By Mitka Baker

As part of the growing culture of corporate social responsibility, many companies seek to give back to the communities in which they conduct business.  But when the charitable giving takes place outside the United States, this practice may raise concerns.

While it is important to be a good corporate citizen, it is equally important to make sure that corporate charitable giving is done responsibly. Given the potential risk for misuse, companies must balance the tension between charitable giving and complying with the Foreign Corrupt Practices Act (FCPA).

While there is no one-size-fits-all solution to monitoring charitable giving, the key component is to ensure that proper due diligence is conducted and that you put in place adequate internal controls (including ongoing monitoring).  Below are six simple steps companies can take to ensure that they are giving responsibly.

1. Have a charitable giving policy in place. One of the most significant steps a company can take to prevent the misuse of charitable contributions is to establish a written charitable giving policy.  It is important that this policy set forth the company’s approach to charitable giving.  For example, a company may limit its charitable giving to a particular focus area (i.e. educational programs) or programs that impact a specific geographic region or community.  Since charitable contributions can take many forms (such as monetary gifts, grants and scholarships, donation of goods), the policy should also state the type of contributions the company is permitted to make and tailor its internal controls to the risks associated with that type of contribution.  Once a policy is established, additional controls should be put in place to confirm that charitable contributions are consistent with the policy.

2. Relationships matter. Conducting thorough  due diligence before making a charitable contribution is essential.  It is important to determine whether the selected charitable recipient has anyaffiliation or connection with foreign officials.  Indirect connections to government officials, such as connections to family members, close advisors or entities in which the foreign official has a financial interest in, must also be considered.

3. The purpose of giving must be proper . The primary objective of the FCPA with respect to charitable giving is to prevent the use of charitable contributions as a vehicle to funnel funds or other benefits to foreign officials.  Accordingly, extra care should be taken to confirm that the contribution is not conditioned on the retention of business, the receipt of future business or the receipt of some other benefit.  Ask probing questions like these: “How are the contributions viewed internally?” “How was the recipient selected?” “What does the company expect to happen after the contribution is made?” “Does the donation violate the company’s charitable giving policy?” “Was the contribution made at the request of a foreign official?” The answers can alert the company to potential red flags and help prevent the misuse of charitable contributions.  In addition, seeking approval from legal counsel before making a contribution can help determine whether such red flags exist and whether the contribution is proper.

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By Diana L. Erbsen, Alan Winston Granwell, Michael J. Legamaro, Ellis L. Reemer, Peter R. Zeidenberg and Catherine B. Engell

In recent years, the U.S. Department of Justice has been aggressively investigating the use of bank accounts outside the U.S. to evade tax. While emphasizing that its enforcement activities are and must remain global, the DOJ has taken public actions relating to banking activities in Switzerland, India, Luxembourg, Israel, the Caribbean and Lichtenstein.  These initiatives and ongoing investigations have resulted in the prosecutions of multiple banks, 68 U.S. persons, and professionals (including approximately 30 banking professionals).

In August 2013, the Swiss Federal Government and the DOJ announced a first of its kind program (the New Program) that will enable eligible Swiss banks to address and resolve their status with regard to the DOJ’s ongoing enforcement investigations.

The New Program, which is open only to Swiss banks not currently under investigation by the DOJ, is effectively a voluntary disclosure program for banks, with features comparable to those of the voluntary disclosure programs offered by the US Internal Revenue Service in recent years to U.S. persons with undisclosed financial accounts outside of the United States (referred to collectively as the OVD Initiatives), incorporating definitions, due diligence procedures and compliance program approaches contained in the Foreign Account Tax Compliance Act (FATCA) as implemented by Switzerland and the United States in the Swiss-US Intergovernmental Agreement (Swiss IGA). (Read more)