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 of 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.

Filmmaking can be exposed to corruption in a number of ways, including:

• 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.
• 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.

Mike Rudberg, partner in Ernst & Young’s Media & Entertainment Group, commented: “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 mind-set to fight corruption, it may not yet be ingrained in the entertainment industry, particularly among local operations.”

Contact Jeffrey Lewis or Siobhain Egan for advice on these issues.