Organizations often contribute to and even fund community development projects in the area where they conduct business or intend to initiate a project. The organization may initiate such community contributions as a way to garner positive social recognition or improve community relations, particularly where an organization’s business or project involves change and disruption to the local community. Alternatively, a public official may request that the organization contribute to a community development project.
In both situations, Canadian organizations conducting business or developing projects in another jurisdiction must be aware of the bribery offences set out in the Corruption of Foreign Public Officials Act, SC 1988, c 34 (the “CFPOA” or “Act”) and take measures to ensure any community contributions and/or funding are permissible under the Act.
The Bribery Offence
Section 3 of the CFPOA creates an offence for bribery of a foreign public official. In relation to community funding provided by an organization, the following elements must be present to constitute a bribe under the Act:
- The organization funds the community development project in order to compel the foreign official to act or refrain from acting in order to influence a decision of the foreign state, and
- The community funding is provided for the purpose of obtaining or retaining an advantage in the course of the organization’s business.
Examples of Corruption Risk in Community Development Projects
The form of community funding an organization provides, where that funding is directed and the results achieved can vary significantly, and there are endless possible scenarios in which community funding by an organization may constitute a bribe under the CFPOA.
One common form of community development funding is the establishment of an educational scholarship or bursary program. This type of community funding should be properly scrutinized by the organization before and during implementation, particularly where a potential recipient of such a scholarship or bursary is a close friend or relative of a foreign public official.
Additionally, organizations frequently fund construction or renovation projects that benefit the community – such as a daycare, community park or recreational centre. While these types of projects are inherently beneficial to the community, organizations should investigate whether a foreign public official stands to receive any unique, personal benefit as a result of the project. For example, are any of the contractors for the project owned or operated by a foreign public official, or a close friend or relative of a foreign public official?
Another community funding scenario which may present challenges under the CFPOA is where an organization sponsors local events. As with the previous example, although the event may provide a benefit to the community overall, the funding organization should determine whether a foreign public official or a close friend or relative of a foreign public official stands to receive any unique, personal benefit as a result of the sponsorship. Does the foreign public official or a close friend or relative of a foreign public official have an interest in any of the suppliers, vendors or presenters at the event?
A key theme throughout all the above-noted examples is whether the community funding provided by an organization will benefit a foreign public official or a close friend or relative of a foreign public official in an individual way that is different from the rest of the community. If some form of additional benefit is conferred on any of these parties, the funding may contravene the provisions of the CFPOA.
Similarly, an organization must also consider the public perception of its funding before it promises or commits to funding a community development project. The public may develop a negative perception of an organization’s funding and may make allegations of bribery in cases where the organization receives any perceived competitive advantage as a result of its funding. Furthermore, the public may perceive bribery when funding is provided in a small community, where it may seem that impropriety inherently exists due to the interconnectedness of all members of the community. In such an instance, the organization should carefully research the relationships between community members to avoid any potential CFPOA violations.
Due Diligence Measures
In order to avoid violating the CFPOA through funding a community development project, organizations must undertake due diligence before promising or committing to funding that is either requested by a foreign public official or initiated by the organization itself. An effective due diligence measure involves pre-screening potential community development funding before a commitment or donation is promised or made.
For example, organizations are well-served by implementing a policy that requires documentation including the details of the potential funding or donation prior to the organization making any approvals. The documentation should seek to discover any potential bribery or corruption red flags, including whether:
- the community development funding was requested by a foreign public official who has the power to do (or refrain from doing) anything that will benefit the organization providing the funding;
- there is a decision pending that affects the organization which may be influenced by the funding;
- the funding requested is reasonable, particularly in relation to the overall cost of the community development project;
- there is a legal or contractual obligation to provide funding;
- a foreign public official and/or a close friend or relative will receive any portion of the funding (i.e. through a construction contract, as a recipient of a scholarship, as a vendor at an event, etc.);
- a foreign public official and/or a close friend or relative will uniquely benefit from the community development project, as compared to the rest of the community.
To ensure the propriety of any community funding, management and/or an organization’s anti-corruption compliance team should review this documentation prior to approval of any community development funding.
Providing funding for community development projects can create numerous benefits, including improved community resources and a more positive public perception of the organization making such contributions. Despite these numerous benefits, Canadian organizations must be cautious when providing funding for community development projects in foreign states. In certain situations, the funding of a community development project in a foreign jurisdiction may constitute a bribe under the CFPOA, resulting in significant consequences for the funding organization. Consequently, organizations should implement due diligence measures that are capable of preventing potential CFPOA violations by recognizing and addressing any red flags before any funding is approved or provided.