Compliance Glossary

Gifts and Hospitality

Gifts and hospitality, including travel and entertainment, are legitimate expenses and common business practices to build relationships or express appreciation. Gifts and hospitality expenses are also referred to as gifts and entertainment or G&E expenses.

How Do Gifts and Hospitality Tie Into Compliance?

At times, excessive gifts or accommodations are offered, given, solicited, or received with an obligation or expectation to provide a benefit in return. To combat this, organizations establish processes to track and approve expenses that are given and received on the organization’s behalf. 

Gifts and hospitality expenses might indicate corruption offenses, can be used to facilitate corruption, or may give the appearance of corruption. Organizations should always cover the use of gifts and hospitality in their codes of conduct. Most organizations require employees to report gifts above a predetermined nominal value.

Why is it Important to Have a Gifts and Hospitality Policy?

The exchange of gifts can be a corruption risk. In most cases, employees are not attempting to engage in any type of corruption activity, but are simply unaware of certain gift scenarios’ implications. 

It is critically important to have a gifts & hospitality policy that outlines both the restrictions and processes around the giving and receiving of these items. Additionally, organizations should have comprehensive training that educates employees on the policy and scenarios that could, while on the surface be completely innocent, create a series of corruption risks, exposing the organization to heightened risk and scrutiny. 

How to Minimize Company Risk When Giving Gifts?

Proper training and policies can go a long way in helping to minimize company risk when giving gifts. However, compliance teams also need to provide a mechanism for employees to report on and request exceptions to the gifts and hospitality policy. This process must be well aligned with the rest of the compliance program. If a gift exception request is submitted, the compliance team must be able to evaluate its risk by aligning with other initiatives including on-going due diligence and other activities that are used to protect the organization from risk. 

Compliance teams should always evaluate these requests at a high level across the organization and across the recipients and requesters. A strong reporting and analytics mechanism should be in place to make sure these evaluations can happen in real-time.

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