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,”

***ENDS***

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

Fri 13 Apr 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).

What is the Defence Companies Anti-Corruption Index (DCI)?

The purpose of the Index is to set the standard for transparency in the defence sector and to explore what companies are publicly committing to in terms of anti-corruption. The Index has a global reach and will assess 143 defence companies across 35 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.

A copy of the 2015 edition can be found here.

 

How will the 2019 Index be different?

Based on feedback from a range of users and advice from anti-bribery experts, the methodology for the 2019 edition of the Index has been reviewed and re-designed. The new methodology will shift the emphasis of the index from a tool which has previously focused on compliance, to ensure that it accounts for a wider range of risks. Full details of modifications will be made available to companies shortly.

Unlike the 2015 version, this edition of the Index will assess companies through publicly available information only. 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 included in the index will be contacted directly in due course. At present, our selection criteria is based on the fact that:

  • The company features in the 2016 edition of SIPRI’s Top 100 defence 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.

 

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.

 

Research for the Index will be conducted by a team of analysts within the Defence and Security team at TI. Once we have assessed your company, we will notify you of our preliminary findings and provide you with a period of time to bring any additional supporting material to our attention.

 

Where can I find the assessment criteria?

The updated assessment criteria will be made available on this website shortly.

 

What is the timeline for the Index?

We will send the information formally announcing the next edition of the Index to companies in April – May 2018. This will include further details regarding the process, timelines, and methodology.

We will be holding a consultation period over the coming months to allow companies to give feedback and ask questions about the upcoming Index. For those seeking further information after this period, we will also host online webinars. Further details will be announced in due course.

Research for the assessments is planned to commence in August and will last until the end of 2018. Initial results will be shared with companies so that they have the opportunity to implement new processes or make more information publicly available. The results of the index will be published in the first quarter of 2019.

 

What do companies have to do next?

We will write to companies included in the 2019 Index shortly. In the meantime, companies don’t have to actively do anything.

 

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 using one of the following opportunities:

  • Take part in one of the online webinars (dates to be announced)
  • Email the team at: dci@transparency.org

Feedback is welcome from all users of the index including governments, civil society, journalists and companies.

Please enter your details here if you would like to nominate yourself as a point of contact for your company

First Name:
Last Name:
Company:
Job Title:
Telephone Number:
E-Mail Address:
I agree to Transparency International Defence & Security using the details provided to contact me about the index.

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

***ENDS***

Notes:

Contact:

Dominic Kavakeb
020 3096 7695
079 6456 0340
dominic.kavakeb@transparency.org.uk

TI Defence & Security

 20th March 2018, London – The re-opening of corruption charges against former South African President  Jacob Zuma, relating to a 1999 arms deal, are a welcome step and should mark the beginning of justice finally being served, according to Transparency International Defence & Security.

Research from Corruption Watch UK into the scandal known as the ‘Arms Deal’ suggests billions of taxpayers money was squandered – at a time when the South African government claimed that there were insufficient funds to treat thousands of citizens for AIDS.

Andrew Watson, Head of Industry Integrity at Transparency International Defence & Security, said:

“We warmly welcome the news that Jacob Zuma may now finally face justice for his crimes. It’s a shame that these charges took him to leave office for a prosecution to take place – but it is encouraging that his crimes may now finally be catching up with him.”

“Jacob Zuma and the companies alleged to have paid bribes to him have escaped justice for many years. These charges must now finally shed some light on one of the largest defence corruption scandals ever seen and result in robust prison sentences for those found to have been involved.”

***ENDS***

Contact:

Dominic Kavakeb
020 3096 7695
079 6456 0340
dominic.kavakeb@transparency.org.uk

TI Defence & Security

Fri 19 Jan 18 // Industry Integrity

19th January 2018, London – Commenting on an announcement by the Serious Fraud Office that it is investigating Chemring Group PLC, a British Defence Company, for corruption, money laundering and bribery, Andrew Watson, Head of Industry Integrity at Transparency International Defence and Security, said:

“It is disappointing to see another British defence company facing fresh allegations of systemic and widespread corruption, highlighting the very real challenges facing this unique sector.”

“Once again, intermediaries – long established as one of the highest corruption risks in defence commerce – are at the heart of these allegations.”

“Whilst it is encouraging that the company reportedly discovered the allegations themselves during an internal audit and that it was then self-reported to the SFO, we call for the company to fully cooperate with investigators and conduct an internal review of its anti-bribery procedures to discover what went wrong and why it wasn’t discovered before now. It’s vital that this investigation is thorough and perpetrators are brought to justice, no matter how high-up in the company they may be.”

Chemring scored a C in the Transparency Internationals most recent Defence Companies Anti-Corruption Index, meaning there is “moderate evidence” that they have anti-corruption measures.

Transparency International’s 2016 report “License to Bribe” identified the significant risks in the use of third parties and agents in arms deals, one area reported to be the subject of this investigation.

***ENDS***

Contact:

Dominic Kavakeb
020 3096 7695
079 6456 0340
dominic.kavakeb@transparency.org.uk

TI Defence & Security

Tue 26 Dec 17 // Conflict & Insecurity

The Independent Defence Anti-Corruption Committee (NAKO) announced that it would withdraw from engagement with UkrOboronProm, due to the failure of the Government and Presidential Administration to make progress in establishing an independent Supervisory board.

The committee had hoped to support efforts to reform the state-owned enterprise, both by providing advisory services and by advising the Government and Presidential Administration on the steps needed to establish an independent and effective Supervisory board for the Company. Recommendations were provided to Deputy Head of the Presidential Administration Valeriy Kondratiuk, who committed to supporting their implementation.

Oleh Rybachuk, co-chair of NAKO, said:

We hoped we could contribute to reducing the high corruption risk that exists in UkrOboronProm today, and ensure that UkrOboronProm is overseen by an independent, effective board, so that the firm could do what it should: provide our troops with the equipment they need and use taxpayer funds wiselyUnfortunately, we do not see that this presidential administration has the political will for real change.

At the invitation of UkrOboronProm, NAKO has monitored UkrOboronProm’s procurement of a consulting firm to advise and support the implementation of governance reform. Without an independent Supervisory board in place, however, the NAKO committee determined that the procurement of a consultant would be out of line with Ukrainian legislation (Article 6 of the Law of Ukraine “On features of management of objects of state-owned property in the defence industry complex” requires Supervisory board sign-off on strategy, audit, and reorganisation of the Company). More importantly, the procurement of a consultant would have little chance of affecting substantive change.

The OECD Principles on Corporate Governance of State-Owned Enterprises represent good practice internationally on governance of state-owned enterprises. According to these principles, the government is responsible for establishing well-structured, merit-based and transparent board nomination processes in State-owned enterprises. These boards are required to provide strategic guidance and monitor management, and are ultimately accountable for the Company’s integrity and performance.

Oleh Rybachuk, co-chair of NAKO, also said:

Given the allegations surrounding senior political leaders’ relationship with UkrOboronProm, it is absolutely vital that the Supervisory board is genuinely independent, said Drago Kos, co-chair of the NAKO. In a time of war, the largest state-owned defence enterprise must meet the needs of the troops – [not political leaders.] The only way for this to happen is through a supervisory board that is independent and trusted by the Ukrainian public.

NAKO announced that it would work with others to develop concrete recommendations on how to put in place an independent Supervisory board in 2018, and offered their continued support to the government on their implementation.

Contacts:

Taras Yemchura
(098)910-24-86
tyemchura@transparency.org

The Independent Defence Anti-Corruption Committee (Nezalezhny Antikorrupciynii Komitet z pytan oborony, or “NAKO”) is a joint initiative established by Ukrainian activists, journalists and international experts to fight corruption in the Ukrainian defence sector. The NAKO is a national-international project of Transparency International Defence & Security and Transparency International Ukraine, and is supported by the Ministry of Foreign Affairs of the Netherlands.

TI Defence & Security

The illegal trade between government-controlled Ukraine and the occupied territories in Donbas is conducted systematically, facilitated by Ukrainian defense and security institutions, according to new research. The illegal trade undermines defence capacity, and damages Ukraine’s economy and reputation. And it is so lucrative that those involved have an interest in sustaining the conflict, potentially prolonging the war.

The research, Crossing the line: how the illegal trade with occupied Donbas has undermined defence integritywas completed by the Independent Defence Anti-Corruption Committee (NAKO), and is based on 40 interviews with ATO participants, security force representatives, civil society, judges, and residents of Donbas.

The government has taken steps to address the problem of illegal trade; in March 2017, the government banned the transport of all goods through the contact line except personal belongings and humanitarian aid. The government has also created “joint mobile groups” made up of servicemen and volunteers, and “fiscal groups,” of State Border Guard Service and State Fiscal Service officers. But these actions have not been effective in reducing the trade.

Olena Tregub, Secretary General of NAKO, said Tuesday:

“The illegal trade incentivizes conflict, and means that some profit as others suffer. When some servicemen collude with militants to facilitate trade, it has a huge impact on coordination between units and security institutions, the accuracy of our intelligence, the reputation of our forces, and has even caused the death of troops.”

The report describes 5 ways that goods are moved illegally across the contact line: 1) by car, through checkpoints 2)  through humanitarian logistics centers, initially organised to enable retail trade 3) through railway corridors, by using the double bottom of the wagons or in undeclared additional wagons 4) by paying defence and security forces to enable movement outside of formal checkpoints, in the “gray zone,” in 2015 the payment for crossing all the checkpoints could vary from 25,000- 120,000 UAH (US $930-4,450); 5) through a process known as “terminated transit,” in which goods headed for the occupied territories are falsely registered as destined for Russia; once in Russia, they enter the occupied territories through the uncontrolled parts of the Ukraine-Russia border.

According to the analysis, this lucrative trade will not be completely halted as long as the occupation continues. It finds that current efforts, including the blockade, have been ineffective in stopping the movement of goods. The report makes a series of recommendations, including immediate steps to mitigate the problem short-term, and long-term solutions.

Download the Report

TI Defence & Security

Fri 22 Sep 17 // Industry Integrity

 23rd September 2017, London – Transparency International Defence and Security welcomes the pledge by Heckler & Koch to no longer sell arms to corrupt states, and calls on the wider defence industry to make similar commitments.

The German firm has announced that it will use Transparency International corruption assessments as one of three indicators to decide which states to sell weapons to, in what is believed to be an industry first. Heckler & Koch should now publicly announce the exact criteria of this move, as well as which countries this will apply to, ensuring full transparency and accountability.

Transparency International’s research has found that selling arms to corrupt states can perpetuate conflict and lead to deadly weapons falling into the wrong hands. This can fuel violent conflict and terrorism, with repercussions both domestically and internationally.

Transparency International’s most recent “Government Defence Anti-Corruption Index” found 70% of states assessed for risk of defence corruption are either at high, very high or critical risk. Defence spending is growing fastest in states at the highest risks of defence corruption with real implications for human suffering.

Katherine Dixon, Director Transparency International Defence and Security, said:

“If implemented fully, this is a welcome pledge from Heckler & Koch. This sort of due diligence should be the norm for defence companies. But it’s important that this commitment is more than just a PR exercise. The best way to ensure this is to provide full transparency over the criteria and which companies they will no longer sell to.” 

“It should be difficult for any responsible defence company or State to justify exporting to countries which don’t implement the minimum transparency and accountability mechanisms to achieve at least a D on TI’s defence anti-corruption index.  Introducing lethal weapons into unaccountable and corrupt environments is a recipe for disaster. Defence companies and the governments that license their exports have the power and responsibility to make a difference in these states and reduce human suffering; we encourage them to use it’.” 

***ENDS***

Contact:
Dominic Kavakeb
Dominic.kavakeb@transparency.org.uk
0044 20 3096 7695
0044 796 456 0340

TI Defence & Security

Fri 22 Sep 17 // Accountable Defence Sectors

22nd September 2017, London – Aleksandar Vulin, Serbia’s Defence Minister, should respond to legitimate questions over his purchase of a 205,000 euro property with transparency.

In December 2015 Serbia’s Anti-Corruption Agency sent a report to the prosecutor’s office after Vulin bought a 205,000 Euro property that did not appear to match with his declared income.  Since then, media reports have suggested that the Serbian police have refused to investigate the matter, despite the involvement of the Anti-Corruption Agency.

So far, Vulin has failed to provide any substantive response to the allegation, but has instead made disparaging comments about journalists reporting on this case.

Katherine Dixon, Director Transparency International Defence & Security, said:

 “Denigrating journalists who are working to expose corruption is not the answer to awkward questions. The only acceptable response by a senior government figure to questions of this nature is transparency.”

“It is vital for the maintenance of public trust in both the government and its institutions that Defence Minister Vulin now responds constructively to legitimate issues raised by the country’s Anti-Corruption Agency.  Integrity in the defence sector is vital for national security and the Defence Minister should be setting a strong tone from the top, by acting with transparency and supporting the role of the anti-corruption agency.”

***ENDS***

Contact:
Dominic Kavakeb
Dominic.kavakeb@transparency.org.uk
0044 20 3096 7695
0044 796 456 0340

TI Defence & Security