Arms manufacturers 'must do more' to speak out against corrupt practices

Two-thirds of firms do not make public adequate information about what they are doing

Some of the world's largest defence companies have failed to provide enough evidence about how they are tackling corruption in the arms trade – a problem that costs $20bn a year globally, a report suggests today.

An index compiled by the pressure group Transparency International UK shows that two-thirds of the companies do not make public adequate information about what they are doing to stop illicit practices. Firms in Europe and the US are among the worst performers.

However, the researchers found that important reforms have been carried out by large sections of the industry. BAE Systems, which has in the past been accused of making secret payments to obtain deals, is now one of the most open businesses in the sector and rigorous about trying to prevent malpractice, says Transparency International UK.

It compiled its Defence Companies Anti-Corruption Index after analysing the performance of the 129 biggest arms manufacturers, who have a combined worth of $10trillion. Most of the concerns approached co-operated fully with Transparency International, with 34 releasing internal information and many expressing a willingness to implement changes that would make their anti-corruption measures more effective.

However, the umbrella group for French defence firms refused to take part in the project – the only national body to do so – citing its dissatisfaction with the methodology employed.

The index divides the companies into six bands, with only Fluor Corporation, a US concern specialising in engineering and building, making it into the top Band A. BAE Systems, Accenture, Serco and Thales are among those in Band B, while Rolls Royce, Bechtel Corporation and QinetiQ Group are in Band C. The last group, Band F, includes Israel Aerospace Industries, Pakistan Ordnance Factories and Russian Helicopters.

Researchers were told that companies' emphasis on tackling corruption depended on the amount of pressure exerted from the top. However, the study found that 85 per cent of senior managers "did not speak up enough on the importance of preventing corruption".

The estimate of financial damage stemming from corruption is based on losses of public money through abuses such as overpayment for products, tax evasion and replacement costs for unsuitable equipment. The figure of $20bn a year is based on data from the World Bank and Stockholm International Peace Research Institute. "This equates to the total sum pledged by the G8 in 2009 to fight global hunger," the Transparency International report points out:

Nevertheless, Mark Pyman, the group's director, stressed that significant progress had been made on tackling corruption in the defence sector. "Many of the companies do take this seriously and they have engaged with us on this," he said. "This is not particularly easy in a commercial environment. They have had to get clearance at board level.

"The desire to have proper practices in place isn't just a Western one. The new manufacturing countries like Turkey, India and Malaysia have said they are willing to look at proposals."

The Labour peer Lord Robertson, a former Defence Secretary and head of Nato, said: "Companies must have a reputation for zero tolerance to corruption. A corruption scandal can wipe away the decades spent building a reputation."