Category: Industry Integrity

At a time of mounting geopolitical tensions and growing instability, governments around the world are spending record sums on defence and security, writes Yi Kang Choo, our International Programmes Officer.

Recent data highlights this move towards increased militarisation. PwC’s 2024 Annual Industry Performance and Outlook reports a 7% increase in overall revenues among the top 11 defence companies in 2023. Leading contractors such as Lockheed Martin, Northrop Grumman, and BAE Systems are grappling with record-high defence order backlogs, with an 11% increase in value to $747 billion. Meanwhile, an analysis by Vertical Research Partners for the Financial Times forecasts that by 2026, the leading 15 defence contractors will nearly double their combined free cash flow to $52 billion compared to 2021.

These figures demonstrate a sector on an upward trajectory, buoyed by heightened demand and increased defence budgets largely due to escalating geopolitical tensions and conflicts globally. Reinforcing this trend, the 2024 Global Peace Index highlights an increase of, while global military expenditure surged to an unprecedented $2.443 trillion in 2023, according to the Stockholm International Peace Research Institute (SIPRI).

In this blog, we will delve into the importance of strong governance standards for defence companies, and outline the role companies, boards, and investors (who are susceptible to the risks of the supply side of corruption and bribery) in fostering a culture of integrity, accountability and transparency within the sector.

At Transparency International Defence & Security (TI-DS), we have long raised concerns about the risks associated with surging military spending. In our Trojan Horse Tactics report, we show that increased defence spending without appropriate oversight often correlates with rising corruption risks. In countries that are not equipped with the requisite institutional safeguards, an influx of funds is most likely to benefit corrupt actors across defence establishments, creating a self-perpetuating cycle that prioritises private gain over peace and security outcomes. Nevertheless, robust governance standards are not only essential for officials and government (the demand side of corruption), but are equally vital for defence companies and contractors on the supply side, particularly as the stakes continue to rise.

The Profit Boom: A Double-Edged Sword

For many in the defence sector, the current boom in profits is a cause for celebration. However, the rapid influx of funds brings increased risks to the industry, too. Despite widespread acknowledgment within the sector that corruption is harmful to business, companies continue to face challenges in effectively implementing preventative measures.

Corruption in the defence industry is also persistent. The combination of complex procurement processes and high value contracts creates a fertile ground for opaque practices, further exposing governance vulnerabilities and inefficiencies within companies. Notably, some of the world’s largest defence companies have faced significant allegations of corruption in recent years:

In 2014, a UK subsidiary of AgustaWestland S.p.A (now under Leonardo) was fined €300,000 – while its parent company AgustaWestland was fined €80,000 – to settle an Italian investigation into allegations of bribery relating to the sale of 12 helicopters to the Indian military. In addition, the court ordered the confiscation of €7.5 million in company profits.

In January 2017, Rolls Royce entered into record-breaking settlements in the US, UK, and Brazil to resolve numerous bribery and corruption allegations involving its . The UK and US settlements involved Deferred Prosecution Agreements worth £497 million and $170 million respectively, while a leniency agreement with Brazilian prosecutors amounted to almost £21 million.

In 2021, UK’s Serious Fraud Office (SFO) secured a corporate conviction against GPT Special Project Management, a former subsidiary of Airbus. GPT pleaded guilty after a near decade-long investigation to a single count of corruption and was ordered to pay over £30m in confiscation, fines, and costs.

In November 2024, a fraud investigation was launched into suspected bribery and corruption at Thales in relation to four of its entities by the Parquet National Financier in France and the UK’s SFO. Thales denied the allegations and said that it complied with all national and international regulations. The investigation is still ongoing. Likewise, earlier in June 2024, triggered by two separate investigations of suspected corruption, money laundering, and criminal conspiracy linked to Thales’ arms sales abroad, police in France, Spain, and the Netherlands also conducted searches in its respective country offices. A spokesperson for Thales confirmed to Reuters that searches had taken place but gave no further details beyond saying that the company was cooperating with authorities.

As seen in the examples above, corruption can also be costly. When allegations are levelled against a company, lengthy investigations divert resources and cause reputational damage. Convictions or settlements may result in large fines, claims for damages and ultimately exclusion from key markets.

And the costs to companies are likely to rise. Increasing shareholder activism and Environmental, Social, and Corporate Governance (ESG)-driven investment strategies meant that investors and stakeholders are scrutinising companies’ ethical practices more than ever. Defence firms that fail to prioritise anti-corruption and transparency risk alienating their stakeholders and jeopardising long-term growth.

The Shadow of Lobbying and Undue Influence

With defence companies forecast to have more cash available in the coming years, spending on share buybacks, increased dividends, and expansion will not be their only focus – it’s also vital not to ignore the risks of companies exerting undue influence on government defence policy.

According to Open Secrets, in 2024, up to $110 Million was spent by defence industries to lobby the US government (including political candidates and committees) in securing government defence contracts, earmarks, and influencing the defence budget to make certain contracts more likely. Amongst the 896 lobbyists, more than half of them (63.28%) consist of former government employees – a stark example of the ‘revolving door’ between the public and private sector which is especially pervasive situation in the global defence industry where significant conflicts of interest may occur if not appropriately regulated.

Whilst traditional lobbying activity with policy makers and institutions to exchange ideas and influence certain policies forms an essential part of the democratic process, the amount of money defence companies spend on lobbying activities, combined with a lack of transparency, may mutate lobbying processes into privileged access. It can also create opportunities to wield considerable influence over politicians and officials responsible for shaping public policy, heightening the risk of policy decisions being disproportionately skewed in favour of individual companies rather than serving the broader public interest. Moreover, for governments and industry regulators, this underscores the need for stringent oversight and transparency measures to ensure that lobbying activities do not undermine democratic processes or market fairness.

The Time to Act is Now: The Role of Companies, Boards, and Investors

Despite these challenges, the compliance and transparency efforts of companies should not be understated. According to the Defence Companies Index on Anti-Corruption and Corporate Transparency (DCI) 2020, most of the world’s largest defence companies have established publicly available ethics and anti-corruption programmes, with robust policies and procedures in place for employees to follow. Industry associations now also have dedicated ethics committees, and many companies participate in platforms such as the International Forum on Business Ethics (IFBEC) and the Defence Industry Initiative for Business Ethical Conduct (DII) which enabled ethics and compliance staff within major companies to access more resources and to receive more senior recognition for their work. However, there is still more work to do. Many major defence companies still do not publish or show no evidence of a clear procedure to deal with the highest corruption risk areas, such as their supply chains, agents and intermediaries, joint ventures, and offsets.

Companies have a crucial role to play to in building and strengthening policies, practices, and a culture of integrity, accountability and transparency within the defence sector worldwide. We call on companies to put anti-corruption and transparency at the very core of their corporate agenda, alongside promoting discussions on how to raise governance standards across the organisational, national, and regional forums in which they are part of. Companies are also encouraged to engage with civil society organisations and anti-corruption experts to exchange learnings, foster accountability, and encourage further employee engagement in the mitigation of corruption risks across the business.

Directors of companies should exercise their fiduciary duties effectively by holding executives accountable when proactive procedures and steps are not being taken to detect, prevent, and address corruption in the highest risk areas. They could also encourage the meaningful disclosure of the company’s corporate political engagement, especially any political and lobbying contributions, to uphold the reputation and long-term stability of the company as it poses a particularly high-risk in the defence sector.

Finally, investors in defence companies could emphasise anti-corruption transparency as an essential cross-cutting issue embedded within ESG initiatives, and to urge the companies in which they hold shares to increase meaningful disclosures of their ethics and anti-corruption programmes. Investors wield significant influence in shaping corporate behaviour, and by advocating for these changes, investors can drive long-term value creation while promoting ethical business practices.

The defence industry is at a critical juncture. As military spending and corporate revenues soar, the stakes for maintaining ethical governance have never been higher. Robust governance standards are essential – not only to mitigate corruption risks but also to uphold the sector’s integrity in an increasingly interconnected and scrutinised global landscape. By taking decisive action and establishing clearly defined, targeted processes, defence companies, boards, and investors can ensure that the industry remains resilient, competitive – and most importantly – aligned with the principles of transparency and accountability.

As world military spending hits all-time high, findings from Transparency International highlight urgent need for transparency and accountability 

April 24, 2024 – Rising military expenditure is outpacing countries’ safeguards against corruption and threatening national and global security, new research from Transparency International finds.

Trojan Horse Tactics explores the nexus between the risk of corruption in the defence sector and rapid militarisation fuelled by Russia’s full-scale invasion of Ukraine, conflicts in the Middle East and the Sahel, and heightened tensions in the Asia-Pacific. 

Read the report  

This comprehensive paper by Transparency International Defence & Security (TI-DS) examines the relationship between military expenditure and corruption through the lens of defence governance. 

Analysis using the TI-DS Government Defence Integrity Index (GDI), which assesses nearly 90 countries on the strength of their corruption safeguards, combined with military spending data from the Stockholm International Peace Research Institute (SIPRI) reveals a clear trend. Countries that spend more on defence as a percentage of GDP tend to score lower in the GDI, indicating a higher vulnerability to corruption. 

Additionally, the issue is becoming more serious. Data released by SIPRI this week shows world military expenditure rose for the ninth consecutive year to an all-time high of $2.443 trillion in 2023. This represents an increase of 6.8 per cent in real terms from 2022, which is the steepest year-on-year increase since 2009. 

Corruption in the defence & security sector, including bribery, conflicts of interest, embezzlement, nepotism and sextortion severely undermines national security. These practices divert critical resources and erode public trust, weakening a country’s defence capabilities and stability. 

Despite this, ‘defence exceptionalism’ – the idea that because of national security considerations the sector should be exempt from transparency norms – means that many countries neglect or completely ignore good governance standards such as parliamentary and civil oversight, accountability, and transparency rules. 

Sara Bandali, Director of International Engagement at Transparency International UK, said:  

“In an era marked by increasing militarisation, it’s crucial that we confront the deep-seated vulnerabilities to corruption in the defence & security sector.  

“Our findings clearly indicate that rising military spending is linked with heightened corruption risks, which in turn threaten national and global security. Our previous research has shown how many defence institutions in countries around the world are ill-equipped to manage the higher corruption risks militarisation brings. If militarisation is to achieve the aim of upholding national and human security, these are issues which can no longer be overlooked. 

“The evidence-based Government Defence Integrity Index not only identifies key areas of concern but also sets global benchmarks for accountability and transparency. We urge all countries to move towards these standards in response to growing insecurity.” 

TI-DS calls on all countries to make transparency and accountability around defence spending a core aspect of the response to increased global insecurity by:  

1. Improving transparency and appropriate oversight of defence budgets to ensure that the public has as comprehensive a picture as possible of spending plans. 
2. Introducing controls to reduce risks of funds being lost to corruption as budgets are spent. 
3. Integrating anti-corruption measures into arms exports controls. This is to prevent exporting countries providing arms to countries which cannot demonstrate their will and capacity to manage corruption risks. 

April 11, 2024 – New research from Transparency International warns that the United States is ignoring potentially dangerous corruption risks around opaque defence contract payments (aka ‘offsets’) that threaten to undermine U.S. and international security.

As the U.S. escalates its defence collaboration globally, Blissfully Blind breaks down the complex web of corruption risks associated with offsets – financial sweeteners added to overseas arms sales in addition to the military hardware the country receives.

Read the report

Offsets are increasingly common parts of international arms deals but the huge amounts of money involved combined with a lack of transparency, especially for offsets going to economic sectors outside defence, makes them especially vulnerable to corruption.

Defence companies are incentivised to offer big offset packages to secure lucrative deals. Foreign officials in importing countries may choose to buy from whichever firm they can personally gain the most, regardless of whether they offer best value for the people they represent.

Gary Kalman, Executive Director at Transparency International U.S. (TI-US), said:

“The culture of offsets in international arms sales may seem an odd practice to the public. Imagine the look you’d get from telling a car dealership that you’ll only buy a car from them if they help fund your child’s school.

“The corruption and other risks of these side deals are so great that, in most industries, the practice is banned. Yet, in the defence sector offsets are standard practice.

“At the very least, we need the type of transparency and accountability called for this in this report.”

Key Findings:

• The global value of defence offsets is projected to reach $371 billion for the 2021-2025 period, with U.S. defence firms estimated to provide between $36.5 billion and $52.4 billion for FY 2021 and FY 2022 combined.
• Among arms importing countries, Indonesia, Malaysia, Oman, Saudi Arabia, Taiwan, the United Arab Emirates, and the UK all face high or very high corruption risk due to a lack of transparency, support for risky types of investments, and weak monitoring or enforcement around offset contracts.
• Other arms importing countries, including Australia, India, Israel, the Netherlands, Poland, South Korea, and Ukraine have specific high-risk aspects of their offset policies.
• Corruption in defence offsets can undermine efforts to obtain critical defensive capabilities, waste government funds, complicate U.S. government and defence company relations with key security partners and weaken citizen faith in governments.
• Meanwhile, U.S. defence companies show weak controls to prevent corruption in offsets. Many lack explicit policies and procedures to address the risks.
• The U.S. government’s ‘hands-off’ approach to overseeing offsets effectively leaves defence firms to mark their own homework. Regulation of offset agreements by the Commerce Department is inadequate.

This report comes at a critical moment. There are increasing demands for offsets from purchasing countries and greater collaboration with countries like the United Arab Emirates, Indonesia, Saudi Arabia, and Malaysia – all nations with minimal anti-corruption safeguards in their defence sectors. 

And in the U.S., there are now moves by Congress to further weaken the already lax checks on offset arrangements by significantly raising the dollar value of arms deals that require congressional review before they can go ahead.

Colby Goodman, Senior Researcher at Transparency International – Defence & Security and author of the report, said:

“A surge in demand for defence offsets, inadequate anti-corruption measures by U.S. defence companies, poor safeguards in many U.S. partner nations, and lenient oversight from Washington has created a perfect storm of corruption risks, which has the very real chance of undermining any public benefit of the offsets to the importing country.

“It’s essential that these corruption risks are confronted and mitigated, with responsibility falling on both the U.S. and importing countries to enact meaningful reforms.”

The report makes a series of targeted recommendations to the U.S. government that would enhance the oversight of defence offsets and significantly address corruption risks, while also ensuring U.S. defence firms do not face unnecessary barriers to their business with international partners:

1. Increase transparency by strengthening reporting on defence offsets and political contributions. Prioritize detailed private disclosures through the State and Defence Departments and establish an interagency task force to improve overall private and public transparency.
2. Assess corruption risks by taking a proactive approach to mitigate corruption risks in offsets by reviewing agreements and conducting comprehensive studies on past arrangements. A focus should be on indirect offsets (investments not directly related to the equipment being sold in the contract)  and partner country controls.
3. Penalize wrongdoing by enhancing the investigation and prosecution of offset-related corruption, establishing watchlists for offenders, and enforcing strict penalties for non-compliance with reporting requirements.
4. Encourage stronger foreign offset policies by urging U.S. partner countries to do the following: adopt transparent and effective offset policies, emphasize the disclosure of offset details similar to Australia, demand stricter oversight of high-risk activities, and ensure robust enforcement against violations.

Notes to editors:

Transparency International is a global network with chapters in more than 100 countries to end the injustices caused by corruption.

Blissfully Blind is a joint research report from Transparency International – Defence & Security, one of Transparency International’s global programs that works to reduce corruption in defence and security sectors worldwide, and Transparency International U.S.

The report was produced through a comprehensive approach that included reviewing U.S. defence offset laws and regulations, analysis of U.S. arms sales data and reports, and 30 interviews with industry experts, U.S. government officials, and representatives from partner countries such as India, Malaysia, and South Korea.

Defence offsets are side deals made between a purchasing government and a foreign defence company in connection with a major arms sale. They are an inducement offered by a defence company and/or a requirement by the purchasing government and would not exist without an arms sale. Offsets typically involve defence companies investing in the local defence industry or other economic sectors in the purchasing country. Offsets can be direct, that is tied to the specific equipment or service sold, or indirect, a broad investment unrelated to a specific contract.

March 6, 2024 – Following the acquittal of two men charged with paying bribes to secure and maintain a major multi-billion-pound defence contract with Saudi Arabia, a full independent inquiry is now vital in order to examine the evidence presented in court of the British government’s direct involvement in these corrupt arms deals.  

Despite it being accepted that millions of pounds of bribes were paid to senior Saudi officials in exchange for lucrative deals to supply military communications equipment between 2007 and 2012, the two former executives of GPT Special Project Management were today found not guilty of corruption after being prosecuted for overseeing these payments. 

The two men had argued that British officials, politicians and diplomats knew about and consented to nearly £60 million worth of bribes to the Gulf state since 1978.  

It is reasonable to assume that, in deciding to acquit these men, the jury gave serious weight to the significance of the evidence that was presented in court of the UK government’s involvement in the alleged bribes. 

Josie Stewart, Director of Transparency International Defence & Security, said: 

“This case involves Europe’s largest defence manufacturer, senior members of the Saudi Royal Family, and allegations of high-level involvement by successive UK governments about systemic corruption that went on for decades. The details that emerged in court wouldn’t look out of place in a Hollywood screenplay but sadly the reality surpasses fiction.  

“Ian Foxley, the whistleblower who lifted the original lid, had no idea at the time how far the rot would go. Thanks to the court monitoring work of our partners at Spotlight on Corruption, we now have a good idea: it went far, and it went high. We now need to know how far, and how high.”  

The case raises serious questions over whether any of the Ministry of Defence’s (MoD) procurement staff queried the corrupt payments. If not, then why not? If so, then to what level and who authorised their continuity? And, who within the MoD authorised the decision to continue opaque payments that may have benefitted Saudi government officials after the case was under investigation? 

Transparency International Defence & Security joins Spotlight on Corruption’s urgent call for a transparent, independent judge-led inquiry into the full nature and extent of the UK government’s knowledge of and involvement in these defence contract payments made to Saudi Arabia.  

This inquiry must consider whether ongoing contractual arrangements are still at risk of corruption, what measures the MoD is putting in place to prevent this, and the adequacy of the MoD’s measures to protect and enable whistleblowers to uncover corruption. A temporary halt should also be placed on any arms transfer licenses approved by the same officials during the period in question until evidence of responsible and corruption-free arms control systems can be provided. 

But this inquiry will not be enough, because this case is not an isolated incident. Enormous budgets, close political ties, and high levels of secrecy make the defence and security sectors fertile ground for hidden payments, undue influence, bribery, and corruption.  

It’s imperative that we restore integrity to the arms trade in order to rebuild trust in our institutions, safeguard the public interest, and strengthen global security. 

As this case shows, the UK, and governments in all arms-supplier countries, must take action to integrate heightened anti-corruption standards into arms transfers. The current controls are clearly not up to the task. They need strengthening with:  

• Increased investment in proactive measures to detect corruption risks in arms transfers, including during the arms deal and licensing processes.  
• Development of arms transfer policies that recognise corruption as a significant risk and establish procedures for investigation and mitigation;  
• Comprehensive disclosure of all intermediaries, subcontractors, and service providers involved, and independent monitoring of all defence sector contracts in which official support is sought or given;  
• Verification of recipient countries’ anti-corruption systems and inclusion of this verification as criteria in arms transfer/license decision-making; and 
• Commitment to share information on corrupt recipient(s) to other arms supplier states.
  

Revelation highlights danger of collusion in arms procurement

February 2, 2024 – Responding to reports that officials in Ukraine had uncovered a mass procurement fraud in the country’s Ministry of Defence, Josie Stewart, Head of Transparency International – Defence & Security, said:

“The confirmation of mass procurement fraud by Ukraine’s Defence Ministry is disheartening and comes at a critical time for a nation grappling with the enduring challenges posed by Russia’s continuing invasion. This revelation poses a significant threat to the safety and security of the Ukrainian people, undermining the effectiveness of the armed forces in their defence efforts.

“We commend the ongoing investigations into this case and the efforts to recover stolen assets, which send a strong signal of Ukraine’s commitment to its continuous and transparent fight against corruption. However, this incident highlights the genuine danger of collusion in arms procurement, with destabilising effects not only on Ukraine’s self-defence but also in neighbouring countries in the Balkans.

“The fight against corruption is an ongoing struggle, and the exposure of such malpractices is a necessary step toward fostering transparency and rebuilding public trust. Transparency International Defence & Security underscores the imperative that, in times of conflict, anti-corruption measures must be central to all defence and security decisions. In Ukraine, corruption in procurement can have life-threatening consequences, compromising military operational capabilities and endangering frontline lives.”

Notes to editors:

Ukraine’s Defence Ministry recently confirmed investigators had uncovered a corruption scheme in the purchase of arms by the country’s military totalling the equivalent of about $40 million.

January 18, 2024 – Transparency International Defence & Security welcomes the seizure of $8.9million that was siphoned off by corrupt Nigerian officials from funds meant to be used to equip the country’s military in its fight against Boko Haram.

The Royal Court in Jersey, a British Crown Dependency, last week ruled that the funds were illicitly obtained by Nigerian officials in 2014.

Instead of being used for legitimate purchases of military equipment, the funds were moved out of Nigeria to a bank account in Jersey. The true source of the funds was obscured using foreign bank accounts and shell companies but the money ultimately benefited family members of Nigeria’s former ruling party.

Nigeria received an ‘E’ in Transparency International Defence & Security’s Government Defence Integrity Index, indicating a very high risk of corruption. Our assessment from 2018/19 showed Nigeria still faces considerable corruption risk across its defence institutions, with extremely limited controls in operations and procurement.

Josie Stewart, Head of Transparency International Defence & Security, said:

“We welcome the Royal Court’s decision to seize these misappropriated funds and begin the process of returning them to the people of Nigeria. This money, rather than supporting the security forces fighting Boko Haram, was diverted to enrich the country’s ruling class.

“This case underscores the pervasive risks of corruption in the defence sector, where the secrecy and complexity inherent in international arms deals, coupled with the large amounts of money at stake, create an environment ripe for abuse of office.

“It is incumbent on the Jersey authorities to return these funds openly and accountably to avoid them being stolen again. The successful return of these assets to the people of Nigeria will not only serve justice but also highlight the critical need for greater transparency in the global arms trade.”

Auwal Ibrahim Musa Rafsanjani, Executive Director of CISLAC/Transparency International Nigeria, added:

“While we wholeheartedly welcome the decision, we are hopeful that when repatriated, the funds will be judiciously utilised in improving the living standards of common Nigerians.

“We find it disturbing that money, rather than supporting the security forces fighting Boko Haram, was diverted to enrich the country’s ruling class.

“We on this note call on Nigerian Government to strengthen the procurement process in the defence and security sector through enhanced transparency and accountability, regular review as well as independent auditing.

“We also call on relevant legislative Committees in the National Assembly and Civil Society to galvanise external oversight of the Defence and Security through regular tracking and scrutiny of budgetary allocation, appropriation, implementation and procurement activities.”

Transparency International highlights key areas for anti-corruption efforts

January 15, 2024 – Following the elections in Taiwan, Ara Marcen Naval, Head of Advocacy at Transparency International Defence & Security, said:

“Following Taiwan’s important election, it’s imperative for the new president and legislature to balance their approach towards external threats with a strong stance against corruption. The country has already taken significant steps to mitigate corruption risk in its defence & security sector, as evidenced by its high score in our Government Defence Integrity Index, but challenges remain in defence contract offsets and the roles of brokers and agents in arms deals.

“These murky areas are especially prone to corruption, which can undermine national security and public trust. We urge the incoming administration to enhance efforts to ensure transparency and integrity, particularly in defence procurement. Strengthening these areas will build on existing progress and ensure that Taiwan’s defence sector not only remains effective and resilient, but also fosters a sense of accountability and credibility within the international community.

“By prioritising transparency and integrity in defence procurement, the incoming administration can fortify Taiwan’s position as a responsible global player. This commitment will not only bolster national security but also contribute to building enduring partnerships, fostering regional stability, and upholding the principles of good governance on the global stage.”

Notes to editors:

The Government Defence Integrity Index (GDI) scores and ranks nearly 90 countries on the quality of institutional controls to manage the risk of corruption in defence and security institutions.

Taiwan achieved an overall rank of B, indicating a low risk of defence & security corruption.

However Taiwan was ranked C, indicating a moderate risk of corruption, on the Index’s ‘procurement’ indicator. 

This assesses the level of safeguards against corruption in arms deals and includes the use of defence contract offsets and the roles of brokers and agents.

Transparency International Defence & Security will be publishing new research on the corruption risk posed by offsets later this year.

December 5, 2023 – Four of the world’s 10 biggest arms producers listed in new research from the Stockholm International Peace Research Institute (SIPRI) show a concerning lack of commitment to anti-corruption, Transparency International Defence & Security said today.

SIPRI’s 2022 Arms Industry Database lists the top 100 arms-producing and military services companies.  Four of the top 10 score either an E or F Transparency International’s Defence Companies Index (DCI), which assesses and ranks major global defence companies based on their commitment to anti-corruption and transparency.

In the top four, SIPRI’s data shows General Dynamics (US), NORINCO and AVIC (China), and Rostec (Russia), collectively responsible for $876 billion in global arms trade last year. All scored poorly in the DCI, indicating a minimal or extremely poor commitment to anti-corruption.

The problem extends beyond these firms, with dozens of other companies in the top 100 assessed by the DCI to show poor or non-existent commitment to anti-corruption.

This is alarming given SIPRI’s data on the increasing demand for arms and military services globally. Corruption in the arms trade can have devastating impacts on people’s lives, leading to heightened conflict and violence, undermining governance and the rule of law, diverting resources from essential public services, and eroding trust in institutions.

Josie Stewart, Programme Director at Transparency International Defence & Security, said:

“The latest SIPRI report, when combined with our previous research on arms producers’ commitment to anti-corruption, paints a troubling picture. Far too many of the world’s biggest arms producers are falling short in addressing corruption risks.

“This should urgently motivate governments and the international community to prioritise addressing these issues in the defence and security sectors.

“As demand for arms and military services grows, it’s crucial to ensure that anti-corruption standards remain a forefront consideration, not secondary to trade, foreign, and defence policy objectives. The cost of neglecting integrity and transparency in these sectors is too great to ignore.”

Notes to editors:

Transparency International is a global movement that combats corruption and promotes transparency, accountability, and integrity in government, politics, and business worldwide.

Transparency International – Defence & Security is one of Transparency International’s global programmes and is committed to tackling corruption in the global defence and security sector.

The Defence Companies Index on Anti-Corruption and Corporate Transparency (DCI) assesses the levels of public commitment to anti-corruption and transparency in the corporate policies and procedures of 134 of the world’s largest defence companies. By analysing what companies are publicly committing to in terms of their openness, policies and procedures, the DCI seeks to inspire reform in the defence sector, thereby reducing corruption and its impact.

Michael Ofori-Mensah, Head of Research at Transparency International Defence and Security, describes some of the dangers documented in our latest research paper.

Unaccountable private military and security companies continue to pursue partnerships that in recent years have led indirectly to the assassination of presidents and journalists, land grabs in conflict zones, and even suspected war crimes.

From Haiti to Saudi Arabia to Nigeria, US-based organisations – the firms that dominate the market – have found themselves associated with a string of tragedies, all while their sector has grown ever-more lucrative.

Transparency International Defence and Security’s latest research – ‘Hidden Costs: US private military and security companies and the risks of corruption and conflict – catalogues the harm playing out internationally as countries increasingly seek to outsource national security concerns to soldiers of fortune.

Hidden costs from the trade in national security

While the US and other governments have left the national security industry to grow and operate without proper regulation, the risks of conflict being exploited for monetary gain are growing all the time.

Hidden Costs documents how the former CEO of one major US private military and security company was convicted – following a guilty plea – of bribing Nigerian officials for a US$6bn land grab in the long-plundered Niger Delta.

Our research also highlights that the Saudi operatives responsible for Jamal Khashoggi’s savage murder received combat training from the US security company Tier One Group.

Arguably most damning are the accounts from Haiti, where the country’s president was killed last year by a squad of mercenaries thought to have been trained in the US and Colombia.

Pressing priority

Many governments around the world argue that critical security capability gaps are being filled quickly and with relatively minimal costs through the growing practise of outsourcing.

Spurred on by the US government’s normalisation of the trade, US firms are growing both their services and the number of fragile countries in which they operate.

The private military and security sector has swelled to be worth US$224 billion. That figure is expected to double by 2030.

The value of US services exported is predicted to grow to more than $80 billion in the near future, but the industry and the challenge faced is global.

The risks of corruption and conflict in the pursuit of profits are plain.

These risks are as old as time. But their modern manifestations in warzones must not be left to spill over. The 20-year war in Afghanistan cultivated dynamics that threaten further damage, more than a decade after governments first expressed their concerns.

Required response

International rules and robust regulation are urgently needed. We need measures that ensure mandatory reporting of private military and security company activities. The Montreux Document lacks teeth, operating as it does as guidance that is not legally binding. Code of conduct standards must also become mandatory for accreditation, rather than purely voluntary.

Most private military and security firms are registered in the US. So Transparency International Defence and Security is also calling on Congress to take a leading role in pushing through meaningful reforms under its jurisdiction. There is an opportunity arriving in September, when draft legislation faces review.

Policymakers have long been aware of the corruption risks and the related threats to peace and prosperity posed by this sector. The time for action is well overdue. No more Hidden Costs.

Transparency International Defence & Security will release the full results of its Government Defence Integrity Index on Tuesday, November 16 at 00.01 CET.

The Government Defence Integrity Index (GDI) is the only global assessment of corruption risks in the defence and security sector. It provides a snapshot of the strength of anti-corruption safeguards in 86 countries.

More on the GDI: https://ti-defence.org/gdi/about/

The GDI highlights a worrying lack of safeguards against corruption in defence and security sectors worldwide. It also shows countries contributing to or leading major international interventions lack key anti-corruption measures in their overseas operations.

Full results and scores for countries will be published here at 00.01 CET on Tuesday, November 16: https://ti-defence.org/gdi/map/

To request interviews or press materials under embargo until publication, please email the Transparency International UK press office press@transparency.org.uk

May 6, 2021 – Close links between the defence industry and governments in Europe are jeopardising the integrity and accountability of national security decisions, according to a new report by Transparency International – Defence and Security.

Defence Industry Influence on Policy Agendas: Findings from Germany and Italy explores how defence companies can influence policy through political donations, privileged meetings with officials, funding of policy-focused think tanks and the ‘revolving door’ between the public and private sector.

These ‘pathways’ can be utilised by any business sector, but when combined with the huge financial resources of the arms industry and the veil of secrecy under which much of the sector operates, they can pose a significant challenge to the integrity and accountability of decision-making processes – with potentially far-reaching consequences.

This new study calls on governments to better understand the weaknesses in their systems that can expose them to undue influence from the defence industry, and to address them through stronger regulations, more effective oversight and increased transparency.

Natalie Hogg, Director of Transparency International – Defence and Security, said:

“When individuals, groups or corporations wield disproportionate or unaccountable influence, decisions around strategy and expenditure can be made to benefit private interests rather than the public good. In defence, this can lead to ill-equipped armed forces, the circumvention of arms export controls, and contracts that line the pockets of defence companies at the public’s expense.

“The defence and security sectors are a breeding ground for hidden and informal influence. Huge budgets and close political ties, combined with high levels of secrecy typical of issues deemed to be of national security, means these sectors are particularly vulnerable. Despite the serious risk factors, government oversight systems and regulations tend to be woefully inadequate, allowing undue influence to flourish, with a lot to gain for those with commercial interests.”

Transparency International – Defence and Security calls on states to implement solutions to ensure that their defence institutions are working for the people and not for private gain.

Measures such as establishing mandatory registers of lobbyists, introducing a legislative footprint to facilitate monitoring of policy decisions, strengthening conflict of interest regulations and their enforcement, and ensuring a level of transparency that allows for effective oversight, will be important steps towards curbing the undue influence of industry over financial and policy decisions which impact on the security of the population.

Notes to editors:

Defence Industry Influence on Policy Agendas: Findings from Germany and Italy is based on two previous reports which take an in-depth look at country case studies. The two countries present different concerns:

• In Italy, the government lacks a comprehensive and regularly updated defence strategy, and thus tends to work in an ad hoc fashion rather than systematically. A key weakness is a lack of long-term financial planning for defence programmes and by extension, oversight of the processes of budgeting and procurement.
• In Germany, despite robust systems of defence strategy formation and procurement, significant gaps in capabilities have led to an overreliance on external technical experts, opening the door to private sector influence over key strategic decisions.

The German report can be found here and the Italian report here.

The information, analysis and recommendations presented in the case studies were based on extensive document review and more than 50, mainly anonymous, interviews.

Contact:

Harvey Gavin

harvey.gavin@transparency.org.uk

+44 (0)20 3096 7695

+44 (0)79 6456 0340 (out of hours)