Governments pushing arms trade into the hands of corrupt middlemen
London, 28th June 2016 – The drive of major governments towards lucrative arms sales in emerging markets is increasing opportunities for corruption by middlemen.
Read “Licence to Bribe? Reducing corruption risks around the use of agents in defence procurement” here.
According to new research from Transparency International (TI), the pursuit of arms deals by states such as the US and UK with corrupt nations undermines legislation created to reduce corruption. In many cases this is sustaining the role of unaccountable middlemen or agents, who are employed by companies to secure defence contracts.
In the last five years, 80% of UK exports of major conventional weapons (measured by volume, 2010-2015) have been delivered to markets assessed by TI to have high to critical corruption risk in their defence institutions, such as Saudi Arabia. This is the highest figure of any NATO member and compares to just 53% and 30% in the US and Germany.
In many of these countries defence budgets are hidden from public view, with the lack of oversight over defence deals and secretive nature of the sector creating huge opportunities for abuse by corrupt agents.
Katherine Dixon, Director Transparency International Defence and Security, said:
“Defence companies are being placed in an impossible position – they are rightly subject to the provisions of anti-bribery legislation, but at the same time are encouraged by governments to secure defence contracts in some of the most corrupt parts of the world. This is simply pushing corruption into darker corners – with shady middlemen frequently a major beneficiary of corrupt arms deals.
“Governments like the UK are turning a blind eye to the destructive impact of their defence export policies. When weapons are sold to deeply corrupt places there is always the risk that they end up in the wrong hands and fuel conflict. Governments must take responsibility for defence export policy, especially when the cost can be the future stability of some of the most insecure parts of the world.”
The UK Bribery Act and US Foreign Corrupt Practices Act prohibit bribery by agents but allegations of defence corruption involving agents continue to emerge. In 2014, for example, Hewlett-Packard was fined USD 108 million for violating the FCPA by paying bribes to government officials through agents.
Agents can manipulate arms deals and procurement decisions to ensure importers purchase their clients’ products. They can be involved in offset contracting, whereby goods or services are promised in return for securing defence contracts. In many parts of the world agents are often former military or public officials and can pose serious conflicts of interest.
Transparency International recommends:
- The UK and other EU nations should act more responsibly when exporting to corruption-prone markets. The first step is to apply existing export control provisions rigorously and require buyer nations to implement basic defence budget transparency and oversight over public spending as a condition of export.
- Importing governments should do more to stop public money being stolen – this includes increasing transparency and oversight over the defence sector, and introducing robust procurement processes to shut down opportunities for corrupt activity by agents.
- Companies must ensure they have the right to follow the money – that means full oversight over agent activities and the ability to audit all their financial accounts. Without this, corrupt agents will continue to steal scarce government resources from the most vulnerable nations.
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