Today’s Guest Post is by Colby Goodman, a Senior Researcher with Transparency International US and Defence and Security. His research focuses on corruption risks within the international arms trade and other forms of defense sector corruption. 

That corruption permeates the international arms trade is no surprise to readers of Transparency International reports (here), business executives (here), or investigative reporters (here, here, and here). What is a surprise is that the U.S. House of Representatives is considering weakening the measures the U.S. government has put in place over the past decades to prevent U.S. companies from becoming entangled in corrupt dealings.

This Tuesday, February 6, the House Foreign Affairs Committee will discuss a bill to significantly decrease the number of proposed U.S. arms sales that would require congressional review before proceeding. The bill would increase the dollar threshold that require  the Defense and State Departments to notify Congress of a planned sale. It follows a US defense industry lobbying campaign to speed up the process in delivering U.S. weapons and so make their purchase more commercially attractive. But at the cost of weakening key U.S. government efforts to curb corruption in U.S. arms sales.

To its credit, in early 2023 the Biden Administration  updated the government’s Conventional Arms Transfer policy to “ensure that arms transfers do not fuel corruption or undermine good governance, while incentivizing effective, transparent, and accountable security sector governance.”  This policy followed its Countering Corruption Strategy, where  the U.S. government pledged to start “reviewing and re-evaluating criteria for government-to-government [security] assistance, including around transparency and accountability.”  These actions recognized the significant harm to U.S. national security that comes from pervasive corruption in partner countries and the need to mitigate corruption risks within the U.S. defense industry.  

Detailed below are four key critical corruption checks that would be undermined by the proposed bill.

Curbs Key Congressional Reviews of Arms Sales that Could be Used for Repressive or Other Unintended Purposes

Congress plays a pivotal role in spearheading internal and public risk assessments, including the risk of corruption, for proposed arms sales.  Its reviews of a proposed sale commonly result in modifications or cancellations to at least one or two of the proposed sales it reviews each year, according to one senior congressional staffer.  Reviews have resulted in cancelling  sales to presidential or royal guards out of concern that the U.S. weapons or security equipment could  be used to keep  repressive  governments in power.  Notifying Congress of a potential sale gives it the opportunity to review any gifts or contributions the selling company made to a foreign official or political party (see more information below).  By increasing the dollar value threshold from $14 million to $23 million for non-NATO countries and from $50 million to $83 million for NATO and other key ally countries, the bill would impair Congress’s ability to perform these critical roles for proposed sales below these new thresholds. 

Limits U.S. Interagency Anti-corruption Checks of those Best Situated to Identify Risks

The State and Defense Departments regularly engage in more vetting of proposed arms sales that require congressional checks than sales that don’t require such checks.  The State Department Bureau responsible for the region where the buying country is located, and its International Narcotics and Law Enforcement and Democracy, Human Rights, and Labor bureaus as well as other offices may have valuable insights on corruption risks in sale destination countries.  These bureaus, for instance, can flag specific government or military personnel that have a reputation for corruption that could lead to the diversion of U.S. weapons.   They could also identify individuals that could use U.S. weapons or military know-how for the political capture of valuable economic resources for their private gain.  But these bureaus are not regularly consulted about sales when the law does not require Congress be notified in advance of the sale.

Complicates Reviews of U.S. Defense Company Political Contributions to Foreign Parties

The State Department requires U.S. defense companies to disclose whether they have provided any political contributions, marketing fees, and commissions in connection with proposed arms sales, information useful for identifying any suspicious payments. Former U.S. government officials involved in overseeing commercial arms sales under the Clinton administration said they used these disclosures to stop violations of the U.S. Foreign Corrupt Practices Act or other questionable activities.  However, the State Department is currently considering (see Part 130) a regulatory change that would require companies to  disclose this information annually instead of for each individual sale, except for proposed sales that require congressional notification..  The proposed change is aimed at improving defense companies’ poor record of reporting.  But a decrease in congressional notifications may limit the State Department efforts to prevent corruption connected with a major arms sale.  

Prevents Congressional Scrutiny on Defense Side Deals (aka Offsets) that May be Used to Evade Anti-Bribery Laws

The Defense and State Departments are required to notify Congress of any side deals associated with a proposed arms sale.  Termed “defense offsets,” the seller agrees to some sort of venture with an enterprise in the purchasing country as a condition of the sale. Examples range from simply investing in a company to hiring it as a subcontractor to entering into a co-production agreement.

Offsets are particularly vulnerable to corruption as they are frequently used as a critical and uniquely flexible inducement to win a lucrative arms sale.  In India, the government’s Central Bureau of Investigation has been investigating at least three corruption cases “in which the offsets route was allegedly used to route payments to corrupt individuals.” Many European countries are also developing and prioritizing new offset policies.  However, most U.S. partners and allies require U.S. defense companies to provide offsets for arms sales valued at $10 million or more.  This means Congress would be denied the chance to review defense offsets for deals between $10 million and the new dollar thresholds ($23 million and $83 million).   

U.S. Representatives and congressional staff reviewing this proposed bill should consider the above important checks on corruption.  Some of these checks may not be well known, and in the case of offsets are often confidential, but they are a critical bedrock of U.S. corruption risk assessments in arms sales.  These checks are also essential for the U.S. government new policy efforts to curb corruption in U.S. security assistance and arms sales.  Even with the current checks and dollar thresholds, there are still many gaps in Administration and congressional oversight of arms sales.  It is important to consider the risks of arms sales along with the potential benefits before making any dramatic changes in U.S. government checks on arms sales.

Congress should also consider the international implications of weakening U.S. controls on arms sales corruption. The U.S. is far the largest exporter of weapons and national security-related equipment. The Biden Administration’s decision to strengthen corruption-prevention measures is helping the push for tighter controls in other arms exporting nations. Does Congress really want to undercut those efforts?