Thu 4 Oct 18 // Industry Integrity
Transparency International Defence & Security would like to announce the initial phase of the 2019 edition of the Defence Companies Anti-Corruption Index (DCI).
A draft version of the 2019 Questionnaire and Model Answer document is available here. Companies may offer feedback and comments about the draft QMA until 2nd November 2018.
What is the Defence Companies Anti-Corruption Index (DCI)?
The DCI sets standards for transparency, accountability and anti-corruption programmes in the defence sector. By analysing what companies are publicly committing to in terms of their openness, policies and procedures, we seek to drive reform in the sector, reducing corruption and its impact. The DCI will assess 145 of the world’s leading defence companies across 39 countries. The Index was first published in 2012 with a second edition in 2015, and the latest edition is set to be published in 2019.
The upcoming index will apply a revised methodology and will include some key differences from previous editions. The Questionnaire and Model Answer document can be found here.
How will the 2019 Index be different?
After a comprehensive review, the new DCI assessment has evolved and should be read alongside our recent report ‘Out of the Shadows: Promoting Openness and Accountability in the Global Defence Industry’ – which provides greater insight into the theory behind our methodology. Based on consultations with anti-corruption and defence experts, TI DS have identified ten key areas where higher anti-corruption standards and improved disclosure can reduce the opportunity for corruption.
In one the most significant changes to the methodology, TI DS will this year base the research only on what companies choose to make publicly available. The decision to exclude internal information from the evaluation reflects our increased focus on transparency, public disclosure of information, incident response and the practical implementation of anti-bribery and corruption programmes.
How have companies been selected?
Companies for the 2019 DCI have been selected on the basis that:
- The company features in the 2016 edition of SIPRI’s Top 100 Arms-Producing and Military Services companies.
- The company features in the 2016 edition of Defence Industry Weekly’s Top 100 defence companies.
- The company is the largest national defence company headquartered in a country exporting at least £10 million, as identified by SIPRI.
To see the list of companies selected for assessment in 2019, click here.
How will data on companies be collected?
Our assessment of a company’s individual anti-bribery and corruption record is based entirely on publicly available information. In particular, we will review the company’s website, including any available reports, for evidence of robust anti-corruption systems, as well as any functioning hyperlinks to other relevant online materials. In reviewing your company’s materials, we will assess the completeness and accessibility of the information, in particular:
- The amount of information a company publishes about its internal anti-corruption programmes, incident response systems and interactions with third parties;
- Evidence that these systems are used by employees and made available to all employees;
- Evidence that the company monitors and reviews its anti-bribery and corruption processes.
Researchers from TI DS will conduct assessments of each company’s public information starting in February 2019, giving companies an opportunity to make any alterations to their publicly available information before the research process begins. The initial results will be shared with your company, after which you will have the opportunity to review the initial findings and suggest any corrections. The final assessments will be published on our website.
Where can I find the assessment criteria?
A draft version of the 2019 Questionnaire and Model Answer document is available here. Companies, governments, and civil society alike may offer feedback and comments about the draft QMA until 2nd November 2018.
Our recent report ‘Out of the Shadows: Promoting Openness and Accountability in the Global Defence Industry’ provides greater insight into the theory behind the changes to the 2019 methodology.
What is the timeline for the Index?
The questions and model answers for the 2019 assessments are now available at www.ti-defence.org/dci. We welcome feedback from companies, governments, civil society and journalists alike, and we will be accepting feedback on this until the 2nd November 2018. To provide input during this consultation period, please contact the team at firstname.lastname@example.org.
We will finalise the methodology shortly after the 2nd November deadline, and research will begin in February 2019 once companies have had some time to make improvements, should they wish to.
What do companies have to do next?
Companies, governments, and civil society alike may offer feedback and comments about the draft QMA until 2nd November 2018.
If the relevant people within your organisation did not receive email confirmation of the DCI launch, or if you would like to suggest an alternative point of contact, please email email@example.com or fill in the contact form below.
Will we have an opportunity to give feedback on the methodology before the assessments start?
Yes – companies may offer feedback and comments about the methodology to TI by emailing the team at firstname.lastname@example.org
Feedback is welcome from all users of the index including governments, civil society, journalists and companies.
If you work for a defence company selected for assessment on the DCI and you have not received information about the upcoming edition, please enter your contact details below:
TI Defence & Security
2nd October 2018, Kyiv – On Tuesday, October 2, the Independent Defence Anti-Corruption Committee presented its new report, Poor governance and corruption in Ukraine’s defence housing system: Risks and Recommendations, and called for systemic changes in how servicemen and women are housed. There are 47 thousand families of servicemen currently waiting for homes. According to a preliminary calculation by NAKO, under the current model, it would take more than 600 years to house them all.
NAKO identified ineffective management and corruption risks, including that a few individuals have the power to make decisions with few controls and little oversight. Interviewees reported that servicemen are required to pay bribes to get a place in the queue for houses, even as some are provided with multiple homes.
And poor oversight means that companies that fail to deliver on the buildings they’ve committed to are not held to account; in one instance, the director of a company that failed to build the homes it was contracted to was even put in the position of overseeing the body ensuring that military properties are built.
The report also identified that poor planning by the MOD leads to unbuilt homes and drained budgets, even as thousands wait for homes. In one building alone, researchers found that the Ministry paid more than $300,000 US dollars over what the Ministry of Regional Development estimated the cost should be.
NAKO Co-Chair James Wasserstrom stated: “It is high time for the MOD to find a realistic way to make good on unrealistic Soviet promises. This is going to require a major change that won’t be easy. It will require political courage to make decisions in the long-terms interests of Ukraine’s military, rather than sticking to commitments that the Ministry is unable to deliver.”
NAKOs New Committee Member, Former NATO Vice Chief fo Staff, SHAPE, LTG Michel Yekovleff, stressed the need for Ukraine to keep its Euro/Atlantic promises: “Being with the EU and NATO means following their principles and procedures”.
In terms of defence housing, it means that Ukraine is expected to follow the best examples of the Euroatlantic contries providing the decent housing to the servicemen in a transparent and non-prone to corruption way”.
NAKO recommends that the Ministry of Defence:
1. Abolish the housing queue. Instead of promising homes that the Ministry cannot deliver, it should move to a model of transparent, fair monetary compensation for personnel, which is not only more realistic, but also puts decision-making in the hands of service families.
2. Conduct an audit of existing homes and the queue of those waiting for homes. This can be used to make the Maino-Zhytlo software, which tracks the queue and available homes, more effective.
3. Adopt capability-based planning, so that housing projects that the MOD embarks on are based on the real needs of its troops.
NAKO conducted the research on housing corruption at the request of Defence Minister Poltorak. The Committee has offered to advise and support the Ministry on the implementation of the recommendations for systemic reform.
NOTES TO THE EDITOR
The Independent Defence Anti-Corruption Committee (NAKO) aims to reduce corruption and increase accountability in the Ukrainian defence sector. It is a joint initiative of Transparency International Defence and Security (TI-DSP) and Transparency International Україна (ТІ Ukraine). NAKO’s vision is that Ukraine’s defence and security sector that is accountable, efficient, and has a low level of corruption. Its mission is to minimize opportunities for corruption through strong research, effective advocacy, and increased public awareness, in order to strengthen the Ukrainian defence and security sector.
The Committee consists of six members: Editor in Chief of ‘Ukrayinska Pravda’ Sevgil Musaieva, Former Minister of Foreign Affairs of Ukraine, Former First Deputy Secretary Defence and Security Council of Ukraine Volodymyr Ogryzko, Chairman of Centre UA, co-initiator of Chesno Campaign Oleh Rybachuk, Chair of the OECD Working Group on Bribery and Former Anti-Corruption Commissioner in Slovenia Drago Kos, and anti-corruption expert and Former Head of Oversight of Public Utilities at the UN Mission in Kosovo James Wasserstrom. The committee is supported by a Secretariat in Kyiv, which is led by Olena Tregub.
TI Defence & Security
19th June 2018, Kiev – The Independent Defence Anti-Corruption Committee (NAKO) announced on June 19th that it is in favour of the revised tender for an independent audit and strategic analysis of Ukroboronprom. It has reestablished dialogue with Ukroboronprom and intends to monitor the tendering process.
NAKO said that the process is the opportunity to bring light to inefficiencies, corruption risks and structural deficits at Ukroboronprom and will be a first step towards resolving these issues and building a state-owned defence establishment that meets the needs of the public and armed forces. The NAKO committee stated that the creation of the independent Supervisory Board, which was appointed by President Petro Poroshenko this January, was a key step towards having effective governance and will be the main customer in the upcoming tender.
Volodymyr Ohryzko, NAKO Co-Chair, stated:
The Supervisory Board of Ukroboronprom is responsible for reforming the institution so that it meets the interests of the public and the Ukrainian state. This audit, in line with international standards, will aid the Supervisory Board in carrying out their responsibility and raising the company to meet international standards of governance.
The call for tender includes three parts: 1) an assessment of the corporate governance of Ukroboronprom and its members, 2) a legal review, diagnosis and consultation of Ukroboronprom and its member companies, 3) an independent financial audit of Ukroboronprom and its member companies.
The original tender did not include some of these components, including the independent financial audit. The NAKO provided recommendations to Ukroboronprom’s Supervisory Board about what should be included in the tender, and the Supervisory Board revised it in line with these recommendations. Following those amendments, the tender process is currently underway. The deadline has been extended from June 18th to September 28th in order to give a broader range of companies the opportunity to bid.
Drago Kos, NAKO Co-Chair said:
We hope to see a strong pool of auditing firms bidding for this. It is undoubtedly complex – but if it can be reformed, the impact on Ukraine and its future will be historic.
Olena Tregub, NAKO Secretary General confirmed that:
The NAKO continues to monitor this tender; our aim is to ensure that the reform of Ukroboronprom is provided with clear advice on the corporate structure and management, and that a full financial audit will identify financial black holes in the company – and will facilitate an evidence-based reform programme.
More details on the tender can be found here.
The Independent Defence Anti–Corruption Committee (NAKO) is a joint initiative to fight corruption in the Ukrainian defence sector run by Transparency International Defence and Security Program – Great Britain (TI-DSP) and Transparency International Україна (ТІ Ukraine).
The Committee consists of six members: Editor in Chief of online media ‘Ukrayinska Pravda’ Sevgil Musaieva–Borovyk, Former Minister of Foreign Affairs of Ukraine, Former First Deputy Secretary Defence and Security Council of Ukraine Volodymyr Ogryzko, Chairman of Centre UA, co–initiator of Chesno Campaign Oleh Rybachuk, Lieutenant–General of the British Army and Former Commander of the NATO Allied Rapid Reaction Corps Timothy Evans, Former Anti–Corruption Commissioner in Slovenia Drago Kos and Former Head of Oversight of Public Utilities at the UN Mission in Kosovo James Wasserstrom.
The goal for the NAKO is to reduce corruption risks in defence and security sector of Ukraine by means of monitoring, evaluation and analysis of anti-corruption reforms and providing the corresponding recommendations.
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TI Defence & Security
11th June 2018, London – Today, NGOs in France, Indonesia, Sri Lanka, Tunisia, the UK and the US are calling upon the agencies investigating Airbus to ensure that the company and its senior executives are properly held to account.
Airbus is under investigation in several jurisdictions for allegedly paying bribes in order to win billions of dollars of contracts. The allegations are egregious and widespread, covering multiple countries and involving several divisions within Airbus including commercial aircraft, helicopters and aerospace and defence.
In February 2018, Airbus reached a €81.25million settlement in Germany to end a corruption investigation into the 2003 Eurofighter deal with Austria. Over the coming months, prosecutors will be weighing up their options, with more settlements as one possible outcome, allowing the company to continue winning government contracts without prosecution.
Today the NGOs in a letter to the heads of the Serious Fraud Office, Parque National Financier and Department of Justice urged the authorities to ensure that:
- National economic interest, relations with foreign states or the importance of Airbus as a national industry must not affect the investigation or prosecution of alleged bribery by the company;
- Individuals responsible for the wrongdoing must face prosecution including those at senior levels;
- No immunity deals should be included in any action taken against Airbus;
- A settlement should only be given if prosecutors have high confidence that Airbus has fully cooperated and revealed the full extent of wrongdoing, and if it has fully signed up to genuine corporate change including through disciplining of employees responsible for wrongdoing;
- Countries where it is proven that Airbus has paid bribes must be fully compensated for harm caused; and
- Any enforcement action must be fully transparent with details of the wrongdoing made publicly available.
Susan Hawley, Director of Policy at Corruption Watch, said:
“The Airbus case is a test of the resolve and independence of the prosecuting bodies and their ability to bring widespread and egregious wrongdoing to justice. Airbus and individuals implicated must not be let off lightly if these global allegations are confirmed by law enforcement investigations.”
Andrew Watson, Head of Industry Integrity at Transparency International Defence and Security said:
“If proven, these extensive cases of corruption will have had a significant impact on the public, state institutions and the industry. With such wide-ranging and complex allegations, it will be will be vital for prosecutors to co-ordinate closely if they are to account for the full scale of alleged offending; because individual cases, serious as they may be, won’t tell the whole story.”
TI Defence & Security
Mon 11 Jun 18 // Industry Integrity
Ensuring any enforcement action against Airbus meets fair justice standards
We are writing as concerned anti-corruption organisations that have seen the effect of corporate bribery on democracy, good governance, economic progress and security across the world.
We are aware of extensive media coverage about allegations of bribery involving Airbus. The allegations are egregious. They span over a decade and include at least 14 countries including Sri Lanka, Kazakhstan, Austria, Tunisia, India, Poland, China, Greece, Saudi Arabia, Turkey, Indonesia, Kuwait, Mauritius and Mali as well as implicating all business segments within Airbus, including aerospace and defence, commercial aerospace and helicopters. The media coverage has indicated that the SFO, PNF and DOJ are all investigating alleged wrongdoing. Other authorities around the world are also investigating these allegations, including in Austria, Kuwait, Poland and Sri Lanka.
We welcome the fact that the SFO and the PNF have set up a joint investigation team in this case with close coordination with the DOJ. The co-ordination of law enforcement activities in such cross-border and global alleged wrongdoing is essential. It helps to maximise use of law enforcement resources and ensure that investigators and prosecutors are aware of the full facts of potential wrongdoing when making enforcement decisions.
We are writing to ask you to ensure that any enforcement action against Airbus, whether a settlement or other form of action, meets standards that would ensure justice is achieved and that the harm caused by any wrongdoing is properly assessed and compensated for. We would encourage you to give careful consideration to the full range of enforcement options available, including prosecution. In particular, we ask you to ensure that:
TI Defence & Security
Thu 7 Jun 18 // Accountable Defence Sectors
6th June 2018, London – New allegations made by Corruption Watch U.K. that British intermediaries took corrupt payments from an Italian defence company, to secure defence contracts in South Korea, must be fully examined by the UK’s Serious Fraud Office and where wrong-doing is established prosecutions should follow.
Robert Barrington, Executive Director Transparency International UK, said:
“’These are strong and long standing allegations about significant crimes having been committed, and need to be properly examined by the authorities in the jurisdictions concerned, which means the Serious Fraud Office in the UK. We also encourage UK MoD to fully consider the use of their procurement exclusion powers and whether the company should be temporarily suspended from MoD bidding while these matters are investigated. If wrongdoing is found to have occurred, the full weight of the law should be used against the individuals involved, any senior officers of the company who were complicit, and the company itself.”
“The use of third parties in defence deals has long presented a significant corruption risk and this case demonstrates the need for more consistent transparency requirements in export policies around the use of payment of agents.”
Transparency International’s. “Licence to Bribe? Reducing corruption risks around the use of agents in defence procurement” highlighted the profound risks of using middlemen in defence deals and showed that 90% of companies assessed by TI, fail to provide evidence of regular due diligence over the use of agents.
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TI Defence & Security
Nigeria: More spent on security votes per year than Army budget
Civil society groups call for scrapping of secretive security vote spending
28th May 2018, London/ Abuja – Ahead of the 2019 Presidential elections in Nigeria, Transparency International and the Civil Society Legislative Advocacy Center (CISLAC) are calling on candidates to commit to scrapping the unaccountable and secretive “security vote” spending – one of the most durable forms of corruption in Nigeria—saying that they fail to provide real security for citizens.
“Camouflaged Cash”, a new report launched today by the groups, estimates that security votes in Nigeria total around $670 million annually – more than the annual budget of the Nigerian Army. This amount dwarfs the US security assistance to Nigeria since 2012 and UK counter terrorism support promised from 2016-2020.
Security votes, used by successive governments since 1999, are opaque funds that are disbursed at the discretion of public officials, very often transacted in cash, without being subject to oversight or independent audit. In theory they are designed to cover unforeseen security needs but in reality many have become slush funds for corrupt officials.
As well as undermining Nigeria’s fight against corruption, the misuse of these funds is fuelling instability. By prioritising security vote spending, less funding is available for Nigerian forces to pay salaries or procure needed supplies, leaving them underequipped to fight Boko Haram. They also offer major potential sources of funding to tilt political campaigns, stoking tensions at a critical time.
Katherine Dixon, Director of Transparency International Defence & Security said:
“The security vote is one of the most durable forms of corruption operating in Nigeria today. Yet instead of addressing its many urgent threats, the ever-increasing use of security votes is providing corrupt officials with an easy-to-use and entirely hidden slush fund.”
“Corruption in the crucial sector of defence and security plays right into the hands of those who seek to sow the seeds of instability and terror. It leaves armed forces under-resourced in the fight against Boko Haram and feeds groups who may destabilize the elections.”
Auwal Musa Rafsanjani, Executive Director Civil Society Legislative Advocacy Center, said:
“We are calling on all candidates for the coming election to agree to phase out this secretive and dated form of spending. Growing insecurity at a time when security vote spending has increased shows that it serves no positive purpose in keeping Nigerian citizens safe. Any candidates serious about fighting corruption in Nigeria will recognise the need to urgently address the problem of security votes.”
“Ahead of our National Democracy Day a strong commitment from public officials against security votes would help the growing understanding that combatting corruption is a vital element of any serious democratic society.”
Transparency International Defence & Security and CISLAC recommends the Nigerian government:
- Pass federal legislation outlawing security votes at all levels, to be accompanied by legislation specifying budgeting procedures and criteria for security expenditure.
- Establish effective oversight structures to ensure existing spending is appropriate.
- Educate its officials, security leaders and the general public about the risks of using security votes.
- Support state governments to set up Security Trust Funds as a constructive first step to phasing out security votes.
Key stats and findings from Camouflaged Cash include:
- $670 million spent on security votes per year
- More than the annual budget of the Nigerian Army
- More than the annual budget of the Nigerian Air Force and Navy combined
- More than 70% of the annual budget of the Nigerian Police Force
- More than nine times the US security assistance since 2012
- More than 12 times the UK counterterrorism support for 2016 – 2020
- 29 Nigerian states receive an average total of $580 million through security votes each year
- $5 million – increase in security vote spending between 2016 and 2018
- $15 billion – estimated amount stolen from Nigeria’s defence sector of by former military chiefs
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Transparency International Defence and Security (TI-DS) works to reduce corruption in defence and security worldwide.
Civil Society Legislative Advocacy Centre (CISLAC) is a non-governmental, non-profit, advocacy, information sharing, research, and capacity building organisation. Its purpose is to strengthen the link between civil society and the legislature through advocacy and capacity building for civil society groups and policy makers on legislative processes and governance issues.
TI Defence & Security
On Saturday, 12 May, the state-owned defence company Ukroboronprom posted an updated tender for a consultant on the e-procurement platform Prozorro. Ukroboronprom is now bound to an independent financial audit in line with international standards. The move follows the re-establishing of the functioning Supervisory Board of Ukroboronprom and extensive input from the Independent Defence Anti-Corruption Committee (NAKO) together with international partners.
The previous version of the Statement of Work excluded a fully independent financial audit. The new edition of the tender includes three components: (1) assessment of corporate governance and strategic consulting of Ukroboronprom and its members in accordance with OECD standards; (2) legal due diligence and legal consulting of Ukroboronprom and its members; and (3) an independent financial audit of Ukroboronprom and its members in accordance with international standards.
NAKO provided recommendations relating to this independent financial audit as well as assessment of corporate governance and they were duly implemented by the Tendering Committee in the final version of the call for tender. NAKO will provide external monitoring of this procurement process.
Volodymyr Ohryzko, NAKO Co-Chair said:
A full and independent financial audit, conducted in accordance with international standards by a recognized auditing firm, will gain trust not only from the Ukrainian people, but also among Western partners and investors’.
The success of the audit depends on multiple factors including: a strict adherence to International Auditing Standards by the auditor; the auditor’s ability to access all necessary information, taking relevant laws on state secrecy into account; the auditor’s independence, impartiality, and; the implementation of audit recommendations.
Olena Tregub, NAKO Secretary General said:
“Ukroboronprom’s willingness to amend the Statement of Work though including the services of independent audit is a positive step which will open the company up to greater scrutiny. It is the first step towards transforming the company. NAKO is expecting to see reputable international auditing firms among the bidders,”
The deadline for companies to bid is 18 June 2018.
More details can be found at: https://prozorro.gov.ua/tender/UA-2017-12-20-003453-c
TI Defence & Security
Transparency International Defence and Security has launched a new project “Strengthening CSO Engagement with Defence Institutions to Reduce Corruption and Strengthen Accountability in Mali”, funded by The United Nations Democracy Fund.
The project seeks to build civil society’s ability to advocate for accountability and transparency in the Malian defence sector and to open a space for them to do so. It aims to be a first step in strengthening the links between national civil society, the defence institutions and the democratic bodies charged with oversight of defence in Mali. Over the next 18 months, TI-DS will support national civil society organizations to identify specific institutional reforms that are needed to reduce corruption risk and offer technical expertise to support civil society in holding constructive dialogue with defence.
The project will run from April 2018 to September 2019 and will be jointly delivered with CRI-2002, the national contact for Transparency International in Mali.
TI Defence & Security
Fri 23 Mar 18 // Accountable Defence Sectors
Western states contributing to military control in Egypt
Opaque and wealth driven military failing to provide security
23rd March 2017 – Western states and arms companies have contributed to the Egyptian military’s consolidation of political power by providing aid and security assistance with few strings attached, according to a new report “The Officers’ Republic” by Transparency International Defence & Security.
This report comes as Egyptians prepare to take to the polls in a widely discredited election, in which the military General, President el-Sisi, is expected to secure another four years of power. Meanwhile the intensity of state violence and human rights abuses continues to soar.
Whilst the Egyptian military has, since the protests that brought down Hosni Mubarak in 2011, cemented its political power and expanded its economic ambitions, it has remained a largely opaque and unaccountable institution. Its pursuit of economic and political interests have meanwhile left it struggling to confront the security challenges faced by the country, with a detrimental effect on both local and regional stability.
Details of Egypt’s defence budget, an estimated $4.4billion per year, are treated as a state secret. Egypt’s institutions provide little scrutiny of the military’s finances. Meanwhile the US provides approximately $1.3 billion a year to the government in foreign military assistance.
At the same time western defence companies – with approval from their governments – have continued to do business as usual with a military force riddled with corruption risk and lacking in any form of meaningful transparency. Egypt was the third largest arms importer in the world over the last five years. In March 2015 the US reinstated delivery of major weapons systems to Egypt, having halted them after the 2013 coup, despite little evidence of reform progress.
James Lynch, Deputy Director Transparency International Defence & Security, said:
“The Egyptian people have a military that does everything but keep the country secure. Its concern with building its economic and political power has hugely frustrated its efforts to deal with the security challenges it faces in the Sinai and other places. This is a military that may very well be the architect of its own security crisis.”
“Egypt’s armed forces have under President el-Sisi expanded their privileged position in the country’s economy, have grabbed full control over the political system and yet they are not under any meaningful scrutiny. Western states, who could do much to influence this situation, are meanwhile failing to demand serious reform and instead carrying on with business as usual, while mistakenly still considering Egypt a trusted partner for security in stability in the region.”
“As Egyptians take to the polls the outcome is highly unlikely to bring about any result other than the continued dominance of the military. The international community must understand that not only is it doing a major disservice to the people of Egypt by providing support to the armed forces with few strings attached, it is also contributing to the security crisis the country and region is facing.”
Transparency International Defence & Security recommends that the international community:
- Promote better domestic oversight of the armed forces by asking harder questions on the military’s economic activity and accountability mechanisms
- Make financial and security assistance dependent on achieving at least basic levels of transparency and accountability
- Amplify domestic voices championing accountability and a better governed defence sector
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TI Defence & Security