Category: Conflict & Insecurity

November 19, London – Corruption is being harnessed by authoritarian regimes as a foreign policy tool, research by Transparency International – Defence & Security warns – and the West could be at risk unless action is taken to address vulnerabilities in key institutions.

Corrupt practices like bribery and embezzlement of public funds have traditionally been viewed as a means of personal enrichment for individuals and networks, but new research published today reveals how policymakers have overlooked a key issue: corruption can be weaponised to achieve foreign policy goals and could potentially become a tool of hybrid warfare.

Corruption as Statecraft details how ‘corruption with intent’ schemes have already been used as part of the foreign policy arsenal of authoritarian states like Russia. They are often based on a dependence in a strategic sector, such as energy exports or infrastructure investments.

Those dependencies, based on a real need and combined with opaque governance and economic arrangements, can enable cross-border schemes where money is funnelled to decision makers in one country with a view to ensuring foreign policy decisions favourable to another country.

Dr Karolina MacLachlan, Regional Programme Manager for Transparency International – Defence and Security, said:

“Typically practices like bribery, money laundering and embezzlement of state funds are used by a corrupt elite for economic gain, but ‘corruption with intent’ schemes are far more insidious. These strategies are not aimed at making money, but are instead focussed on corrupting decision makers and public institutions in other countries in the pursuit of foreign policy goals.

“The damage corruption causes to individuals, communities and entire countries is well documented – and the poorest in society are inevitably left to suffer the brunt of the impact. This indiscriminate ‘collateral damage’ is what needs to make policy makes pay attention.”

Corruption as a tool of foreign policy can be deployed anywhere there is opaque company and government contracting structures, bribery, lack of oversight, and loopholes in key regulations. This means Europe and the United States are both at risk.

The Parliamentary Assembly of the Council of Europe has already been targeted by a corruption with intent scheme – and its ethics watchdog initially failed to stop it. The European Parliament, unable to fully account for MEPs’ external employment and outside income, is also at risk.

Dr Karolina MacLachlan said:

“While it would be tempting to assume that this weaponising of corruption is only a threat to emerging democracies such as Ukraine or Armenia, our research also highlights a vulnerability at the heart of the Europe Union which malign actors have already exploited – and others that can be exploited in the future.

“Worryingly, there are vulnerabilities in European energy trade and infrastructure investment carried out as part of China’s trillion-dollar Belt and Road Initiative. Large-sale commitments made by a number of countries, alongside limited transparency in international contracts and with legal loopholes, limit countries’ room for manoeuvre and open them up to external pressures and corrupt schemes.

“Despite the warning signs, there is still time for policymakers to address these chinks in the armour. The link between corruption with intent and strategic dependence means that European countries and the US not only need to pay far more attention to their own vulnerabilities and treat corruption as the strategic threat it can be, but also reconsider how they can help other countries fight corruption. Anti-corruption programmes need to be joined with wider political and economic considerations to manage the dependence that corruption schemes can be based on.”

How ‘corruption with intent’ schemes can work:

1. There is a real or perceived need: infrastructure investment, energy, arms imports
2. The need is met by an entity from another country (government, state-owned enterprise, a private company linked to government)
3. The contracting and mode of implementation of the project(s) are opaque, involve intermediaries, are based on unfavourable terms, and create dependence. They are facilitated by local loopholes
4. Opacity is used to funnel money to elites in the recipient country to secure favourable foreign policy outcomes

Contact:

Harvey Gavin
harvey.gavin@transparency.org.uk
+44 (0)20 3096 7695
+44 (0)79 6456 0340

By Dr Karolina MacLachlan

States and corrupt elite are turning to corruption to achieve foreign policy goals and a way to carry out hybrid warfare.

This kind of corruption is not aimed at economic benefit: rather, it relies on a willingness to forgo economic gains in favour of increased influence, desired political outcomes, and an ability to spread political norms and practices.

If successful, the use of corruption within a foreign policy arsenal can enable elites in one country to hold whole political classes in other countries to ransom, to undermine government institutions and exert illegitimate influence in the target state, and sow insecurity and instability.

In their most dangerous and durable form, these ‘corruption as statecraft’ schemes are built on political and economic dependence, usually in key sectors such as energy, defence and military equipment or even infrastructure projects.

Russia’s attempts to shape the domestic and foreign policy decisions of Ukraine over the last two decades, for example, reportedly utilised corrupt schemes in the energy sector. These schemes capitalized on Ukraine’s dependence on Russia’s state-owned energy giant, Gazprom, for gas imports to strengthen and leverage corrupt networks in Ukraine to help achieve foreign policy goals. The fluctuations in gas prices, often orchestrated by Gazprom’s political masters; threats of supplies being held up; and the use of opaque, anonymously owned intermediaries between Gazprom and Ukrainian state-owned energy company Naftogaz to redirect profits to oligarchs and political parties enabled a combination of pressure and bribery that helped further Russia’s foreign policy interests.

Corruption can also be a tool of hybrid warfare, alongside disinformation and cyber-attacks. Electoral campaign contributions could be traded for political influence or promises of decisions favourable to individuals. For example, Former Lithuanian President Rolandas Paksas was accused of having received campaign financing from individuals suspected to be linked to Russian organised crime, in exchange for granting them Lithuanian citizenship and for divulging classified information on investigations into their business dealings. While Paksas was eventually cleared of the charges of divulging state secrets to his campaign contributors, similar schemes could be employed to undermine institutions managing crucial infrastructure or those responsible for deterring aggression and providing security.

‘Corruption as statecraft’ is hard to detect and difficult to prove because it is often intertwined with complex, opaque corruption and criminal networks, both in the state employing corruption and in the target state. Where governing elites have extensive links to organised crime and where the distinction between public and private is blurred, criminal networks can be harnessed by the state to exercise influence, thereby turning corruption into a weapon

The ‘Azerbaijani Laundromat’, a money-laundering scheme transferred a total of $2.9 billion USD from Azerbaijani companies and government departments through four UK-based shell companies. This money bankrolled both private enrichment and foreign policy schemes aimed at improving the country’s international reputation. Azerbaijani officials appear to have used funds passed through the ‘Laundromat’ to bribe members of the Parliamentary Assembly of the Council of Europe in order to water down official criticism of Azerbaijan’s human rights record; at the same time, top officials used it as a slush fund to pay for luxury goods and services.

Schemes like these also pose significant problems in mature democracies. Authoritarian, kleptocratic elites from across the globe use financial channels that enable opacity and anonymity, but also offer political stability and protection of the rule of law not only to hide and legitimise wealth, but to export their way of doing business.

Unless countered, practices ranging from the illegal (bribery and tax evasion) to the unethical (such as tax avoidance through offshore banking) will weaken institutions and laws across multiple states in which corrupt networks operate. Ultimately, the use of corruption to undermine national and international institutions threatens upon which many societies are based.

The links between corruption and insecurity have already been recognised in the US, with calls for Congress to take action to block financial flows which can not only undermine allies, but also influence the US political system. In the EU there has been even more progress in addressing the prevalence of anonymous companies and reporting financial flows, but verifying data, monitoring financial flows, and understanding their purpose pose ongoing challenges.

Only by understanding and addressing the strategic dependence that often underpins these schemes can we begin to attempt to dismantle them effectively. Even a robust anti-corruption effort will only have limited effects if it’s not combined with efforts to address the underlying issues. Whether it is a crucial resource such as energy, a key state asset such as defence and military power, or investment in important infrastructure projects, these dependencies have to be tackled if countries are to have a chance of dismantling the schemes that grow out of them, and to maintain independence and freedom of manoeuvre on the international scene.

This article is based on Corruption as Statecraft, a new report by Transparency International – Defence and Security, available here.

Bénédicte Aboul-Nasr is a Project Officer at Transparency International Defence and Security. She works on issues related to corruption, conflict, and insecurity in the Middle East and North Africa region, as well as on how corruption affects United Nations Peacekeeping.

This week, Member States are convening for the 74^th Session of General Assembly, during which they will discuss the general affairs of the United Nations. This will include a session focusing on a comprehensive review of peacekeeping operations.

Last September, the Security Council held its first meeting on corruption, underlying its relationship to global insecurity. Secretary-General António Guterres emphasised these links, noting that: ‘Regrettably, there is currently no coordinated strategy to gain the necessary leverage … to break the link between corruption and conflict’. The sentiments were echoed by the UK, calling corruption ‘an insidious plague’; and the Executive Director of our chapter in Venezuela made the same argument. And while not often discussed, links between corruption and the conflicts which the UN seeks to address with peacekeeping operations should be discussed.

There is no doubt that corruption breeds conflict and insecurity, as well as poverty and inequality. Six of the ten lowest-scoring countries in Transparency International’s Corruption Perceptions Index were also amongst the ten least peaceful countries in the most recent Global Peace Index. Transparency International’s research has long highlighted that addressing corruption can help prevent and address the very conflicts the UN finds itself involved in.

The Secretary-General has praised peacekeeping for its instrumental role in supporting peace and security – all the while acknowledging shortcomings and promising to reform performance and accountability and the conduct of peacekeepers and peacekeeping operations throughout his ‘Action for Peacekeeping’ (‘A4P’) initiative. Whilst those fighting corruption around the world will welcome his strong words, newly implemented reforms and a persistent focus on the challenges operations face present an even better opportunity for the UN to do more to root out corruption within its ranks.

Corruption undermines the chances of mission success, particularly of complex UN peacekeeping missions in the most high-risk areas of the world. Where fuel supplies are sold off, for example, troop mobility is reduced; when soldiers have paid to become blue helmets instead of earning their post through merit, missions may lack the skills they need; and when a blind eye is turned to smuggling, it enriches combatants and fuels further conflict. Such misconduct also reduces public trust in the ability of intervention forces to secure the peace.

The increasing discussions around corruption and conflict are a welcome step to beginning to address the problem. But as is so often the case, taking serious action is harder. In order to make words a reality, the UN will need to address corruption within its own systems, and figure out how to deal with corrupt governments in the areas where peace operations are in place – in particular if leaders are more focused on self-enrichment than on the needs of the population or the fulfilment of a UN mandate.

A leaked staff survey of the Secretariat in December 2017 had depressing findings: 50% of staff doubt people at all levels are held accountable for ethical behaviour; 55% were not confident that ‘UN staff members will be protected from retaliation for reporting misconduct or cooperating with an authorised audit or investigation’. Far from New York, the problem can have immediate with dire consequences for the hope of lasting peace.

So how can the UN go from public statements to actually handling the issue?

The UN Secretariat should strengthen its commitment to tackling corruption and the associated risks, particularly in the context of peace operations. To do so, the Secretary-General could issue a direction providing greater clarity on the responsibilities of Troop and Police Contributing Countries; in particular, when it comes to investigating instances of corruption and holding individuals responsible for misconduct to account within their national judicial systems. Whistleblowers – one of the best ways of identifying corruption – should be encouraged to come forward. Ultimately, holding perpetrators to account is often the best way to shift an institutional culture away from turning a blind eye, or even condoning graft.

The UN also needs people in the organisation with the mandate, expertise and capacity to get to grips with this issue – from understanding the risks on the ground to navigating corruption risks in one of the world’s largest and most complex bureaucracies.

Guterres was right when he said that ‘In peace operations, our engagement should be designed and implemented with a clearer anti-corruption lens to reinforce a culture of accountability and respect for the rule of law.’ But in a Member State organisation, this will be tough. The sad truth is that many governments in states where there are UN operations are kleptocratic or based around highly corrupt regimes and networks – often in direct contravention to the UN’s aims and to mission mandates. Operating with an ‘anti-corruption lens’ will not mean just improving procedures, but making difficult political decisions; ultimately, the UN has to be willing to put its goals in peace operations over the interests of diplomacy, if it is to successfully implement its own peacekeeping mandates.

Transparency International wants to help the UN fulfil its aims and support its efforts to strengthen peace and security worldwide. In July, we published an assessment of corruption risks within UN bodies relating to peacekeeping, to illuminate the dynamics of corruption and better support efforts to address it. TI’s Defence and Security Programme is also working on a toolkit for those leading international interventions to help officials, commanders and their planners chart a course through the challenges of conducting operations in high-risk, corrupt environments and understand the ways of responding to corruption.

If admitting to a problem is the first step to solving it, then the UN is on a much better path than it has been, and Guterres should be commended for this. But now is the time to start the next round of the heavy lifting needed to weave a more consistent approach to tackling corruption into the fabric of the organisation and its missions. Doing so promises to make UN operations more effective, cheaper, and better able to serve the interests of the most vulnerable.

Not tackling the underlying dynamics at the root of a conflict, and inadvertently sustaining or even reinforcing it, merely serves to prolong a peace intervention and can end up sowing the seeds of the next crisis. If the UN is serious about reducing the root of conflicts — all of which will be discussed in much detail over the coming weeks — it should ensure that its own operations are capable of responding to the very corruption risks they are vulnerable to — regardless of political sensitivities.

The United Nations (UN) should further expand its work to safeguard against corruption around peacekeeping missions or risk jeopardising the success of its operations, according to new research published by the Transparency International Defence and Security Programme (TI-DS). 

UN peace operations can be an effective way to respond to conflicts, natural disasters and other crises. But the risk of not placing anti-corruption at the heart of the planning and conduct of missions threatens to undermine their success – and can perpetuate the very conflict the UN seeks to quell.

Following commitments by Secretary-General António Guterres to put transparency and accountability measures at the forefront of his proposed UN reforms, TI-DS has recommended five actions which would help enhance the effectiveness of future missions.

In a new report entitled Corruption Risks and UN Peace Operations: Strengthening Accountability to Improve Effectiveness, TI-DS has assessed these risks and identified areas the UN is struggling to fully address.

Steve Francis, Director of Transparency International’s Defence and Security Programme, said:

“UN Peacekeepers face a difficult task when being deployed to conflict zones where corruption may have sparked the very conflict they are there to quell. If the UN is serious about reducing the root causes of conflict, it should do everything possible to ensure its own operations are protected against the same corruption risks host nations are vulnerable to. Ultimately the objective of these operations is to protect civilians, provide security and establish conditions for a sustainable peace – failure to make anti-corruption a guiding principle in both a peace keeping mission’s design and delivery threatens to delegitimise what is supposed to represent a global response for good.

“Acknowledging there is a problem with corruption is undoubtedly the first step to solving it, and the commitment from Secretary-General António Guterres to improve accountability in peacekeeping operations is a welcome step in the right direction. Transparency International wants to help the UN in its efforts to reform, and our research offers clear, deliverable changes which would address the risks and strengthen those anti-corruption measures already in place. We hope the UN leadership will consider our recommendations, make good on its pledge to improve accountability and take the required steps to safeguard the legitimacy and success of future peacekeeping operations.”

The report summarises the key findings of an in-depth study which has also been published today. TI-DS drew on UN documents, secondary literature and some 50 interviews with a range of former UN officials, officials from Member States, as well as academics and community groups.

Recommendations include:

• Adding credibility to the commitment to fight corruption by improving funding to specialist oversight offices, and staffing these internal watchdogs with anti-corruption experts.
• Acknowledging that UN peacekeeping operations, which inherently involve a large influx of funds, resources and personnel, may create an unintended corruption risk for the host nation – and planning ways to mitigate this risk from the outset.
• Drafting clear and unambiguous mandates in conjunction with host nations and other UN Member States to enhance the legitimacy and effectiveness of peacekeeping missions.
• Ensuring any peacekeepers found to have engaged in corrupt or illegal behaviour are properly held to account by monitoring the steps taken against those who have been repatriated for trial or investigation.

***ENDS***

Contact:

Harvey Gavin
harvey.gavin@transparency.org.uk
+44 (0)20 3096 7695
+44 (0)79 6456 0340

Notes to Editors:

The UN Security Council held its first ever meeting to address the links between corruption and conflict in September 2018. Addressing the Council, Secretary-General António Guterres emphasised these links and warned that corruption is a problem in all nations, both rich and poor.

He said UN Member States must be on the front lines of combatting corruption, adding that UN peace operations should also employ a clear anti‑corruption lens.

TI-DS is one of Transparency International’s global initiatives and is based in our London office. Through its work, TI-DS is fighting to establish global standards and hold advanced and emerging powers to account, prevent conflict and support fragile countries and address systemic corruption risks in the arms trade.

Transparency International is the civil society organisation leading the fight against corruption

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.

***ENDS***

Download NAKOs Research ‘Poor Governance and Corruption in Ukraine’s Defence Housing System: Risks and Recommendations’ here

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.

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

***ENDS***

View the full report here.

Contact:
Dominic Kavakeb
+44 20 3096 7695
+44 79 6456 0340
Dominic.kavakeb@transparency.org.uk
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.

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

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.

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 wisely. Unfortunately, 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.

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 integrity, was 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.

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5^th September, 2017, London – Corruption is perpetuating violent conflicts around the world. New research from Transparency International – Defence and Security found that fighting corruption is rarely a foreign policy priority, despite mounting evidence it’s a major 21^st-century contributor to global insecurity.

“The Fifth Column”, published today, found that states most affected by corruption are very often victims of deep conflict. Seven of the ten lowest-scoring countries in Transparency International’s Corruption Perceptions Index were also amongst the ten least peaceful countries in the most recent Global Peace Index.

Corruption was found to be contributing to violent conflict in a number of ways, including:

• Undermining public trust, which can lead to violent movements for regime change;
• Driving the recruitment of extremists, who use corrupt governments as a rallying cry;
• Enabling terrorist groups, who can exploit corrupt structures for their operations;
• Facilitating proliferation of WMDs;
• Undermining state sovereignty, when foreign governments use opaque networks of shell companies to hold whole political classes hostage;
• Eroding state’s capabilities to respond to instability and violence when it occurs.

By failing to address these risks, governments are ignoring a major cause of conflict. Transparency International recommends corruption is treated as a serious foreign policy concern and that states should:

• Address kleptocracy, or state capture, as a development, diplomatic and security issue, exerting political pressure on corrupt elites, supporting oversight institutions and focusing on improving governance in partner states.
• Focus on defence governance and avoid treating it as a “special case” that can circumvent normal oversight processes.
• Stop viewing corrupt autocrats as an alternative to instability and instead limit their influence through options such as financial sanctions, visa bans, and the withholding of international recognition.

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

“Its high time that states made corruption a top-tier foreign policy priority, as important as non-proliferation and counter terrorism efforts. Until they do that, efforts to end conflict, promote global peace and stability, will be falling short of the mark.”

“Corrupt regimes are unstable and dangerous, and supporting them is rarely the right choice for building stability either nationally or regionally. From Syria to Ukraine, corruption has fuelled conflicts, undermining the long-term future of those states and contributing to the loss of many lives.”

On Thursday, Transparency International Senior Advisor Sir Ian Andrews, and Defence and Security Director Katherine Dixon facilitated a day of high level discussions with the leadership of the Nigerian Air Force. The aim was to identify the corruption risks which face the Nigerian armed forces, discuss the initiatives already taken, and to begin to develop mechanisms to address them.

Sessions included a full discussion of the challenges facing the Air Force including issues surrounding defence budget processes, personnel integrity, and procurement systems. TI facilitators presented lessons from international best practice, including the vital role of political leadership, a commitment to transparency, and external independent oversight mechanisms which had been crucial factors underpinning successful defence transformations in other context, such as Colombia.

The entire leadership of the Air Force was present or represented, including the Chief of Air Staff, Air Officers Commanding and Branch Chiefs.

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

“We welcome the positive participation of the Air Force. The purpose of the event was to create a forum for the leadership to discuss openly the corruption risks as they see them. The Nigerian Air Force outlined the steps they had taken to address these challenges and we strongly encouraged them to end the presumption towards secrecy and open these measures up to public scrutiny.”

Transparency International has outlined a number of recommendations for systemic reform of the Nigerian Defence sector including the development of unified anti-corruption strategy, extending public access defence and security information, and strengthening external oversight particularly over confidential procurements.

Contact:

Gavin Raymond
graymond@transparency.org
0044 7738 621 115