Next, the broad contours of that travel and entertainment policy remain the same. It should warn employees against lavish gifts, travel, and entertainment for any customers, and especially for customers who represent foreign governments. It should include a pre-approval process for spending on those foreign government customers, and spell out how employees can request exceptions to whatever policy you have.

After these processes have been implemented, employees should be trained on your G&E policy, and then certify that they understand it. When and where it seems sensible, senior executives should keep talking about bribery risks and the importance of following policy.

Fourth, collect data about your company-wide GTE spend and use analytics software to mine that data for insight. For example, you might discover more exception requests for a certain level of sales executive or in a certain product line. That could suggest the need for more training, or that managers should revisit their spending caps.

Gifts and Entertainment Changes to Make in 2020

The points above are best practices for any year. COVID-19, however, makes 2020 a year unlike any other. Compliance officers need to anticipate that in their travel, gifts, and entertainment policies.

For starters, employees are likely to encounter more restrictive travel generally. Your company might curtail travel for budget reasons or just forbid travel to COVID-19 hotspots, but the practical upshot for compliance officers is the same—you will need to assure that the existing travel policies reflect the latest marching orders from senior management.

Outdated policies create ambiguity. Before COVID-19, that might just mean an employee takes unpermitted travel, and the compliance officer reads that person the riot act later. Now it could mean one or more people getting infected with a deadly disease. Without strong policy management, you invite a mess of corruption, health, and legal liability risk.

Additionally, more restrictive travel means closer supervision of that travel, so you will need some way to manage approvals and documentation for the employees who do require travel to take.

For example, some corporations have decided to ban employees from any industry event of more than 50 people. Well, how would you enforce that ban? What documentation would you want to collect from the employee? Who reviews it to decide the event is indeed acceptable?

Anti-corruption GTE policies were all about governing suspicious transactions. COVID-19 is about governing risky personal conduct. That’s very different from what compliance officers are accustomed to watching.

It is also critical to watch employee spending on gifts more closely—because that’s how they’ll continue to woo clients when travel and entertainment aren’t available. You might see employees asking that the company donate funds to some, ahem, “non-profit foundation” tied to a foreign government official considering a contract. Or employees might treat clients to $49.99 meal deliveries every month, which miraculously fall under your $50 gift cap.

We all know what those transactions really are. COVID-19 reshuffles the profile of your suspicious transactions, away from travel and entertainment but toward gifts. You’ll need to ensure you have the right process and GTE technology in place to manage that new risk.

Ensure Flexible Gifts & Entertainment Compliance

Another frustrating part of COVID-19 is its evolving nature. It remains a dire threat in some parts of the world, is already receding in others, and may surge again later in the year. We don’t know.

Your policies will need to reflect that uncertainty somehow. For example, you might want to tie corporate travel policies to the World Health Organization’s pandemic threat levels; or to mandates from governments around the world where your employees do business. (Australia and New Zealand are already exploring how to resume less restrictive travel. So are several countries in Europe that knocked down COVID-19 early.)

Government restrictions on travel will always supersede your corporate policy. As those restrictions change, that’s going to challenge your own policy management. Start thinking now about how to incorporate those shifts quickly and easily into your policy, and how to communicate that to your workforce.

Likewise, companies will need to consider quarantine policies—either ones your company adopts itself, or policies mandated by government decree. Some quarantine requirements might make travel impossible anyway: What’s the point of traveling for a three-day business trip, if you’ll be quarantined for two weeks upon arrival? However quarantines might affect your business operations, those changes should be reflected in policy somehow.

Prioritize Compliance Program Effectiveness

Compliance officers should also appreciate the challenges COVID-19 poses to their program’s effectiveness. The virus has caused enormous disruption in how business processes work—which changes the risks your business will face and your ability to mitigate them.

For example, one invaluable source of information about potential employee misconduct has always been another employee raising concerns on the hotline. How will that work in a COVID-19 world, where employees now spend much more time physically apart from each other?

The truth is that we don’t know. Still, consider this from a program management perspective: your anti-corruption control of employees speaking up about potential misconduct is weaker because they’re less likely to witness suspicious activity. So your compliance program must try to introduce a suitable compensating control to keep the overall anti-corruption program effective.

What would that compensating control be? Perhaps more monitoring of employee communications and spending, although wrongdoers could find clandestine ways to violate policy if they were committed to it. Or you might need to focus more on ethics training, to keep potential wrongdoers away from temptation.

Those are the sorts of policy challenges compliance officers are likely to encounter as we grind through 2020. Gifts, travel, and entertainment will return as a part of business transactions eventually—but even as we wait for that day to arrive, COVID-19 will give compliance officers plenty to address on those subjects right now.

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