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Military-Owned Businesses & Corruption Risks

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Thursday, 26 January 2012

military owned businessesCommercial businesses owned by the military are a surprisingly common phenomenon which is open to a wide range of potential abuses. As there is extremely limited information on such businesses, Transparency International's Defence and Security Programme (TI-DSP) has taken a first step through an initial review. Saad Mustafa explores the topic

   
A significantly under-researched and often overlooked subject, military-owned businesses (MOBs) pose a significant corruption risk within the defence and security sector. They are usually, but not exclusively present in weak or transitioning democracies attempting to assert a certain degree of civilian control. However, by allowing militaries such influence and authority, the civilian government essentially weakens its position and allows the armed forces to play a significant role in society.

    
Given that this is such a pressing issue in countries that receive large amounts of overseas development assistance funds – Egypt, Pakistan, and Turkey to name a few, Transparency International UK Defence and Security Programme's (TI-DSP) new report provides a timely first-look into how such businesses are structured, what some of the inherent corruption risks are, and why and how some countries have reformed their respective MOBs.

    
There are a number of reasons why military entrepreneurship should be a cause for concern for both policymakers and civilians. For starters, when you introduce profit incentives into an organisation whose sole purpose is defending the country, it distracts officers from their official duties. Second, there are significant costs to the country's economy because not only can it encourage monopolistic behaviour, it may also prevent the liberalisation of the economy by promoting cartelisation in certain key economic sectors. There is an opportunity cost as well: private entrepreneurs will regard the military's involvement as a significant barrier to entry seeing as how MOBs will always enjoy a competitive business advantage.

    
Most worryingly of all however is that military businesses are usually linked to the exploitation and eventual depletion of a country's natural resources. This is especially worrisome when one considers that in some countries the military is responsible for policing borders and inspecting what is brought in and what is taken out of the country. In Indonesia for example, the military uses this privileged position to move illegally logged timber without any worry of accountability or external oversight.

    
All this is not to say that corruption is an inevitable consequence of MOBs. It is more that the military's participation in the economy creates certain vulnerabilities which compromise the degree of professionalism within the armed forces and create opportunities for corrupt practices to take place.

     
A longer version of this article appears on the Trustlaw Governance blog

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Training: Doing Business without Bribery

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Monday, 16 January 2012

Rachel Davies speaks to Robert Barrington, Director of External Affairs at Transparency International UK, about anti-bribery procedures and TI-UK’s new training module, Doing Business Without Bribery.
     
6 months on from the commencement of the Bribery Act, what do you think is the current state of play with regard to companies’ understanding and implementation of anti-bribery procedures?
   
It’s very variable. Some companies are doing a lot and doing it very well. Some companies are doing surprisingly little, probably distressingly little compared to their obligations under the law.
A key feature of that is going to be the quality of their training programmes. We know that some companies have pretty good training – putting a lot of staff through it in-depth – but others haven’t even really started, particularly the smaller companies.
    
What is the right balance between e-learning, group training and one-to-one training – and are companies achieving the balance?
   
The right balance probably has to be some kind of mass training for the majority of staff, which is likely to be e-learning. Beyond that there are certain people who are much higher risk because they travel to certain countries or have certain functions in the company – such as sales – and they need much more in-depth training. I think that certain companies have achieved that but many have probably had an over-reliance on mass training and not really been very specific in their training for those that are really high risk. That is where the focus needs to be in the future.
   
How would the Doing Business Without Bribery toolkit add to a company’s existing anti-corruption strategy?
     
We think it’s the best training that we’ve come across.  It demonstrates best practice by giving Transparency International’s view of how to deal with very complex circumstances in an extremely practical way that’s both ethical and realistic. It helps companies with their ‘adequate procedures’ because training has to be a fundamental part of how you carry those out. I suspect that most training to date has focused on what the law is and what your legal obligations are.  We view this new toolkit as a next generation of training because it’s taking training into new areas.  It’s giving people much more depth, much more complexity, and a more sophisticated understanding of how bribery happens and how you respond to quite difficult and challenging circumstances.
     
    
    
Doing Business Without Bribery is a free online training module with accompanying slides and Trainer’s Handbook, designed to help companies provide in-depth anti-bribery training for staff. For more information click here
        
Richard Alderman, Director of the Serious Fraud Office, spoke at the launch of the anti-bribery training course. To read a transcript of his speech, click here

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2011 – A crisis in Governance

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Thursday, 01 December 2011

2011 has been a year of passionate political protests around the world, often provoked by high levels of corruption in public life. Many citizens feel their leaders and public institutions are neither transparent nor accountable, and all too often are systemically corrupt.

TI_CPI_2011_infographicSmallToday marks the release of Transparency International’s Corruption Perceptions Index (CPI) which ranks 183 countries based on how corrupt their public sector is perceived to be. Not surprisingly the events and public anger of 2011 are reflected in the results.

Eurozone countries suffering debt crises, notably Greece and Italy, are among the lowest-scoring EU countries - reflecting public authorities’ failure to tackle the bribery and tax evasion that are key drivers of debt crisis.

North Korea appears on the CPI for the first time and makes its entrance at the bottom, ranked at 182 in joint position with Somalia. Both Tunisia and Egypt have dropped 14 places since last year’s index.

Corruption hits the poorest hardest and it is a mistake to think that citizens are resigned to accepting it. One such country where corruption is a regular experience for many is Afghanistan, which ranks near the bottom of this year’s index at 180, in joint place with Myanmar.  Afghans are now paying bribes at twice the level of two years ago, according to the United Nations Office on Drugs and Crime. They often have to pay bribes for services that they are already entitled to such as access to medical care, education and justice in court. The current level of $158 per bribe is equivalent to 37% of the average annual Afghan income. In poll after poll, Afghans citizens don’t rank the Taliban, terrorism or the economy as their highest worry. Corruption is their top concern and tackling it, their most urgent need.

This concern is seen again and again by Transparency International (TI) colleagues who work at a grassroots level in over 50 countries to provide free and confidential legal advice to witnesses and victims of corruption, helping them to pursue their complaints. To date, TI has dealt with more than 96,000 individual cases.

Closer to home, the UK is ranked 16th this year with a score of 7.8 out of 10, compared to 7.6 in 2010. The introduction of the UK Bribery Act is likely to account for this small improvement. However, more recent events such as the phone hacking scandal have shown that there are still too many areas of corruption vulnerability in the UK public sector.

Given the UK Government’s promise of zero tolerance for corruption, the UK should be achieving a top ten ranking.  However, practices that have been taken for granted for many years are still awaiting change, such as the cosy relationship between politicians and the media and poorly-regulated ‘revolving door’ employment between companies, political offices and the public sector.

Corruption is not just something that happens abroad. It exists at home too. Despite this fact, there is no individual or institution with responsibility to coordinate a robust response to corruption in the UK. Ironically the Government has an ‘overseas anti-corruption champion’, reflecting its underlying assumption that corruption is a problem overseas but not here.  This remit must be extended to cover domestic corruption.  Before it calls for better standards abroad the UK needs to address urgently the problems in its own back yard.

 

To view the results of the 2011 Corruption Perceptions Index, go to www.transparency.org/cpi

 

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Defence Budget Transparency: The Challenges

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Friday, 25 November 2011

Maria Gili and Leah Wawro of Transparency International’s Defence and Security Programme outline obstacles to more transparency and accountability in how countries spend their defence budgets.
    

DBT-lowDefence budgets are the primary tool that legislators and civil society can use to hold their governments and armed forces to account and see how their taxes are being spent. Yet the ability to use that tool is rare, since most countries disclose too little defence and security spending information to their public, and many disclose only limited information even to their legislatures. Accountability builds public trust in defence and security establishments, and helps reduce corruption that hurts their effectiveness.
    
TI’s Defence and Security Programme’s latest report, ‘The Transparency of Defence Budgets’, ranked 93 countries according to their defence budget transparency and accountability. The study found that only 13 of those countries score as having high transparency, 20 as moderate to high, 14 as moderate, 21 as moderate to low, and 25 as low. The scale of the challenge is clear: nearly 65% of countries studied scored moderate or below.
    
So why do so few countries provide defence budget information to their public?
   
1      National security as an excuse for secrecy: Confidentiality is vital to certain aspects of public work, and in no sector is this more pertinent than in defence and security. Yet far too often, national security is used as a blanket excuse for highly aggregated budgets, over-classification, and as a veil for corrupt activity. Our report found that 61 of the 93 countries studied spend more than 8 per cent of their defence budget on secret items. Although protection of confidential information is important, this does not mean it cannot be compatible with accountability.
   
2     Poorly-defined budgeting processes: Many countries are limited by the lack of a clearly-defined defence policy. Countries should develop a national security and defence strategy and make it available to the public.
   
3      Lack of capacity and staffing constraints: Auditing budgets can be a challenging task, as a certain level of knowledge about the sector is generally required.  Our report found that 33 of the 94 countries studied do not employ designated staff for these matters, and 10 do, but not the level necessary to fulfil the task.
   
4      Audit body independence:  When the auditing body is not independent from the Ministry of Defence, conflicts of interest can arise which prevent accountability.
   
5      Lack of civil society and media pressure: Defence budgets have the reputation of being “untouchable” because of their confidentiality and technical content. Nevertheless, it is the government’s duty to make the documents as accessible as possible. Putting them in the public domain is only a first step—they also need to be simple and clear to read.  Civil society can play an important role. In Guatemala, for example, civil society organisations worked with the UNDP to monitor defence spending, encouraging a decrease in military spending and a shift towards a more development-focused budget.
   
Because corruption wastes resources and diminishes public trust, it is in the interest of any government to be effective and transparent when allocating, managing and overseeing resources for its defence and security sectors. This is also true of ministries of defence and security and the Armed Forces, as the risk of corruption increases if they lack accountability in the way they spend their money. This makes them weaker institutions, reducing their effectiveness.
   
In the defence and security sectors, certain secrets have to be kept. Yet there must be processes to ensure that the government and defence establishments remain accountable to the citizens they serve, and whose money they spend. A defence budget which is open to the people, and to the legislature, and which is properly developed, overseen, and audited, is a vital tool of accountability.
   
This is an shortened version of the article. The full text can be read at the Space for Transparency blog

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The need for reform to party funding is palpable

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Tuesday, 22 November 2011

Despite committing to removing 'big money' from politics in their election manifestos, all three major political parties have today rejected calls for an inquiry into how they're funded. TI-UK's Executive Director, Chandu Krishnan, asks "Must we wait for yet another scandal to convince politicians that reforms are necessary?"
    
corruptionlawIn a report published by Transparency International UK earlier this year, respondents were asked to rank several scenarios as a possible example of corruption. 86% of respondents thought that ‘a seat in the House of Lords for a businessman who has made large donations to a political party’ was potentially corrupt, the highest score for any of the scenarios.
   
Sir Christopher Kelly’s report on Political Party Finance launched today, which recommends that all political party donations should be capped at £10,000, echoes what we have been urging for several years. The system is highly vulnerable to corruption – this is why UK politics has suffered periodic scandals, such as the ‘cash for peerage’ controversy in 2006.
    
Although the Political Parties Elections and Referendums Act 2000, the Electoral Administration Act 2006 and the Political Parties and Elections Act 2009 have lead to greater transparency in political party funding, the UK is one of the few industrial democracies that does not have a ceiling on donations to political parties. The so-called ‘arms-race’ approach to election spending, combined with decreasing party and trade union membership, puts financial pressure on politicians and parties. A high dependence on very large individual donations has resulted, increasing the risk of corruption and exacerbating public unease about donors’ influence over politicians.
   
The full version of this article can be found on politics.co.uk

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Are aid donors walking their own talk?

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Tuesday, 15 November 2011

A new study on donor transparency shows that many aid agencies are not putting into practice the levels of disclosure that they typically demand from the governments which receive their money. Produced by Publish What You Fund, the global campaign for aid transparency, the study compiles an index to see how different donor agencies measure-up when it comes to opening up their own books on how much aid they give, where and what for.

Transparency Index

The index looks at 58 agencies, ranging from the World Bank's International Development Association (the top performer) to Malta's Ministry of Foreign Affairs (the worst performer). In many cases, different agencies within the same institution or for the country are assessed. For example, three agencies from the EU and four from the United States are separately analysed to see how easy it is to follow the flow of the money. Overall 11 of the 15 worst performers on the index are EU member states. 

To read the full post, written by TI's Senior Policy Coordinator Craig Fagan, go to the Space for Transparency blog

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Conflict and Corruption

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Tuesday, 01 November 2011

border_conflictCorruption can manifest itself in several stages of a conflict. In the 1980’s it was one of the initial drivers of conflict in Burundi, Guatemala and El Salvador. In all three, corruption catalysed a wide range of grievances against the central government by various social groups. Corruption can also thrive after the conflict has ended, preying on weak institutions which have not been allowed to fully form and develop. It is for this reason that countries caught up in conflict should and must address this social ill.
  
Arguably, corruption is a more acute problem in post-conflict environments than in peaceful settings. The milieu of a post-conflict arena allows corruption to be catalysed by greed and ideology, and runs the risk of alienating vital sections of society who could otherwise play a crucial role in guiding the country towards a more prosperous future. The chaos and corruption that most often defines these states can reverse very expensive gains as shown in Afghanistan, and weaken already unstable and fragile governance structures thus reducing the hope of economic growth and future prosperity. In a worst case scenario, rampant corruption can retrogress countries towards the very instability and conflict from which they have just broken free.
   
Corruption can take many forms: embezzlement, nepotism, cronyism, bribery and fraud are just some. The harmful effects of each is magnified in post-conflict countries where huge inflows of foreign aid can distort the political balance and provide an increased incentive to engage in corrupt practices. For example, in Liberia over half the country’s $750 million of aid is off-budget and therefore not subject to government control. Further, a report by the Special Inspector General for Afghanistan Reconstruction highlights that the United States’ inability to control aid flow in the country is increasing the risk that some of the money is inadvertently fuelling insurgency. The two examples emphasise that the need for robust and transparent local governance institutions is even greater in such situations. Aid initially earmarked for crucial development of basic services and the establishment of a stable and self-sufficient economy can be diverted, misappropriated and stolen. This not only undermines advancement but reduces public confidence in governments which are already weak to begin with.
   
For this reason it is important to chart how disparate post-conflict countries have risen to the challenge and addressed the harmful effects of corruption. Rwanda, Liberia and Serbia, the three case studies in our new report ‘Counter-corruption reforms in post-conflict countries’, have not fully eradicated corruption, but each has taken major steps to addressing it. The strategy adopted has reflected the unique intricacies of their respective security, political and social dynamics. Whilst there is no one panacea for corruption, the report has highlighted two key areas to addressing corruption risk:
  
1. Political will: a genuine motivation within the political elite to eradicate corruption from their shores is essential. Establishing institutions and legislating anti-corruption doctrines only provides the framework. The real driver will always be the political elite and it is up to them to implement the norms and laws of the land both in letter and in spirit.
  
2. Free speech: It is essential for countries to allow their citizens, officials and media to express views and draw attention to stories which may not always portray the government in the best possible light. Freedom of speech is cornerstone for any society to hold governments practices to account. With regards to counter-corruption, the multiple stakeholders can play a crucial role in discovering cases of corruption, bringing them to the attention of the relevant authorities, and creating a space for real debate within society on how best to tackle it.
  
Written by Saad Mustafa, Research Assistant for TI-UK's Defence and Security Programme

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FIFA reform

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Friday, 21 October 2011

In August, Transparency International (TI) published recommendations for building trust at FIFA. As part of the global TI response, TI-UK wrote to the Football Association asking for their support for the recommendations, and requesting their participation in the global debate on FIFA reform.

 

Today, the FIFA Executive Committee met to discuss the proposed reforms and announced the conclusions they reached at a press conference in Zurich. TI has released a press statement welcoming the announcement that FIFA will start a reform process to address allegations of corruption.

 

Links to further information:

Safe Hands – TI recommendations for FIFA reform

TI-UK letter to the FA

TI blog posts on FIFA

The Telegraph – Blatter’s continued reign could halt hopes of restoring FIFA’s reputation

TI press statement

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Organised crime and corruption

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Friday, 16 September 2011

gun_organised_crime_tript-low"Corruption feeds organised crime and organised crime feeds corruption." This is one of the key points made by Transparency International UK's Defence and Security Programme in its Organised crime, corruption, and the vulnerability of defence and security forces Paper. Criminal networks use corruption to carry out criminal activity, avoid investigation and escape prosecution. Criminal factions who abuse international borders in order to conduct their business put pressure on public services, local communities and legitimate businesses and an easy way to achieve this is through corruption. Beyond the often used example of Italian mafia, there is also illegal logging, which relies on bribing Foreign Service officials, forest guards, politicians, police and bureaucrats to get bogus logging permits. In the United States, attempts to reduce illegal logging have been opposed by the timber industry which, incidentally, is the third largest political contributor.  

We in the Defence & Security team have long considered organised crime to be a major contributor to corruption in the defence and security sector. With our latest report we are exploring this connection further, and raising awareness about the depth of this issue. The paper looks into how defence and security forces can themselves become involved in organised crime. And it is exactly through corruption that this happens.

Read the full article on the Space for Transparency blog


Julia Muravska works for TI-UK's Defence and Security Programme

@TIdefenceteam

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Corruption risks may undermine Arms Trade Treaty

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Monday, 11 July 2011

ATT_colour_low_triptThough there are international treaties to control the sale of many goods, from dinosaur bones to postage stamps, there is no such treaty to control the trade in weapons worldwide. From July 11 to July 15, the 192 member states of the United Nations are meeting in New York to continue their negotiations towards an “Arms Trade Treaty” (ATT). States intend to agree on the final version of an ATT in 2012, which means that this is the last major meeting before the final negotiation conference next year.
   
The purpose of an ATT is to regulate the legal global trade in arms. States have endorsed a UN resolution to negotiate a legally binding treaty with “the highest possible common international standards for the transfer of conventional arms”. These standards could include regional and international security concerns, the diversion of weapons away from their intended end-users, the abuse of international humanitarian law or international human rights law, or sustainable development concerns. One of these standards must be corruption.
   
The arms trade is one of the most corruption prone sectors – up to GBP 20 billion each year is lost to corruption. Numerous cases demonstrate the devastating impact that defence corruption has on sustainable development, public trust in the government and its armed forces, as well as the ability of nations to pay a fair and uninflated price for the weapons.
   
This is why Transparency International’s Defence and Security Programme emphasises that a Arms Trade Treaty must have strong anti-corruption mechanisms if it is to be robust and effective. Even if States were to agree an ATT at the final negotiating conference in 2012 which introduces stronger controls without strong anti-corruption mechanisms these controls are likely to be undermined by and circumvented through corruption.
   
Transparency International’s Defence and Security Programme is in New York this week, working with its large number of partners in civil society such as Oxfam, Saferworld, the Arias Foundation, and Amnesty International to constructively work with States to ensure that the corruption measures proposed in the draft are strengthened and not deleted at this last preparatory stage.
    
Tobias Bock works for TI's Defence & Security Programme
The full version of this article can be found on the Space for Transparency blog

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Strong leadership needed on phone hacking corruption

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Friday, 08 July 2011

 

small_Chandu_Krishnan
   
As the phone hacking scandal escalates, more and more evidence is emerging highlighting undercurrents of corruption that are embedded in our media, police, and political institutions. The relationship between media ownership and the UK political establishment has come under particular scrutiny over the past few days.
   

Among the revelations that have emerged in recent weeks are:
• a donation from a powerful media organisation to a sports club closely associated with an influential MP
• the revolving door between executives from major media organisations and positions as political advisers
• bribery of police officers
• a potential cover-up, or deliberate delaying of an investigation, within the police
• the unwillingness of politicians to challenge an organisation that owns large sections of the media
• the deliberate cosying up to powerful media figures by senior politicians
• the willingness of a powerful media organisation to be less than honest with Parliament and the Press Complaints Commission
• the enormous public concern about the approval of News International's attempt to take over BSkyB.
   
When you take all this together, a disturbing pattern emerges of the abuse of entrusted power, a lack of transparency and accountability and weak checks and balance.
   
It can be no surprise that politicians are tempted to court the favour of a powerful media empire. The News International website claims that one in four Sunday shoppers has read the News of the World and that there are only three TV shows in Britain that get a daily audience bigger than The Sun's. The influence of powerful media magnates is undeniable, and there lies the problem.  If a company controls a large portion of the UK media circulation, it is inevitable that many with political influence will try to ensure they keep in its favour or avoid its displeasure.
   
Although it can be easy to tar everyone with the same brush and grow cynical about all who work in these sectors, it is important to remember that there are countless politicians, police officers and journalists who work hard to expose corruption and uphold integrity.  It is unfortunate that those who use their positions of influence to act unscrupulously are tarnishing the good reputation of the system as a whole - the police, politics, parliament and the media.
   
Our recent report, Corruption in the UK, reveals that although not endemic, corruption is a bigger problem in the UK than widely recognised and there is an inadequate response to its growing threat. The recent allegations that Metropolitan Police officers accepted bribes from journalists in exchange for confidential information has further highlighted the vulnerability to corruption in some of the UK’s key institutions.
   
The phone hacking scandal now leaves no room for denying the fact that the UK has a corruption problem. It may not be as widespread as some countries where the problem is entrenched, but any level of corruption in our public institutions is too much. There must be zero tolerance.  Most importantly, the government needs to take corruption more seriously.   Ironically, it has appointed an 'overseas anti-corruption champion'.  Who oversees the fight against corruption within the UK?  Actually, nobody does.  Even worse, some of the oversight structures that are safeguards against corruption, such as the Audit Commission, are being hastily dismantled with apparently no real thought as to the consequences.
   
Interestingly, the new Bribery Act, which has just come into force, contains severe penalties for those who give or receive bribes, companies that fail to prevent bribery, and senior officers of companies who consent to it, or turn a blind eye.  It is a badly-needed law - not just for UK companies operating overseas, but evidently for those that pay bribes in the UK and senior executives who allow it to happen. There should be no place in the UK for a culture of impunity, in which powerful people or organisations involved in corruption do not face the consequences of their actions.
   
This scandal has shown that, unless it is rooted out swiftly, corruption will increasingly threaten key pillars of the UK's society and democracy. What we need is strong, clear and coordinated leadership from the Government and Parliament. Complacency is not an option.

 

Written by Chandrashekhar Krishnan, Executive Director of Transparency International UK

This article also features at politics.co.uk 

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Phone tapping scandal shows police corruption risk

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Wednesday, 06 July 2011

piggybankJPGThis afternoon the Metropolitan Police Commissioner, Sir Paul Stephenson, has confirmed that documents supplied to the police contain evidence that journalists working for the News of the World made ‘inappropriate payments’ to police officers in exchange for information.

    
This is the latest development in the phone hacking scandal which has seen the Sunday paper accused of accessing the voicemails of several thousand people, including the families of those caught up in the 7/7 bombings. It is no surprise that the alleged disregard for those coping with the aftermath of such tragic events has caused such a strong public reaction.
  
What is clear is that this recent allegation is one of corruption and straightforward bribery. This highlights the fact that bribery appears in many forms and can occur in many different contexts, but it also raises questions about the vulnerability of the UK police force to corruption. Although our recent report, Corruption in the UK, did not highlight this sector as an area of particular concern, there was evidence that corruption is still a risk:
• In 2008/09 the Independent Police Complaints Commission received 368 allegations of corruption. Of these, 152 were investigated and 11 substantiated.
• Each police force has its own anti-corruption team which shares information with the Serious Organised Crime Agency. However, the proposed budget reduction may have a detrimental effect on anti-corruption work, because not only will it result in fewer officers, but also a shift in policing priorities.
   
These developments act as a warning that our police force is not immune to corruption and that adequate steps must be taken to root out bribery risks at all levels. Today Sir Paul announced that a ‘thorough and robust investigation’ into claims of police payments would continue.  This is certainly welcome, because nothing but a zero-tolerance approach to bribery is sufficient.
  
By Rachel Davies
@RachelTIUK

 

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Faster Higher Stronger: Ending corruption in sport

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Wednesday, 06 July 2011

Over the weekend another allegation of sport corruption hit the headlines. The Sunday Times claimed that a London football club, which has secured the use of the Olympic Stadium after the Games, was making regular payments to a member of the deciding body during the bidding process.
  
It is yet to be confirmed whether or not these claims of bribery are true, but this is already another blow to the reputation of a sector which has frequently featured in the headlines under allegations of this nature.
  
Team sportOur recent publication, Corruption in the UK, revealed that the British public believe sport to be the second most corrupt sector in the country. There are certainly large amounts of money at stake – both in securing rights to sporting events and in gambling. The diverse range of cases studied in the report demonstrate three common risk factors – the problem of self-regulation, the difficulty of regulating against international corruption, and links with organised crime.
  
For those in the criminal underworld, sport is an attractive area to engage with because it gives legitimacy and social status, as well as providing potentially lucrative contacts for future ventures. Sport supplies a channel for overseas gangs to increase criminal activity yet remain relatively undetected. What is clear is that nearly all types of sport corruption identified in our report have an international dimension. This makes regulation within the sector difficult.
   
What particularly saddens me about this, and other recent cases such as the FIFA scandal, is that sport can be such a wonderful medium for good – it brings communities together and cultivates a culture where people strive for improvement. It can even offer a space where people are able to rise above the conflict which usually divides them.
   
In some areas of sport, corruption has already been proven, and not simply alleged.  It has involved both well-known sports personalities and senior members of various sporting bodies.   This casts a shadow not only on the reputation of their own sport, but the sector in general. One of the defining aspects of sport is that matches are played fairly – a game breaks down if all parties do not abide by a common set of rules. Corruption distorts this. When the leadership of a sporting body is corrupted, this can rapidly permeate the whole system which sits underneath.
  
Transparency International UK is recommending a full independent inquiry into UK sport, with a view to setting up a coordinated response to corruption within sport across the country. For further information on this issue, click here to download the report.
   
By Rachel Davies
@RachelTIUK

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Why we need the Bribery Act

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Thursday, 30 June 2011

Tetraethyl


Tetraethyl lead – a compound used in leaded petrol – was a major source of income for the international chemical firm, Innospec, before health and environmental concerns led to its abolishment in the US and Europe more than ten years ago.
  
The poisonous chemical – which has been proven to stunt the mental development of children – was also on schedule to be phased out in Indonesia in the late nineties. In order to avoid further financial loss, Innospec’s UK branch bribed Indonesian officials to ensure that the ban was blocked. It is estimated that the company made £505 million as a result of the deal. As I read the details of this case this morning, I have to admit my shock that a British based branch would undertake a venture that was so obviously damaging to people who had no say in the transaction.

The Bribery Act comes into force tomorrow, modifying UK bribery laws dating back to 1889. Among four new offences being introduced is the crime of bribing a foreign public official. While many British companies are not involved in corrupt practices, it is a sad reality that some have used bribery to obtain contracts overseas and increase their own revenue.
  
The Act has certainly been controversial with some opponents stating that it has not received enough time for consultation and analysis. However, the proposed law underwent four separate periods of consultation to which civil society and business were all engaged.  It is rare that British legislation receives as much scrutiny as has been afforded to this Act.

There is also concern that implementation of the Act will result in all forms of corporate hospitality being targeted. It is important to note that much corporate hospitality is legitimate and not intended to bribe. Section 7 of the Ministry of Justice official guidance to the legislation adequately covers this in some detail. 
  
Bribery and corruption impact upon the poorest hardest. The implications of the Bribery Act on payments abroad have caused some concern, but currently the people who are most affected by bribery do not have the option of walking away. They are the ones who must live in a society where corruption is further entrenched by bribery payments from western companies. The Government must ensure that implementation of the Act leads to prosecution of serious and complex cases of bribery while levelling the playing field for responsible UK businesses. Bribery is not a crime without victims, and it is my hope that the UK Government will implement robust enforcement of the Act to protect those who need it most.
  
written by Rachel Davies
@RachelTIUK

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FIFA: Is Corruption inevitable?

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Tuesday, 31 May 2011

Jeremy CarverThis morning Transparency International (TI) board member, Jeremy Carver, took part in a BBC Radio 5 Live phone-in. The show focused on the FIFA allegations and asked the question: Is corruption an inevitable part of life, or should we do whatever it takes to stamp it out?

You can listen again to the programme here

TI is calling on FIFA, the governing body of world football, to postpone its presidential elections set for 1 June so that an independent investigation into all allegations of corruption against its executives can be carried out.

To read the full TI press release on the FIFA allegations, click here

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Cabs for Hire

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Wednesday, 18 May 2011

 
“I’m really looking forward to translating my knowledge and contacts… into something that makes money.”


One year after Geoff Hoon spoke those now infamous words to undercover reporters, the former Defence Minister has taken a job with Augusta Westland. Hoon was in charge of the Ministry of Defence in 2005 when it awarded a helicopter contract to Westland worth one billion pounds.

The timing of this revelation is striking. This week Transparency International has launched a report, Cabs for Hire: Fixing the Revolving Door between Government and Business, which looks at the movement of individuals between public office and jobs in the private sector.

There are potential advantages of a strong relationship between business and government – in fact this is something that should be encouraged – but in order to maximise the benefit to society there must be proper procedures in place to ensure that the relationship isn’t abused.

For example, a senior official might use his or her power to shape government policy in favour of a particular corporation, with a view to securing a job with that organisation once they have left office. They may even ensure that their department does business with that company.

The recent news of Hoon’s appointment does little to inspire public confidence in Parliament. Our report lays out fifteen key recommendations, including, in exceptional cases, a life-time ban on public officials from high-risk departments – such as defence – taking up employment in an associated sector. If the proposals had been in place, this may have been one such case.

Instances like this one will not help to restore public confidence in our parliamentarians. That is a shame because there are many excellent MPs and Peers – people who really are in office because they want to make a positive difference to society.  Sadly, the current regulatory procedure is creating a space for corruption to thrive, which casts a shadow over the good work of many honest people in Parliament. In order to restore public confidence and limit the risk of corruption, the system needs to change.

 

Rachel Davies is the Communications Officer for Transparency International UK

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MPs recommend stronger anti-corruption focus on arms export controls

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Tuesday, 12 April 2011

by Tobias Bock, of Transparency International's Defence and Security Team

The Parliamentary Committees on Arms Export Controls (CAEC) published their annual report for 2011 on Tuesday, 5 April. They recommend that the UK Government introduce a much stronger focus on addressing corruption risks when issuing arms export licences, in line with the written evidence submitted by Transparency International.

Transparency International welcomes the Committees on Arms Export Controls’ anti-corruption conclusions and recommendations. Together with other civil society organisations including Oxfam, Amnesty International and Saferworld we are calling for a thorough and transparent review of all arms export licences to the Middle East and North Africa, as recommended by the CAEC.

The CAEC consist of four House of Commons select committees – Business, Innovation and Skills, Defence, Foreign Affairs, and International Development. Their report concluded ‘that the Government has failed to demonstrate satisfactorily whether, and if so how, it assesses the risk that individual arms exports may be linked to bribery and corruption during the licence approval process’. The Committees ‘recommend that the Government sets out fully in its response to this Report whether such an assessment is made for all arms export licence applications, and if so how’.

The 2008 EU Common Position on arms exports, which is legally binding for all EU Member States including the UK, does not include a stand-alone criterion on corruption. It contains a criterion on sustainable development, but the CAEC rightly ‘recommend that, given that Criterion 8 applies only to developing countries and that bribery and corruption are not confined to such countries, the Government gives full consideration to proposing the insertion of an additional Criterion into the EU Common Position on arms exports obliging Member States to assess the risk of bribery and corruption before approving an arms export licence to any country’.

Regarding the UN Arms Trade Treaty, the CAEC ‘recommend that the Government, in its response to this report, sets out its policy on including anti-corruption provisions in the Arms Trade Treaty with details of the provisions it would wish to see incorporated’.

More information on the CAEC and the 2011 annual report is available here.

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Is Corruption in the Defence Sector Inevitable?

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Friday, 11 March 2011

By Leah Wawro of TI’s Defence and Security team

It’s true that the defence sector has a higher risk of corruption than many other sectors.  But it’s no longer inevitable that the world must put up with significant corruption in the defence and security industries.

One of the reasons for this optimism is the success of a handbook produced two years ago, and recently updated, by the Defence and Security team at Transparency International. According to Mark Pyman, leader of the team, the world has moved on from asking ‘why is defence corruption a significant problem?’ to ‘so what should we do about it?’

The handbook discusses how to diagnose corruption risks in defence and security establishments and suggests how to do go about reducing them through practical reforms. It shows busy decision makers how significant progress can be made in tackling corruption risks in defence and security.

So strong was the positive reaction to the first handbook, that a second edition building on the first was launched this month.  It draws on the lessons learned by the TI defence team working with the first edition in military and defence establishments here and abroad.

The second edition Building Integrity and Reducing Corruption in Defence and Security: 20 Practical Reforms was launched on 8 March at a Chatham House event chaired by Lord Robertson of Port Ellen, the former Secretary General of NATO. He’s a long-time supporter of TI’s defence programme. Four speakers, including Mark Pyman, gave presentations to mark the occasion.

Pyman was optimistic about the changes taking place in the realm of defence and security anti-corruption. He stressed that tackling corruption is not a losing battle—it has been done, even in challenging, post-conflict countries like Liberia, Rwanda, and Serbia.

Avgustina Tzvetkova, Deputy Minister of Defence of the Republic of Bulgaria also spoke positively about the changes in Bulgaria. The country has seen significant reform, in part through partnership with NATO and Transparency International’s Building Integrity Programme.  Bulgaria’s ministry of defence has made major reforms since the inauguration of a new government in 2009, and Tzetkova emphasized the importance of strong political will and a clear and practical strategy.

Sir Stewart Eldon, former UK Permanent Representative to NATO, praised the handbook’s second edition as 'some of the world’s best practice in its field'. He noted that the increase of recommended reforms from ten to 20 reflects the growing knowledge of defence corruption issues. Afghanistan has brought the subject to the fore, and Eldon echoed Pyman’s statement that awareness of defence corruption’s devastating consequences, and willingness to address it proactively, has increased.

Sir Ian Andrews, Chairman of the Serious Organised Crime Agency, discussed the links between organised crime and defence corruption.

'Where there is corruption, organised crime is never far behind,' he said. '…Wherever corruption is taken seriously, so too is the threat from organised crime.' He called for closer engagement between law enforcement agencies and civil society bodies like Transparency International, in order to combine their strengths and tackle corruption and organized crime jointly and thus effectively.

Several members of the audience asked thought-provoking questions. A lawyer discussed whether alternatives to traditional penalties should be used in prosecuting cases of defence corruption—rather than using sanctions - allowing companies to continue to operate as they pay settlements. This was well-received by Pyman, who said that working with companies, rather than just advocating prosecution, has proven successful. Both Pyman and Eldon noted, however, that prosecution is vital in countering corruption, particularly because it indicates a strong commitment to reform. 

Another audience member asked Tzvetkova about regional cooperation on defence corruption issues and countering organised crime. She responded that Bulgaria hopes to lead the region on this, and has been cooperating with other members of the South-Eastern Europe Defense Ministerial process (SEDM). A question was raised about the Bribery Act, and the potential impact of including hospitality and so-called ‘grease payments.’ All members of the panel expressed support for the Act. Pyman stated that he does not feel the Bribery Act would hamper the British defence industry, and said it will be a major step forward in reducing corruption. In fact, Pyman noted that in his conversations with members of the defence industry, they have been supportive.

If you are interested in receiving a copy of Building Integrity and Reducing Corruption in Defence and Security: 20 Practical Reforms, please contact the defence and security team.

To read Sir Stuart Eldon's speech click on the attachment.

Attachments:
Download this file (Sir Stuart Eldon's speech 8.03.2011.pdf)Sir Stuart Eldon's speech 8.03.2011.pdf25 Kb
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Have your say on aid scrutiny

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Friday, 25 February 2011

By Graham Ward, Chief Commissioner, Independent Commission for Aid Impact

With the Coalition Government’s commitment to greater independent scrutiny of UK aid, now is the chance to have your say on which areas of aid should be looked at.

I am Chief Commissioner of the Independent Commission for Aid Impact (ICAI), the independent body responsible for the scrutiny of UK aid, focusing on the delivery of value for money for the UK taxpayer, maximising the impact for recipients and promoting effectiveness of the UK aid budget. To assist in the development of our three year work plan we have launched a consultation calling for members of the public and our stakeholders to have their say on which areas of UK overseas aid they would like to see scrutinised.

With a remit to scrutinise all overseas aid spending in UK government departments, the ICAI consultation is an excellent opportunity to shape which areas of UK aid we review. Responses to the consultation will be key to ensuring we understand the views of our stakeholders, the UK public and partner countries.

The consultation is easy to respond to, visit the consultation page on our website www.independent.gov.uk/icai. We encourage all followers of the Transparency International blog with an interest in what happens to the UK’s aid budget to have their say. The consultation runs until the 7 April, we look forward to receiving your responses.

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British business simply can not afford a delay to the Bribery Act

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Sunday, 06 February 2011

Dr Gavin Hayman

We are desperately trying to rebuild British business after the financial crisis. Against that backdrop, you would think that an update to archaic anti-bribery laws that brings us into line with international standards and protects our business interests would pass off smoothly.

Passed last April with cross-party consensus, the Bribery Act underwent extensive consultation with business and NGOs before going through with support from the commercial sector.

So one wonders why it has since been the subject of so much grumbling over its supposed complexity or stringency, and has now been twice delayed by the coalition Government, this last time with no clear timeframe.

The Act is critically important to Britain’s overseas interests and reputation, bringing us into line with our international counterparts and creating a level playing field for our investments.

It is acutely embarrassing that since 1998 the US has seen fit to levy fines totalling $477.5 million, on UK companies that we have failed to properly regulate. Quite apart from what this does for our ethical standing, revenues on this scale would be very welcome to the Treasury.

The latest delay now seems likely to damage our commercial interests, too.

This week’s postponement drew threats of an export “blacklisting” for UK companies by members of the Organisation for Economic Co-operation and Development. Its patience is “running out fast”, according to Professor Mark Pieth, of the OECD’s anti-corruption group, whose stinging criticism a few years ago helped to prompt the new law.

Stopping bribery is not just a matter of principle – corruption destroys lives.

Bribery of foreign public officials means revenues that could be used for development are wasted on unnecessary, inflated and poor quality procurement projects.

This poses a risk to education, health and life where essential services are denied funding.

Bribery also encourages an environment in which embezzlement and other forms of corruption can flourish. And in these straitened economic times, it’s hard to tell the UK public to spend millions on overseas aid – one of the few areas of spending protected against cuts - when we are undermining development and subverting democracy in poor countries by permitting companies to bribe.

As with any law, this one will be subject to judicial discretion and common sense when implemented.

Contrary to some of the more breathless claims in recent coverage, companies will be allowed to continue to provide proportional hospitality to potential clients without fear of prosecution. Likewise, they deserve reasonable guidance from the Government in adjusting to the new law’s requirements – but this cannot be used an excuse for failure to react or to see the Act watered down.

Having known about this law’s arrival for several years and undergone consultation before its passage, companies have had plenty of time to prepare.

Indeed, as Richard Alderman, of the Serious Fraud Office, pointed out yesterday this latest delay actively disadvantages those companies that have made efforts to bring themselves into line with the new standards – hardly the best advert for the Government’s supposed new era of transparency.

Let us remember, also, that bribery by companies is only one aspect of corruption, which can also be fuelled by failure to disclose payments made to governments for natural resources.

The coalition Government has created a strong national transparency agenda. Transparency is at the heart of the other necessary step to tackle corruption: a law requiring disclosure of payments made to foreign governments by extractive companies, to mirror the recent US legislation and create a better business environment in many of the world’s most fragile countries.

But in the meantime, successful implementation of this much-needed bribery legislation is the first real test of the coalition’s ability to walk its talk on corruption, and so far things are not going well.

The author is the director of campaigns at Global Witness, which investigates and campaigns to prevent natural resource-related conflict and corruption and associated environmental and human rights abuses

First published in, and reproduced with permission of, The Times on February 3rd 2011 www.thetimes.co.uk

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Help save the Bribery Act!

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Thursday, 20 January 2011

The London Evening Standard and a minority of business interests have been pushing the Government to dilute or scrap the Bribery Act in recent weeks. It’s a crucial law that would close loopholes that allow bribery and breed corruption. The Standard’s editorial campaign is riddled with misinformation, even arguing that it would "strangle commercial activity."

We cannot let them get away with arguing that commercial benefit is more important than the nation’s integrity, or the lives of the world's poorest and most vulnerable.

Followers of this blog will know that TI-UK has been pressing for speedy implementation of the Act – undiluted by concessions to misguided special interests.  We and other NGOs are meeting Justice Secretary Ken Clarke on Monday (24 January) to argue the case. But we need as much support as possible to ensure the government stays strong in the fight against corruption. 

Please write to Ken Clarke now in support of the Bribery Act. Go to http://www.globalpovertyproject.com/campaigns/briberyact where there’s a letter you can customise and send.

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Don't dilute the Bribery Act!

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Thursday, 30 September 2010

The Bribery Act was passed by parliament in acknowledgement that corruption is one of the world’s great evils.  The victims are usually the poorest of the poor, living in countries where corruption has undermined the rule of law, the economy and the provision of basic services like health, education and sanitation.  When a company pays a bribe, it makes corruption worse.   Perversely, that only escalates the cost of doing business there, both for the bribing company and other companies.

However, siren voices have already been raised claiming that aspects of the Act will be a ‘bureaucratic nightmare’. Questions are also being asked on whether companies should be made responsible for bribery by their commercial partners.  I would not be at all surprised if we soon hear protests against the Act’s sensible ban on so-called facilitation payments, on the grounds that small bribes to petty officials is the only way to do business in some environments.   

The Government’s draft guidance on how part of the Act will be implemented, published on 14 September, appears to be a good effort towards clarifying difficult areas.  Most UK companies want to conduct business ethically and it is important to address concerns about how certain provisions of the Act may affect legitimate business activity.  The problem is that unscrupulous companies pay bribes sometimes disguised as corporate hospitality or promotional expenditure.  This creates an awkward situation for companies that want to make reasonable, proportionate and bona fide expenditure on such activity.  I hope we can find a constructive solution that addresses their concerns. I do not believe the answer is to seek an amendment of the Act because this may weaken it in ways that would be exploited by dishonest companies.  TI-UK supports the Bribery Act as it stands.

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Corruption should not derail UN Millennium Development Goals

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Thursday, 02 September 2010

Last month I attended an international conference to discuss Transparency, Free Flow of Information and the UN Millennium Development Goals (MDGs), agreed in 2000. Many delegates expressed concern about how corruption and weak governance may derail the MDGs.  Transparency International’s own research shows, for example, that corruption would inflate the cost of attaining the MDG on water and sanitation by more than US$48 billion.  Later this month, a summit of world leaders in New York will assess progress in attaining the MDGs by 2015.  Transparency InternationaI is campaigning for the summit to recognise the importance of tackling corruption in efforts to accelerate progress.  We are also asking governments to commit to: 1. Providing timely, credible information on public resources spent on MDGs.  2. Strengthening access to information laws and other transparency measures that help citizens to hold governments to account. 3. Participating in the International Aid Transparency Initiative in order to have an international standard for transparency in all aid flows. 

 

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Fear of misuse of funds should not halt humanitarian aid to Pakistan

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Wednesday, 18 August 2010

Nature’s fury has made millions of poor Pakistani citizens victims of one of this century’s worst humanitarian disasters. That tragedy would be compounded if fears about corruption were to reduce aid from the UK government and public. Transparency International UK and our colleagues in Transparency International Pakistan believe the answer is to have adequate safeguards for greater transparency, monitoring and accountability in the disbursement of emergency relief as well as aid for longer-term reconstruction efforts. Also, citizens should be involved in decision-making, those reporting corrupt behaviour should be protected, and the corrupt punished. Corruption should not be a reason for withholding aid in desperate humanitarian crises. Transparency International’s handbook for dealing with such crises (http://www.transparency.org/news_room/in_focus/2010/hum_handbook#1) and recommendations of 8 February 2006 http://www.transparency.org.pk/documents/Transparent%20Use%20of%20Earthquake%20Reconstruction%20Funds%20Workshop%20Report.pdf show how corruption risks can be reduced so that aid reaches those who need it most.

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Trade should not trump ethics

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Thursday, 05 August 2010

Diplomats to become UK plc’s salesmen as trade trumps politics’ reports the FT (5 August). But trade should not trump ethics.  In carrying out their new commercial duties, British diplomats should ensure that business is conducted ethically.  In fact from April next year the new UK Bribery Act will insist on it – with zero tolerance for bribery for all UK companies. Diplomats in the field could also help UK exporters resist demands for bribes and expose those companies that pay bribes to win business. So much fairer for honest exporters.

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Finally some good news!

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Wednesday, 28 July 2010

Last week, it was depressing to hear the government announce a delay in the implementation of the new Bribery Act until April 2011. Today, there is some good news! Transparency International’s annual assessment of compliance with the OECD Anti-Bribery Convention shows that the UK is now one of seven countries that are actively enforcing the Convention. The number of cases brought in the UK is up from zero in 2008 to 10. But three things are essential to maintain this positive momentum: 1. The Bribery Act must not be weakened before it takes effect. 2. More resources should be devoted to anti-bribery law enforcement. 3. The 20 OECD parties to the convention who have done virtually nothing to enforce it should face strong international pressure to raise their game, so leveling the playing field for the active enforcers.
See TI’s assessment at http://transparency.org/news_room/latest_news/press_releases/2010/2010_07_28_oecd_progress_report

Last week, it was depressing to hear the government announce a delay in the implementation of the new Bribery Act until April 2011. Today, there is some good news! Transparency International’s annual assessment of compliance with the OECD Anti-Bribery Convention shows that the UK is now one of seven countries that are actively enforcing the Convention. The number of cases brought in the UK is up from zero in 2008 to 10. But three things are essential to maintain this positive momentum: 1. The Bribery Act must not be weakened before it takes effect. 2. More resources should be devoted to anti-bribery law enforcement. 3. The 20 OECD parties to the convention who have done virtually nothing to enforce it should face strong international pressure to raise their game, so leveling the playing field for the active enforcers.  

See TI’s assessment at http://transparency.org/news_room/latest_news/press_releases/2010/2010_07_28_oecd_progress_report

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A long wait for the Government Guidance

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Wednesday, 21 July 2010

The Bribery Act’s key provisions only come into force after the Government has issued official guidance to companies on what constitutes ‘adequate procedures’ for compliance with them.  Companies face potentially disastrous financial and reputational consequences if they fail to prevent bribery and should therefore ensure that they have sound anti-bribery systems.  News that the official guidance won’t be ready until early next year because of yet another consultation process means that the Bribery Act won’t come into force until April 2011. There’s no reason effective guidance could not have been published in time for the Act to commence in 2010. Now there’s a danger that under the guise of ‘consultation’, attempts may be made to water down the Bribery Act. Meanwhile, the victims of corporate bribery, usually the poorest people in the poorest countries, will continue to suffer.

In the meantime companies - especially those with non-existent or weak anti-bribery systems - need to act swiftly.  After all, changing an organisation’s culture can’t be done overnight. In the absence of the long- promised official guidance, TI has today published its own guidance for companies to help them establish robust anti-bribery systems and get a ‘head start’. Our guidance is based on well-established principles and tools that companies all over the world are already using to benchmark their anti-bribery systems.  We would welcome feedback from companies on the TI Guidance.

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