Thailand: Third Fundamental Element of Internal Control Measures under the NACC's Guidelines

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.”

We Can Help

Baker McKenzie has the experience and international coverage to help you devise and implement a compliance program or fill in the gaps of your existing program. Our compliance team is prepared to work with all the critical participants in your corporate compliance effort. We take pride in our ability to work together with clients to anticipate, manage and resolve issues, to provide practical advice and to serve as the “trusted advisor” to management and boards of directors of a wide variety of corporate clients. We work with clients to help ensure their brand, reputation and enterprise are protected and positioned to create additional value.

With a renowned global network and professionals on the ground in 17 cities in Asia Pacific alone, we can handle all your compliance needs, regardless of whether they require a local, regional or global perspective.

Thailand: Third Fundamental Element of Internal Control Measures under the NACC’s Guidelines

Related Posts

Japan: Amendments to legislation on bribery of foreign public officials and updates to guidelines for the prevention of bribery of foreign public officials

Australia: Healthcare and competition update – ACCC to focus on pathology and oncology-radiology sectors in new merger regime

United Kingdom: Government publishes guidance on Failure to Prevent Fraud Offence