The issue of gifts and hospitality has been in the news lately – albeit in the political arena, rather than that of financial services. However, it is an issue that seemingly never really goes away (the classicists among you will recall why Troy fell!) and now might be a good opportunity to revisit some basic principles behind the issue e.g. why a firm should have a defined policy, how it should police it and examples of good and bad practice.
“I can resist everything except temptation”
Oscar Wilde, Lady Windermere’s Fan
There was a newspaper article recently written by Martin Bell on the temptations of office. A former BBC journalist who was elected as an independent MP, Bell commented that although he had stood on an “anti-sleaze” ticket against an opponent alleged to have received cash for asking questions in parliament, he needed to remind himself of that fact as various gifts and offers were made to him once elected.
For those working in the financial service sector similar temptations can arise so it is critical to have clear and understandable guidance along with records: the two key parts being a policy and a register. A Gifts & Hospitality (G&H) policy will also have a read across to the issues of conflicts of interest and should cross reference that policy as well.
Gifts vs bribes
The giving of gifts to clients is a legitimate business practice when done correctly and there is no expectation of anything in return. A bribe on the other hand is an inducement with intent to influence. The 2010 Bribery Act is designed to prevent corruption, not to stop corporate gift-giving or hospitality per se.
Nonetheless, a well-defined policy will make it clear to everyone at an organisation just what is and what isn’t acceptable and as always, records are critical.
In this respect The FCA’s FCTR (Financial Crime Thematic Review) 13.3.7 is extremely helpful. Although this thematic review involved investment banks, the principles and examples of good practice and bad practice have a wider application and it is worth repeating some of them below.
Good practice
- Policies and procedures that clearly define the approval process and the limits applicable to G&H.
- Processes for filtering G&H by employee, client and type of hospitality for analysis.
- Processes to identify unusual or unauthorised G&H and deviations from approval limits.
- Staff trained on G&H policies to an extent appropriate to their role, in terms of both content and frequency, and regularly reminded to disclose G&H in line with policy (i.e. a register).
- Cash or cash-equivalent gifts are prohibited.
- Political and charitable donations are approved at an appropriate level, with input from the appropriate control function, and subject to appropriate due diligence.
Bad practice
- Senior management do not set a good example to staff on G&H policies.
- Acceptable limits and the approval process are not defined.
- The G&H policy is not kept up to date.
- G&H and levels of staff compliance with related policies, are not monitored.
- No steps are taken to minimise the risk of gifts going unrecorded.
- Failure to record a clear rationale for approving gifts that fall outside set thresholds.
- Failure to check whether charities being donated to are linked to relevant political or administrative decision-makers.
As I wrote in my article about Whistleblowing in August, as with all policies and procedures it doesn’t matter how well a G&H policy is written, if no one reads it and indeed if isn’t adhered to it isn’t worth the paper that it is written on. So, again make sure that:
a) the policy is up-to-date and,
b) that the policy has been socialised.
As a final point, firms and their employees should apply a common-sense approach to the issue of gifts and hospitality. If what you are offered doesn’t feel right or you think it might be misinterpreted by a third party then the chances are that it isn’t appropriate.
