Key takeaways from Kneejerk Compliance: Abandoned gifts and unwanted hospitality

The recent spotlight in Singapore on elaborate and expensive gifts and entertainment may have led some companies to shy away from offering or receiving them altogether. While most companies may be aware of the perennial risks associated with gifts, entertainment and hospitality, it may not be immediately obvious how they can be effectively managed to allow a business to thrive while being compliant with applicable laws.

On 29 May 2024, we hosted an interactive workshop in our Singapore office for legal and compliance personnel on topical issues relating to gifts, entertainment and hospitality. The workshop was conducted by our Regulatory Compliance and Investigations team, led by Wilson Ang (Partner, Co-head of Regulatory Compliance and Investigations, Asia-Pacific), and supported by Jeremy Lua (Senior Associate), Charis Low (Senior Associate), Wang Chen Yan (Associate), and Terence De Silva (Associate).

Participants of the workshop were provided with a timely refresher on the laws of anti-bribery and corruption relating to gifts, entertainment and hospitality, and had lively discussions exploring practical ways to deal with complex yet realistic scenarios.

Below are the key takeaways and highlights from the workshop. If you would like to learn more about these topics, please contact our Regulatory Compliance and Investigations team.

Refresher on the law regarding bribery and corruption

To kick off the workshop, Chen Yan provided a refresher on the law regarding bribery and corruption in Singapore, including: (a) the elements of the primary offences under the Singapore Prevention of Corruption Act 1960 (PCA); (b) factors typically considered by the Singapore Courts in PCA cases; (c) the inadmissibility of customary evidence; (d) issues relating to corporate liability for bribery and recent prosecutions of companies; (e) an enforcement case study illustrating the prohibition against bribes to cultivate the recipient so that he/she would become beholden to the briber; and (f) a comparison between the primary PCA offences and the offence under Section 165 of the Singapore Penal Code 1871 (relating to a public servant’s acceptance of or attempt to obtain any valuable thing from a person in connection with his official functions). Permissible forms of gifts, entertainment and hospitality, and the use of proxy monetary thresholds to assess the reasonableness of the value of a benefit given/received were also discussed.

Key takeaways from discussions relating to hypothetical scenarios

Participants were taken through some hypothetical scenarios (derived from our experience advising clients on such matters) illustrating often unexpected risks from a compliance perspective that could arise in the business context, which require a considered and nuanced approach to handling gifts, entertainment and hospitality.

The scenarios generated lively discussions among the participants who shared valuable insights and perspectives for navigating challenges relating to:

1. issues relating to the conduct of company events and provision of hospitality with no clear business justification or purpose;
2. pros and cons, and associated risks, of providing company-branded items as gifts;
3. appropriate valuation of gifts, entertainment and hospitality offered or received (e.g., based on cost to the company or market value);
4. considerations in inviting customer representatives to corporate events (whether personally or through their respective companies/departments);
5. offer of gifts, entertainment and hospitality to government officials, taking into account local law requirements and the applicable limits with regard to per diem allowances;
6. reimbursement or payment of expenses incurred by family members and other persons related to customer representatives;
7. in situations where there has been an apparent change in circumstances rendering the original purpose of the gift or hospitality moot, how a company should deal with the budget that has been approved or gifts that have already been purchased;
8. risks involved in providing valuable items to employees or third party agents that are susceptible to misuse (e.g., where items have a high intrinsic value or a resale market, and/or can be converted into a bribe) and what can be done to mitigate such risks;
9. potential risks when expenses, or gifts, entertainment and hospitality are not properly recorded and accounted for, from a tax and accounting perspective; and
10. practical tips to avoid the perception of corruption or conflict of interest.

Wilson wrapped up the workshop with a summary of the key takeaways:

1. First, it is important for companies to demonstrate top level commitment, instill an ethical culture and implement incentives/disincentives to promote compliance. In that regard, companies should consider having compliance targets as a key performance indicators (KPIs) for bonus and compensation of employees, and enforcing clawback or forfeiture of bonus and other compensation as a form of disciplinary action that may be taken against non-compliant employees.
2. As regards the management of gifts, entertainment and hospitality issues, the key is to ensure that any gift or receipt is transparent, proportionate, reasonable and for a legitimate purpose. Records should always be retained to demonstrate each of these aspects.
3. Cross-department controls (involving e.g., Compliance, Finance and Procurement) should be implemented to prevent and detect any improper use of gifts, entertainment and hospitality. Companies would be well-advised to conduct ongoing risk assessments, impose suitable monetary limits (including cumulative thresholds), and maintain an effective gifts, entertainment and hospitality register that is subject to periodic audits.
4. Third parties (including agents, contractors and suppliers) should be effectively managed to reduce bribery and corruption risks, through due diligence, risk mitigation measures, and contractual requirements relating to anti-bribery and corruption.

We sincerely thank the participants who took the time to join our workshop. If there are other topics of interest, please feel free to provide us with your feedback.