Diagnosis Print

An accurate diagnosis is essential for effective action. The Transparency International defence team believes it is reasonably straight-forward for interested parties - defence officials, defence companies, parliamentarians and the public - to make a diagnosis of the defence and security corruption risks in their country.

The diagnosis starts from an understanding of the different sorts of defence corruption, then looks at the vulnerabilities in each of these areas of risk. The analysis then needs key facts and figures to identify the areas of greatest financial concern. There are a number of well-identified specific vulnerabilities: democratic control, procurement, offsets, agents, property, and pay.

Corruption is a very broad concept which covers a wide range of different activities from the small and personal all the way up to state capture. In order for governments, companies, legislatures, and civil society to make progress in tackling corruption in the defence sector it is vital to have a break-down of these different types of corruption. Our typology defines three broad types of defence corruption: political context and control, procurement, and other vulnerabilities.

An overview of defence sector corruption risks and the reasoning behind why these vulnerabilities are present and particularly significant for the sector.  These include the necessity of democratic control, characteristics of defence procurement, offsets, agents and intermediaries, and competition.

A good understanding of the money flows is one of the elements of diagnosis. This page presents an overview of the defence trade, suppliers, companies and recipients.

Democratic control
Democractic civilian control of the defence sector is necessary to ensure accountability of the armed forces, to instil an ethos of transparency in the sector, and to prevent the abuse of public trust for private gain. Key areas are procurement, budgeting and public financial management, and policy.

Procurement, characterised by large, infrequent, and technically complicated contracts, is hard for non-experts to comprehend.  Challenging equipment specifications is a highly technical task. Vast sums of money, limited transparency and accountability, and the temptation by defence officials to profit illicitly from defence procurement can contribute to the corruption of the process.
Procurement is cited by defence officials as the area in which corruption is greatest in the sector. It is also the one where there is the largest range of anti-corruption tools to address the problem.

Offsets are compensation arrangements in international defence contracts whereby the supplying company agrees to provide additional investments in the host country's economy. The additional investment may be in the form of local sub-contracting or assembly, or it could be unrelated to the main contract.

They are widespread in the defence sector, despite being heavily restricted by international trade law in most areas of international business. Offsets are generally poorly regulated and may represent a substantial corruption risk without safeguards on the parts of governments and companies to monitor, evaluate, and ensure performance on offsets contracts.

The use of agents and intermediaries is widespread in the defence sector. Agents, intermediaries, and other third parties are often the conduit through which bribes are paid, both in defence and elsewhere.  Companies should use stringent vetting procedures and controls when hiring agents and intermediaries, and should disclose the identities of intermediaries and their contract arrangements and payments to the procuring authority on specific bids.

Single soure procurement is a significant corruption risk in defence procurement. There is a remarkable lack of competition in defence procurements in many countries. Transparency International's research suggested that in a dozen major governments, some 50% of all defence procurements were being carried out through single source and not competitive procurement. The result was similar whether looking at number of procurements or value of procurements.

Property and pay
The sale of defence assets, both property and second hand or surplus equipment, is an easy area of abuse by defence officials. It is often subject to poor controls, under-resourced, and with no public accountability department.

Military pay is at risk in several areas. First is the well-known problem of 'ghost soldiers', soldiers who are declared to be on the pay-roll but who do not exist. Second is the diversion of the weekly pay-roll by senior officials.