|Third Fundamental Element of Internal Control Measures under the NACC’s Guidelines|
In our previous article (link), we analyzed the second fundamental element under the National Anti-corruption Commission (NACC)’s guidelines, which is “the risk assessment to effectively identify and evaluate exposure to bribery.” In this article we will discuss the third fundamental element, namely “enhanced and detailed measures for high-risk and vulnerable areas.”
Companies should have detailed measures in place for high-risk and vulnerable areas that may be implicated in a bribery case. These areas, which include facilitation payments, hospitality expenditures and gifts, and charitable and political donations, are considered high-risk and vulnerable areas because it is difficult to see whether they are expenditures for a traditional, customary, or cultural occasion, or on an occasion wherein the manners practiced in society require the giving of such, or bribery.
Internationally, facilitation payments or grease payments are minor expenditures that are paid to government officials to ensure that the official will perform their duties or expedite the process in situations where the official is not required to use his or her discretion and is legally obligated to perform their function, e.g. applications for licenses, certificates, or public services. These are legal rights that companies can legally obtain. However, companies conducting business in Thailand should not make any facilitation payments to officials for any reasons whatsoever and should clearly communicate their policy prohibiting such practice in their organizations as it is a high-risk and vulnerable area. If companies decline to pay facilitation payments, it can decrease unnecessary costs and expenses in business operations and support transparency and equal and fair competition. Companies, particularly those that have parent companies in other countries or those that conduct business in foreign countries, should be mindful of both Thai and foreign laws in relation to expenditures for high-risk and vulnerable areas. For example, the US Foreign Corrupt Practices Act (FCPA) specifically provides the definition and principles of facilitation payments, which are not considered bribery, while the UK Bribery Act considers facilitation payments to be illegal as the payments support the bribery of officials.
Hospitality expenditures and gifts are expenditures intended to create good relationships or sometimes given in accordance with social etiquette. Hospitality expenditures may include accommodation costs, travel expenses for visiting business establishments, study trips, and food and beverage expenses. Gifts may come in various forms, for instance, cash, goods, services, and vouchers. However, these expenditures may be considered bribery if they are made to induce a government official to perform or not perform or delay in the performance of any act within his or her area of responsibility or as a quid pro quo, which often are concealed in financial statements as training, consultancy services or marketing promotion. To ensure that the expenditures are not for the purpose of bribery, companies should consider various factors to determine whether they are expenditures for traditional, customary or cultural occasions for business in good faith. For instance, study trips abroad should aim to support efficiency of work, not for tourism or entertainment. Actual costs and expenses with receipts must be recorded.
Charitable donations may be part of a company’s corporate social responsibility activities. At the same time, they may be used as a channel for bribery if they are donated for inducing officials to provide illegal benefits for their company. Intention of donation is an important factor to identify whether the donation is made to conceal bribery. This also applies to political donations, and companies should be mindful of the relevant laws on political donations.
In the next article we will discuss the fourth principle of the fundamental elements, which is “application of anti-bribery measures to business partners.”
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Yuthana Sivaraks joined Baker & McKenzie in 1995 and became a partner in 2004. Prior to working with the Firm, he served as a judge advocate in the Royal Thai Navy. He is currently a member of various practice groups in the Bangkok office, including those for IT/Communications, Intellectual Property and Corporate & Commercial. In addition to practicing law, Mr. Sivaraks is an active visiting lecturer on IT, telecommunications, intellectual property and trade competition law for a number of Thai universities and institutions.
Praween Chantanakomes is an associate at Baker & McKenzie’s Bangkok office. He was admitted in 2008. He is currently active in the Corporate & Commercial, Mergers & Acquisitions, Environment, Natural Resources, and Pharmaceuticals practice groups.
Haruthai Chaisanee is an Associate in Baker McKenzie Bangkok office.
Mallika Tubtim is an Associate in Baker McKenzie Bangkok office.
Pongtorn Jittapinijmas is an Associate in Baker McKenzie Bangkok office.