August 9, 2022, Washington, DC - Regulatory oversight of the private military and security sector is failing to keep pace with the rapidly growing and diversifying industry, leading to heightened global risks of fraud, corruption and violence, according to a new report from Transparency International Defense and Security.

This is happening at the same time as the U.S. administration has committed to strategically reducing corruption as a national security priority.

With the U.S.-led missions in Afghanistan over, U.S. and foreign contractors are increasingly seeking to expand their sales of surveillance, armed security and military training to many countries around the world that have critically weak protections against defense sector corruption.

Hidden Costs: US private military and security companies and the risks of corruption and conflict reveals that 80 per cent of sales by these U.S. firms are to non-U.S. and non-NATO countries – a far higher percentage than previously thought.

The report exposes the many flaws in the U.S. government’s regulatory framework and provides a stark overview of the associated risks and costs.

Recent examples of the consequences of these failures of oversight include:

• Former U.S. intelligence officials working for an Emirati intelligence contractor, DarkMatter, helped spy on foreign and domestic critics of the UAE, including American citizens.
• The U.S. State Department approved a contract for the combat training of Saudi operatives by a U.S. security company PMSC called Tier One Group. These operatives were later involved in the savage murder of Washington Post journalist Jamal Khashoggi.
• A former CEO of a major U.S. private security company pleaded guilty to bribing Nigerian officials on behalf of the company for a $6 billion contract to develop hydrocarbon infrastructure in the conflict-affected Niger Delta.
• An American private security company partnered with an Iraqi official who moved over $170 million outside of Iraq in 2009 through an elaborate corporate mechanism that a financial services provider found “suspicious”.
• Former senior U.S. military personnel were employed by the UAE to support its foreign military operations or activities in Yemen, Libya, and Somalia – including evidence that a former U.S. lieutenant colonel served as the commanding general of the UAE’s combat helicopter wing. 

Colby Goodman, a consultant to Transparency International Defense and Security and co-author of the report, said: “The U.S. government’s sluggishness in responding to this industry is rooted in an emphasis on controlling the export of technology without a sufficient emphasis on services and on supporting industry self-regulation. The United States needs to urgently re-evaluate and close the loopholes that allow Americans to engage in combat activities, surveillance and armed security abroad without proper U.S. government oversight.”

American companies currently control a leading share of the $224 billion global private military and security company (PMSC) industry. The value of the American industry’s annual sales is predicted to grow to more than $80 billion in the near future. The global industry is expected to expand to $457 billion.

Some of the largest U.S. PMSC companies score poorly on their overall commitment to anti-corruption and corporate transparency, including their commitment to reduce corruption in supply chains, agents, conflicts of interest and political contributions. 

Regulatory loopholes and gaps in U.S. oversight include:

• Holes in U.S. export regulations that make it easier for U.S. companies or contractors to provide combat training, armed security and spying for foreign police and intelligence agencies without U.S. government approval.
• Weak laws and regulations aimed at preventing U.S. companies or individuals from engaging in direct combat activities abroad or using their previous U.S. military training and expertise to assist corrupt regimes.
• Critical PMSC controls that are limited by a lack of high-level coordination, with different U.S. agencies maintaining different controls and different degrees of oversight.
• Chronic under-training and under-staffing following job reductions made in the Defense Department between 2017-2020, inhibiting the ability of US agencies to hold contracted PMSCs fully accountable.
• Limited number of countries supporting and implementing multi-lateral agreements on private and military security companies.

Transparency International Defense and Security is calling for a series of urgent U.S. government initiatives to rein in PMSC activity. These include:

Tighten export laws and regulations to allow for better oversight of U.S. companies or persons providing direct combat activities, surveillance, armed security and police training.

Appoint new senior-level officials in the Defense and State Departments to improve oversight and coordination of PMSC contracts with the US government.

Strengthen congressional oversight of U.S. companies or individuals providing PMSC services abroad through increased reporting on these companies’ sales from the State and Commerce Departments. 

Improvements to Defense and State Departments’ processes for vetting subcontractors involved in PMSC contracts with the U.S. and foreign governments.

Better guidance documents from the State Department and enhanced training for the State and Defense Departments to more effectively recognize U.S. contractor corruption.

Michael Picard, a Transparency International Defense and Security research fellow, and co-author of the report, said: “The increasing use of private military companies by unsavory governments – including U.S. adversaries – is deeply worrying. The U.S. Government has a large stake in this issue, partially because it has normalized such companies, and also because it is well-positioned to be a leader in PMSC regulation. It should address this international issue by taking strong action at home.”

Media Contacts:

Gary Kalman, Executive Director, Transparency International U.S.

[email protected]

Barney Cullum, Global Media and Communications Manager, Transparency International.

[email protected]

Notes to Editors:

Transparency International’s Government Defense Integrity (GDI) index scores countries according to the risk of corruption in their defense institutions. The UAE was ranked E, indicating a very high risk. The GDI includes country rankings for many other US security partners.

Transparency International’s Defense Companies Index (DCI) scores top defense companies around the world based on their commitment to anti-corruption and corporate transparency. The DCI includes scores on more than 30 US companies.