Hospitality, travel and entertainment

Potential scenario

Your company is currently negotiating a major contract with a foreign government. To demonstrate the technical capability of your offering, you invite a government delegation to an international conference in your country. Your company pays for business class flight, accommodation at a five-star hotel and other travel expenses.
Since the conference takes place before the weekend, your company also provides an “all-inclusive” weekend stay, including sightseeing and a visit to a football match.

I. Understanding the risk

 
 

Not every corruption-related activity is as easily recognised as a luggage stuffed with cash to bribe a public official. Corruption can be far more subtle, making it difficult for employees to recognise it unequivocally for what it is. That is especially the case for business practices that are legal, but can be abused to disguise corruption.

  • Hospitality, travel and entertainment are legitimate expenditures which companies often use to build and maintain good business relationships, as well as to demonstrate their prowess in the case of visits to their facilities.
  • However, these expenditures can also be misused to disguise corruption. For example, a company may use hospitality, travel and entertainment to provide an undue advantage to a public official, in order to influence a bidding decision in their favour.
    Providing hospitality, travel and entertainment therefore poses a risk according to situational factors and proportionality, rather than in the action itself.
  • Hospitality, travel and entertainment can be misused as bribery on either side of the transaction:
    1. An employee promises, offers, or gives hospitality, travel or entertainment, with the intention of receiving an improper benefit in return; or
    2. An employee solicits or accepts such hospitality, travel or entertainment, with the intention of providing an improper benefit in exchange.

II. Recognizing practical challenges

 
 
  • Companies operating in multiple countries deal with a range of customs and business practices, making it challenging to provide uniform, company-wide procedures.
  • Offering and accepting hospitality is deeply embedded in the culture of doing business. Placing restrictions on its use, such as a requirement for supervisor approval, may result in avoidance strategies, such as:
    1. Circumvention of official procedures (e.g. mislabelling of expenses), or even
    2. Rejection of the entire programme.
  • Even clear, visible and accessible anti-corruption policies may be insufficient to deter employees from making or receiving inappropriate offers, for various reasons, including:
    1. A concern that relaying such policies to a business counterparty, for example when selecting a less expensive restaurant, will appear mean-spirited.
    2. A concern that refusing an invitation will cause offence.
    3. The perception that “everyone else is doing it”.
  • Employees seeking to bribe a business partner must have the resources to do so. Hospitality, travel and entertainment can be an especially appealing way to disguise corruption, because they can be paid for and recorded as legitimate expenses. That may be much simpler than trying to disguise money exchange through complicated, off-the-book accounts.

III. Mitigating the risk

 
 

Companies must address hospitality, travel and entertainment expenses in their anti-corruption programme, in the context of their particular risk exposure.
However, the general legitimacy of such expenses may also mean that a company has to invest considerable effort to communicate the related risks, and the importance of complying with official procedures.
Additional, practical safeguards to mitigate the misuse of hospitality, travel and entertainment as a form of bribery include:

  • Establish detailed guidelines, for example in the form of checklists or decision trees, to clarify whether it is appropriate to accept or to offer hospitality, travel and entertainment expenses.
  • Adapt these guidelines to local circumstances, such as monetary thresholds in a country’s local currency.
  • Encourage employees to use the “newspaper test”: Would they still feel confident in the legitimacy of their actions if these were reported on the front page of the local newspaper?

Training cases

Dinner with a foreign public official
[TI UK BA, Scenario 3]

Travel expenses paid for foreign public officials to view company facility
[TI UK BA, Scenario 4]

Hospitality given to foreign public official at a company’s UK office
[TI UK BA, Scenario 5]

Pharmaceutical conference at overseas resort
[TI UK BA, Scenario 7]

Hospitality used as a facilitation payment to secure a permit
[TI UK HTB, Page 8]

Suggested reading

“How To Bribe – A Typology Of Bribe-Paying And How To Stop It”, Section 1.2

“The 2010 UK Bribery Act Adequate Procedures – Guidance on good practice procedures for corporate anti-bribery programmes”, Chapter 5.1.2

“An Anti-Corruption Ethics and Compliance Programme for Business: A Practical Guide”, Chapter E.2