By Daniel Hunter

UK film and TV companies need to heed corruption and bribery risks in financing and making films abroad, fraud investigators at Ernst & Young have warned.

Ernst & Young’s Fraud Investigation & Disputes Services have warned that the next front for enforcers could be the film industry following a growing trend among studios to work in emerging markets on new productions. There is also a general pressure on countries to raise quotas of imported films.

In the US enforcers have begun to ask questions of studios about potential bribery of foreign officials showing the extent to filmmaking’s exposure to such risks.

The warning follows China’s relaxation on the number of foreign films that can be distributed in the country, while UK filmmakers looking abroad for new opportunities received a funding boost earlier this year.

Ernst & Young has suggested a number of ways that filmmaking can be exposed to corruption and how to avoid risks:

- 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.

Jonathan Middup, Partner, UK Head of Anti-Bribery and Corruption, 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.

“Filming on location and gearing up distributor networks in new markets present great opportunities but carry high risks. Businesses in this industry can’t afford to ignore the possibility that bribery and corruption may be happening in their name.”

Mike Rudberg, partner in Ernst & Young’s Media & Entertainment Group, added: “With recent regulatory changes, it is vital companies are aware of their potential risks. While in more regulated industries, such as oil and gas, aerospace and defence, employees have a mindset to fight corruption, it may not yet be ingrained in the entertainment industry, particularly among local operations.”

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