Bribery Act & Proceeds of Crime - Written by on Friday, October 7, 2011 1:50 - 1 Comment

WARNING: Gifts on the SFO radar – Complaints about gifts of iPads and Laptops made to the SFO

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SPIFF: Special payment Incentive For Fast Sales

SPIV: A petty criminal dealing in black market goods

News reaches us that SPIFFS and incentives are on the radar of the SFO following complaints from ethical corporates who feel at a competitive disadvantage.

A source has told us that there have been complaints of incentive arrangements under which individual employees in different countries are given iPads and laptops by UK and non UK companies in return for placing orders.  We understand that  it is claimed that these gifts/incentives are unknown to the employer of the recipients and that the SFO is concerned about the issue.

How they work

We have written before about incentives and on the practice of SPIFFS : “Special payment Incentive For Fast Sales”.

The use of SPIFFS and similar incentive arrangements involves the giving of a reward by a seller to the employee of a customer.  Sometimes, but not always, the customer is a retailer.

An employee of the customer is ‘rewarded’ for buying the sellers products. It can be anything, we have written about BBQ’s, but it could be tractor engines, oil drill bits or tank tracks. The incentive should be something of small value when set against the value of the order and in compliance with the guidelines issued by the SFO in connection with corporate hospitality.

The SFO approach

The Director of the SFO has spoken before on the SFO’s approach to the issue of incentives.  Broadly speaking the SFO position is, so long as the employers of the recipients of incentives know about the incentive arrangements being used and the incentives are not generally at odds with the SFO guidelines on corporate hospitality, then the SFO is unlikely to be concerned.  Here is an example of just one of the Director of the SFO’s comments on the subject:

“Incentive payments. These are a common feature of many industries…I know that a number of companies and a number of industry organisations have been looking at this issue in order to see whether there are risks when the Bribery Act comes into force. We have had a number of meetings in the SFO with corporates and industry bodies about this issue. We have been able to talk through the issues and offer reassurance.

Clearly, these incentive payments are normally designed for commercial reasons and are commercially justifiable. There are risks though. What we have been talking about with corporates is the need for transparency and, in particular, the need to know where the money goes and the fact that it is justifiable. We also talk about the need for a senior person at the corporate’s head office to have visibility of what is happening and to be satisfied that what is happening is justifiable.”

On the other hand, there are plenty of examples where gifts of laptops and other electrical items have crossed the line and been considered bribes.  For example, earlier this year IBM settled FCPA violations with the US SEC which included improper gifts of laptops and cameras and paid US$10 million.

Organisations need to take care when it comes to these arrangements.

A report from a major company to the SFO to the effect that they have been disadvantaged in the winning of an order due to another company offering the potential customers employees non transparent incentives will place the SFO, or any regulator, in a difficult position.

It raises the question: is this a legitimate SPIFF (or incentive)? or is this a SPIV – seeking to win business through bribery.

Our suggestion

We have reported on numerous occasions that the key to SPIFFS/incentives is transparency.

So, if a business does use SPIFFS or similar incentive arrangements we recommend that the details of the programme is (i) transparent (ii) known to the employer of those receiving the incentive (iii) distilled into writing and (iv) details of SPIFFS given recorded in line with the corporate policy which in turn (v) should be in line with the SFO guidance on corporate hospitality.

The incentive policy should set out the details of the SPIFF/incentive programmes including appropriate values and when it is appropriate to give them.

Getting it wrong can be expensive.

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Oct 20, 2011 3:22

[…] chamber.” The FCPAProfessor on the Siemens case for a compliance defense. says gifts are on the SFO’s radar, and notes a change from the agency’s head that could be tipping […]

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