London, 31st January 2017 – An attempt by two Republican legislators to repeal a vital section of the US safeguards against corruption threatens to seriously undermine national security, according to Transparency International.
Section 1504 of the 2010 Dodd-Frank Act requires oil, gas, and mining companies registered with the Securities and Exchange Commission to publicly disclose payments they make to foreign governments. Removing transparency in these transactions will make it more likely that significant amounts of these often billion-dollar payments will be diverted to corrupt criminal networks.
Representative Huizenga (R-MI) and US Senator Jim Inhofe (R-Oklahoma) jointly filed a motion yesterday under the Congressional Review Act, specifically targeting the bi-partisan provision originally introduced by Sen Lugar (R-Indiana) and Sen Cardin (D-Maryland).
Katherine Dixon, Director Transparency Defence and Security, said:
“The attempt to repeal this legislation is gambling American lives to save international businesses the task of filling out forms. The link between corruption and development is simple: corrupt leaders that siphon state funds and resources away from vulnerable populations bring about weak states and public unrest, creating fertile ground for terrorists and organised crime.”
“If we want our corporations to support responsible governance, they too must be responsible. If the government believes US companies deserve a level-playing field abroad, they should lead the fight to raise international standards – not participate in an all-out-race to the bottom.”
“In the interests of transparency and national security, we hope that representatives from both the Democrats and Republicans will reject any attempts to weaken anti-corruption legislation. The new administration has prioritised accountability and putting American security first; this motion does precisely the opposite.”
TI further warns that these actions could be the start of efforts to chip away at anti-corruption legislation, such as the Foreign Corrupt Practices Act. The FCPA has been in place since 1977 and has set the standard in international anti-corruption legislation.
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8th November 2016, London – India must put in place strong safeguards to ensure effective anti-corruption mechanisms are built into any coming defence deals between the UK and India, according to Transparency International Defence and Security (TI-DSP).
During Prime Minister Theresa May’s visit to India it was announced that “the UK and India are committed to further strengthening their strategic partnership in defence.” India is the largest importer of arms in the world but scored a ‘D’ in TI-DSP’s 2015 Defence Corruption Index, meaning vast sums of vital public funding is at a high risk of corruption.
India must ensure that the new blacklisting policy remains a robust sanction while allowing India to procure the technology that meets its security needs. Blacklisting is a vital tool sending a strong message to Indian and international suppliers that corruption will not be tolerated, and protects India’s public funds from misuse. The new policy should replace mandatory minimum penalties with a debarment system that weighs mitigating factors, and allows for shorter sentences in the event of strong remediation actions taken by the company.
Katherine Dixon, Director Transparency International Defence and Security, said:
“As India is one of the largest defence markets in the world, the UK Government is naturally extremely keen to cultivate deals. But unless India has in place strong anti-corruption mechanisms, public funds will continue to be at risk, while poor procurement practices contribute to military shortages and undermine public trust.”
“Recent allegations that a major British defence company paid bribes to win contracts only further underlines the risks that weak procurement systems are at serious risk of being exploited by unscrupulous suppliers or their agents.”
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We know that corruption is a threat to international security. Now we need to work out how to address it.
Corruption threatens international security, destroying the legitimacy and effectiveness of governments and the defence and security sector, hindering economic development, and providing a powerful call to arms for violent extremist movements. Fortunately the issue is gaining recognition. NATO’s Building Integrity policy, adopted at the 2016 Warsaw summit, acknowledges that tackling corruption is a core task of the Alliance, including in collective defence, crisis management, and spreading security through cooperation with partners. Similarly, the 2016 Anti-Corruption Summit Communiqué commits nations to concrete action.
The even better news is that this recognition is beginning to be mirrored at national level. The UK’s recent doctrine (JDP 05), influenced by the outcome of the mission in Afghanistan, recognises that corrupt practices could not only fatally undermine missions such as defence capacity building and stabilisation operations, but can also be made worse if intervening forces do not recognise and mitigate their impact.
This is an important step forward for NATO and its members. Without strategic recognition of how corruption can destroy any hope of achieving stability in places like Afghanistan, Iraq, or Bosnia, nothing will change when NATO forces are next called on. But it’s only the first step. Anti- and counter-corruption activity should be in the DNA of defence and security institutions rather than a series of limited and ad-hoc initiatives; new expertise, resources, and a readiness to do routine things in new ways is needed. Transparency International has found that without tailored guidelines and policies, military and civilian personnel involved in operations and security assistance may view tackling corruption as “too difficult”, or worse, “non-urgent”. And even if they do want to do something about it, lack of guidance, systematic training (individual and collective) and institutional support can make it very difficult to take action.
We urgently need solutions and Transparency International has begun work on an ‘interventions integrity toolkit’. The toolkit will provide analysis and recommendations for strategic and operational planners, implementers, and monitoring personnel involved in security assistance and military operations. It will comprise four elements:
- UNDERSTAND: case studies explaining the links between corruption and interventions;
- ANALYSE: analysis illustrating the impact of corruption on mission goals and at tactical, operational and strategic levels;
- REVIEW: recommendations for mission planning and implementation;
- APPLY: a repository of scenarios applicable to exercises, including UN and NATO training.
The content of the toolkit, including recommendations and exercise material, will be adaptable to the needs of a number of organisations, including the UN, NATO, and national policymakers and military officers. TI – Defence and Security would welcome partnerships with civilian and military stakeholders to help ensure that recommendations made are practical and immediately applicable.
For any inquiries related to the toolkit, please contact Dr Karolina MacLachlan, TI-DS Senior Research Officer (email@example.com).
We would like to thank the UK Army’s 77th Brigade for continuing cooperation and for the commitment to operationalising anti-corruption for the armed forces. Thanks are also due to the Building Integrity Working Group at NATO’s Allied Command Operations and the US Army’s Peacekeeping and Stability Operations Institute for initial feedback on the toolkit concept.
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Joint national-international committee sets sights on increasing transparency and accountability in country’s most vital sector
25 October 2016, Kyiv – The Independent Defence Anti-Corruption Committee (Nezalezhny Antikorrupciynii Komitet z pytan oborony, or “NAKO”) held its inaugural meeting in Kyiv last week, setting forth its intention to fight corruption in the Ukrainian defence sector. The Committee comprises six members, three national – Sevgil Musaeva, Volodymyr Ogryzko, Oleh Rybachuk (co-chair) – and three international experts – Lt Gen Tim Evans, Drago Kos (co-chair), and James Wasserstrom.
“Corruption in the Ukrainian defence sector is costing lives,” said Oleh Rybachuk. “Our soldiers and citizens deserve an MOD that is efficient, accountable, and serves their interests – our aim is to help our MOD achieve those aims.”
The Committee will develop a strategy 2017-2018. Its mandate, agreed on Thursday 20th of October, includes analysing and evaluating anti-corruption efforts in the defence sector, the development of recommendations, reporting to Ukrainian authorities and the public, promoting transparency, and strengthening accountability structures. It will also, later this year, enable citizens and soldiers to anonymously report corruption concerns to the group.
As a first step, the NAKO will produce a report on lessons learned from other monitoring groups, including the Monitoring & Evaluation Committee in Afghanistan. It will also analyse corruption risks and mechanisms for monitoring security assistance and military aid. Drawing on the findings from the 2015 Government Defence Anti-Corruption Index, produced by TI Defence & Security, it will submit recommendations for inclusion in the Annual National Programme 2017.
“In Afghanistan and Iraq, I saw first-hand the impact that corruption can have on the success of military operations. Without integrity, an Army can’t function effectively – and our aim, in the long-term, is to help the Ukrainian defence forces protect its people and its country,” said Lt Gen Timothy Evans, former commander of the NATO Allied Rapid Reaction Corps.
The idea for a dedicated monitoring body is based on learning from previous efforts in Afghanistan, Guatemala and Palestine. The committee was selected by a joint board of TI Ukraine and TI Defence & Security, following a public call for nominations earlier this year.
The NAKO is a project of TI Defence & Security, based in London, and TI Ukraine, and is supported by the Ministry of Foreign Affairs of the Netherlands.
Notes to editors
Biographies of NAKO members:
Lieutenant General Timothy Evans CB CBE DSO: A 3 star General in the British Army and former Commander of the NATO Allied Rapid Reaction Corps.
Drago Kos (co-chair): Former Anti-Corruption Commissioner in Slovenia, Former Chair of GRECO, and current Chair of the OECD Working Group on Bribery. “I’ve been coming to Ukraine for 15 years and for the first time I feel the country is ready for real change – and it’s time to include the defence sector too.”
Sevgil Musaeva: Editor in Chief of Ukrainska Pravda and author of investigative reports for Reuters, Forbes Ukraine, and the Organised Crime and Corruption Reporting Project. “I understood the problems of a weak defence sector when Crimea, my region, was annexed. So for me, it’s personal—I want to make the our armed forces more transparent and effective.”
Oleh Rybachuk (co-chair): Chairman of Centre UA, co-initiator of Chesno Campaign, and former Vice Prime Minister for European Integration and Chief of Staff to the president.
Volodymyr Ogryzko: Former Minister of Foreign Affairs, First Deputy Secretary Defence and Security Council of Ukraine. “We badly need international support to fight corruption in Ukraine.”
James Wasserstrom: Former Head of Oversight of Public Utilities at the UN Mission in Kosovo, Senior Advisor on Anti-Corruption at the US Embassy Kabul, and strategy advisor and lead anti-corruption at the Special Inspector General for Afghanistan Reconstruction. “Countries in conflict are always immense opportunities for nefarious activities, especially corruption, profiteering, and egregious mismanagement. I look forward to this body tackling all of the above.”
image: flickr.com/Sasha Maksymenko cropped by TI-DSP
This article was first publidhed by Defence One here
A recent anti-corruption summit produced hundreds of commitments, exactly eight of which concerned defense.
Slowly but surely, the world is realizing that corruption defies borders and that governments must work together to ensure the integrity of their institutions. (See: the Inter-American Anti-Corruption Convention, signed in 1996; the OECD Anti-Bribery Convention, 1997; and the UN Convention against Corruption, 2003.) But there is one area that remains all but untouched by these reforms: defense.
Speaking at the World Economic Forum in January, U.S. Secretary of State John Kerry called corruption a threat to “global growth, global stability, and indeed the global future” and asked governments to fight it as a “first-order, national-security priority.” Five months later, countries at the London Anti-Corruption Summit released a “Global Declaration against Corruption,” in which they pledged to “put fighting corruption at the heart of our international institutions” and advance inter-state cooperation to stop corruption. By Transparency International’s count, 42 individual countries made 648 commitments across 20 issue areas, nearly one-third of which we deem both new and ambitious.
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Author: Hilary Hurd – Transparency International Defence & Security Programme
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In the UK and Europe, legislation such as the UK Public Contract Regulations 2006 and the European Public Procurement Directive give governments the power to debar or exclude companies guilty of fraud and corruption from public sector procurement. Despite having these powers, no companies have been debarred in the UK and the number in Europe is very low.
This blog was originally published by the Chartered Institute of Public Finance and Accountancy and has been reproduced with permission.
To highlight this issue, the CIPFA Counter Fraud Centre invited Transparency International to comment on the effectiveness of the European laws aimed at curbing fraud in the defence sector. TI’s analysis shows that despite tougher laws, corrupt suppliers are still not being excluded from public contracts. Comparing Europe to the US, TI’s report signals the need for urgent action, not only in the defence sector but across all areas of the public procurement sector.
Through multiple directives, the European Commission has been trying for 15 years to establish US-style suspension and debarment powers in Member States. Last month, the Commission concluded its public review of the 2009 Defence & Security Public Procurement Directive. But nothing has changed: strong words don’t make for strong laws.
The Defence Directive sets out rules for the exclusion for suppliers convicted, or strongly suspected of, corruption, organised crime, collusion, money laundering and supporting terrorist activities. The Directive was supposed to enable governments to hold defence companies accountable for fraudulent misconduct. The problem? It is not enforced by governments seemingly content to turn a blind eye to criminal wrongdoing.
New research from Transparency International uncovered 10 European defence suppliers that have been investigated or convicted of bribery in the last three years but have not been formally excluded from bidding. For example, Sweett Group PLC, which has continued to win multi-million dollar contracts from UK public procurement authorities, during the criminal investigation and immediately after sentencing.
But the problem is deeply entrenched. As of 2015, only the Czech Republic confirmed it had used its powers to exclude corrupt contractors. According to TI’s Government Defence Anti-Corruption Index 2015, Poland, meanwhile, still lacks the necessary domestic legislation to enable it to exclude suppliers at all. Rather than incentivising good practice and penalising bad behaviour, the Defence Directive is simply being ignored.
Another prominent example is the Italian bribery investigation into the sale of 12 helicopters for £466m to the Indian military. As part of the settlement, AgustaWestland’s UK subsidiary and Italian parent company were fined €380,000 in 2014, with a further €7.5 million in revenue confiscated, while the former CEO of AgustaWestland and the former CEO of Finmeccanica were both convicted of bribery. But despite the scale of the alleged bribery to Indian officials running into the 10’s of millions and the launch of two new bribery investigations into AgustaWestland’s sales operations by Swedish and South Korean enforcement agencies, the defence group has continued to win contracts – including in Italy and the UK. AgustaWestland’s annual report simply states that the settlement “was neither an affirmation of liability, nor an acknowledgement of guilt.”
Allowing convicted companies to evade exclusion removes any incentive for them to implement effective policies that minimise risk of future malpractice. In contrast, the US is seeing year on year increases in the number of companies self-reporting to the authorities. Meanwhile, in Europe, historically low criminal enforcement convictions are compounded by a failure to implement exclusion, removing any incentive for contractors to actively collaborate with enforcement agencies in the early stages of a criminal investigation.
So why isn’t the law being enforced? Transparency International’s research indicates that the primary causes are a lack of knowledge and understanding, state protectionism towards domestic defence contractors and defence market concentration. After all, if a country buys most of its defence products from a handful of domestic suppliers or via single source contracts, excluding those suppliers from bidding is a tough call. And the Defence Directive legitimises exemptions for “overriding requirements in the national interest”.
But crying national interest shouldn’t be the end of the story. Reliance on a few suppliers is not a distinctly European problem. And, even if governments can’t otherwise get access to the equipment they require, they still have options. For example, companies should still be required to prove that they have taken robust measures to reform their practices. A “self-cleaning” framework mandating robust anti-corruption measures a company needs to implement to continue bidding has been central to the success of the US debarment system.
Following the conclusion of this latest consultation, real action must now be taken to ensure companies are faced with real economic incentives to change their behaviour. For too many defence companies, paying a bribe to secure a lucrative contract still makes economic sense. Exclusion from public procurement gives governments a tool to reverse that financial equation. But a good law is a bad law if it’s not enforced. At the moment, the Defence Directive has undershot and underscored – more can and must be done.
Article authors: Eva Anderson and Hilary Hurd, Transparency International Defence and Security Program
To read TI’s recommendations and latest report ‘Evaluation of the functioning and impact of the EU Defence and Security Public Procurement Directive’, click here.
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8 August 2016, London – Commenting on the UK Serious Fraud Office (SFO) opening a new investigation into allegations of fraud, bribery and corruption at Airbus, Katherine Dixon Director of Transparency International Defence and Security Programme said:
“The use of agents is one of the biggest corruption risks across the defence and aerospace sector, and Airbus is just one of a long line of companies that have run into trouble. The failure of Airbus to declare its agents highlights the weakness of self-disclosure requirements and why governments can and should use export policies to reduce the influence of corrupt middlemen.”
“The Airbus case demonstrates the need for more consistent transparency requirements in export policies around the use and payment of agents.”
Last month Transparency International issued a report highlighting the risks in the use of middlemen in defence deals. “Licence to Bribe? Reducing corruption risks around the use of agents in defence procurement” 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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