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Scott Moritz: A detailed marketing plan can save your compliance program

Companies that make and sell consumer products — toothpaste, smart phones, cars, movies, food, medicines, golf clubs, cosmetics, whiskey, shoes, jewelry, and so on — spend billions of dollars promoting their goods.

There are free samples, coupons, gift cards, event passes, and more for consumers and distributors.

Can anyone really confirm all the money was expended lawfully and for the intended purposes?

What if the company produces a popular cognac and its distributor in Shanghai requests 10 cases of the product and $50,000 for a tasting event? What if, at the same time, the distributor also has been negotiating with the airport authority to place the product in the duty-free shops at the international airports?

How can the company be sure its very expensive cognac wasn’t simply gifted to a government official or that invoices for the tasting event weren’t inflated?

Sometimes sales distributors are rewarded with gift cards in addition to their normal incentive compensation if they meet sales milestones. But in some parts of the world, gift cards are a common way to “thank” government officials and SOE employees, especially around some holidays. So gift cards have the potential to go very wrong.

Big events are full of FCPA risks. The Olympics, the World Cup and FIFA matches, Formula One races, golf tournaments, tennis and cricket matches — they all rely heavily on corporate sponsorship.

With the sponsorship comes hospitality tents, junkets, VIP access and seating, tickets, transportation, and sometimes accommodation and related expenses. Providing those perks to invited guests can be construed as offering or giving something of value in an effort to gain an unfair business advantage.

Historically, marketing incentive programs are predicated on trust, with very little detail about what the local subsidiaries or distributors are expected to do to ensure things are above board and don’t create FCPA or Bribery Act liability.

Clearly, companies that engage in marketing and promotional activities in foreign markets should always be able to demonstrate that:

  • They have thoughtfully considered all of the potential bribery risks associated with the various marketing activities in which value is being transferred directly or on their behalf, and
  • They have risk-appropriate controls in place to ensure that the events and other marketing activities they funded actually took place, and that the products that were sampled were provided in strict adherence to written agreements with third parties and were in alignment with the detailed marketing plans with which the company has agreed.

With the big sports events, it’s critical to submit a list of proposed attendees to someone in legal or compliance, not just to executives in the sales organization.

The list should come with some background on who the proposed guests are, whether they might be a “foreign official” as the company has defined that term, and whether the company has any business before that official at the time or which the official might influence through his or her office.

Nearly all companies have marketing plans. But many of those marketing plans are vaguely worded and lack compliance accountability. They don’t explain what local marketing activities are planned, how the activities will be documented, and who’ll be responsible for ensuring that the marketing money or products are used in alignment with the company’s code of ethical conduct and anti-corruption program.

A detailed marketing plan that sets out obligations of those charged with executing it is essential. That’s how companies can ensure there’s an adequate trail to monitor or audit to confirm that marketing activities aren’t putting the organization at risk.


Scott Moritz is Managing Director and Global Lead of Protiviti Forensic, based in New York. He served as an FBI Special Agent for nearly 10 years where he focused on white collar crime, domestic and international corruption and money laundering investigations. A version of this post previously appeared on Protiviti View.

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