Earlier this month, the UK’s Serious Fraud Office said it would toughen its stance on bribery, meaning criminal penalties could become more commonplace. Today, Ernst & Young warns that the next front for enforcers could be the British film and television industries as companies increasingly work in emerging markets, and says the business should “heed corruption and bribery risks in financing and making films abroad.” The report notes that “In the U.S., enforcers have begun to ask questions of studios about potential bribery of foreign officials showing the extent of filmmaking’s exposure to such risks.” In April, the U.S. majors received letters of inquiry from the SEC regarding their China dealings, although it is considered unlikely the Hollywood studios are involved in any wrongdoing.
In the U.S., there are training exercises in place to teach employees the ins and outs of the Foreign Corrupt Practices Act. But in the UK, whereas oil and gas industry employees “have a mindset to fight corruption,” the report says, “it may not yet be ingrained in the entertainment industry” which is becoming more and more international. UK filmmakers received a funding boost this year which promotes inward investment, foreign exports and gives priority to bolstering growth and relations with Brazil and China, forming part of the basis for the E&Y bulletin.
E&Y partner Jonathan Middup said: “Film and TV making is particularly exposed to bribery and corruption risk. Films are shot all over the world and in some cases they are in countries where corruption is commonplace. There is a lot of cash being used and there is a need to get access to areas closed to the public, creating a lot of potential touch points with local governments or even the military.” In some countries, how one accesses those things can run afoul of UK law even though they might be accepted practices in the country in question.
Here are Ernst & Young’s tips for avoiding pitfalls:
— Control of film distribution by one party, which can be government-owned, can increase the risk of corruption. Filmmakers need to make sure they are not making inappropriate payments to gain access to this market.
— Gift-giving is important in certain cultures, but under some circumstances could be construed as a bribe. Filmmaking also may need access to areas or locations closed to the public which may risk so called ‘facilitation’ payments which are illegal under the Bribery Act. Close attention should be given to avoid making such payments.
— Under the Bribery Act failure to carry out checks on third parties leaves a company open to unlimited fines if it was to have a bribery or corruption problem. Joint ventures and third parties doing business on filmmakers’ behalf should be background checked – film companies need to know who they are dealing with and what relationship they have to the government.