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Transparency International (UK) Press Release
April 25, 2002

Arms Trade Rife With Corruption

A report published today by Transparency International (UK) urges the Government to take effective steps to limit corruption in the defence industry. TI(UK) estimates that the official arms trade accounts for 50% of all corrupt international transactions. A conservative estimate of the level of commissions paid is 10%, in an industry worth $40bn a year.

TI(UK) Chairman, Laurence Cockcroft, says, “It is clear that corruption plays a significant role in influencing arms procurement, but despite repeated scandals this situation has been largely ignored by governments, NGOs and academics.”

Under the new Anti-Terrorism Act, which came into effect in February this year, the bribery of foreign officials is now a criminal offence. TI(UK) argues that the enforcement of this law in the defence industry needs to be addressed specifically and separately from other industries in recognition of its unique structure and the nature of the environment in which it operates.

The national security dimension to all arms transactions shrouds procurement decisions in secrecy and gives exporting governments a strong incentive to ignore the commissions paid to secure contracts.
The impact of corruption in the official arms trade is potentially more devastating than that of corruption in any other trade. Large commissions paid to importing officials encourage the purchase of unnecessary weapons, which can contribute to regional insecurity and prolong conflict. For the many developing countries that account for 60% of global arms imports, such corruption diverts resources away from pressing socio-economic needs and undermines attempts to develop good governance.

The TI(UK) report contains a number of recommendations, including;

Making export licences and public subsidies for manufacturers of arms exports conditional on the production of contract specific “no-bribery” warranties, reinforced by robust internal compliance procedures;
Increased parliamentary scrutiny of the official arms trade in both exporting and importing countries;
An international industry-wide Anti-Corruption Code of Conduct;
Implementing the Transparency International Integrity Pact (a binding no bribery agreement between all bidders in a public contract) in arms procurement contracts; and
Banning offsets (the practice whereby exporting companies commit to investing in local enterprises as part of the contract).

Full copies of the report can be downloaded from here: www.transparency.org