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Corruption in defence and due diligence

July 06th, 2015 - Posted by Sam Hemmant in Anti-Bribery And Corruption

The Defence Companies Anti-Corruption Index 2015 paints a worrying picture of corporate practices that in many cases simply do not go far enough to support fair and transparent dealings in the arms sector.  It is also noteworthy that the split between good and poor performers in the report is not clearly delineated along geographic lines – for example US-based arms manufacturers appeared in both the top and bottom bands measuring the strength of companies' internal anti-corruption policies.

Transparency International recommendations for the UK MOD

In addition to the clear evidence of corporate shortcomings in tackling defence sector corruption, Transparency International's 2013 Government Defence Anti-Corruption Index provides equally strong evidence that governmental establishments could be doing more to address corruption risk.

The 2013 Index placed the UK in Band B (on a sliding scale from A to F).  While this rates the risk of corruption evident within the UK defence establishment as "low risk", it falls short of meeting the standards required to be considered "very low risk".

Building Integrity in UK Defence

With this in mind, a subsequent Transparency International policy paper, Building Integrity in UK Defence, made the following recommendations to the Ministry of Defence:

  1. Analyse the scale of the problem by undertaking a detailed corruption risk assessment.
  2. Establish and communicate a formalised internal MOD anti-corruption policy and identify which organisation or department within the MOD is responsible for monitoring and mitigating corruption risk.
  3. Review, strengthen and reinforce existing guidance for MOD and armed forces personnel on the issues of corruption and bribery and how to respond in these situations.
  4. Provide specific guidance for staff and troops on deployment in areas where corruption is known to be prevalent, and where appropriate deploy trained individuals to monitor corruption risk on an ongoing basis.
  5. Ensure that policies which are designed to protect whistle-blowers from reprisal for reporting corruption are fully enforced.
  6. Ensure that comprehensive operational anti-corruption doctrine continues to be developed and reflected in single service training.
  7. Strengthen controls on arms exports within the context of the provisions of the UN Arms Trade Treaty, as well as enforcing strict requirements to control corruption and bribery risks in government-to-government contracts, including post-contract monitoring measures.

A corporate perspective

While Transparency International's Building Integrity in UK Defence paper is aimed at government, rather than business, it provides an exemplary framework for the implementation of strong anti-corruption policies and practices within defence sector companies.

Arms deals are already subject to anti-corruption legislation such as the UK Bribery Act 2010, the Foreign Corrupt Practices Act (FCPA) in the United States, and similar laws which cover international trade.  However, if companies are to take steps to address corruption risk, they must be prepared to go beyond tick-box regulatory compliance and make positive changes in attitudes towards due diligence and risk assessment.

Key aspects of Transparency International's recommendations, such as implementing a formal anti-corruption policy and establishing who is responsible for monitoring corruption risk, could equally be applied within the corporate structure of any defence company – and would contribute to minimising that firm's exposure to the very real financial, regulatory and reputational risks associated with corruption.

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