Financial News

  • 4 February 2014, 10:33

UK Defence Firms 'Vulnerable' To Corruption

Britain's defence industry remains "vulnerable" to the risk of bribery of foreign officials, according to the first ever European Union report on corruption.

It said corruption affects all EU nations and costs the economies a combined £100bn a year.

The report, compiled by European Commissioner Cecilia Malmstroem, said: "In the United Kingdom, petty corruption does not appear to pose a challenge.

"Moreover, the UK has made strides in encouraging its companies to refrain from bribing officials abroad, through stringent legislation and detailed guidelines.

"Traditionally, the UK promotes high ethical standards of public service. However, to ensure continued success, further efforts are necessary to address risks of foreign bribery in vulnerable industries such as defence."

But the report also said transparency should be improved in corruption cases settled out-of-court.

The Bribery Act covers corruption within Britain and also offers jurisdiction over bribing foreign officials abroad, whether by a UK national, foreign resident or UK registered business.

British and mainland European firms have also fallen foul of the strictly-enforced United States' Foreign Corrupt Practices Act (FCPA).

European companies fined in the US in recent years include Siemens ($800m), Total ($398m), Snamprogetti/ENI ($365m) Daimler ($185m) Alcatel-Lucent ($137m) and Deutsche Telekom's Hungarian offshoot ($95m).

The EU findings also recommend Britain impose a cap on political party donations and impose limits on electoral campaign spending "and ensure proactive monitoring and prosecution of potential violations".

The report also included polls on EU citizens' perception of corruption and found 64% of UK respondents believe that corruption is widespread in Britain, compared to an EU-wide average above 75%.

More than 80% of respondents in Ireland, 97% of Italians and 99% of Greeks said corruption in their home country was widespread.

While only 25% of people in Europe said they were affected by corruption in daily life, 63% of Spaniards said they were - the highest rate in the EU. In Luxembourg, where a number of multinational firms have based their European financial hubs, 42% of respondents said corruption was widespread.

But the small nation was prompted to improve rules on conflicts of interest, public access to information and resources used to combat financial and economic crime.

Ms Malmstroem said of the blight of EU bribery: "Corruption undermines citizens' confidence in democratic institutions and the result of law, it hurts the European economy and deprives states of much-needed tax revenue.

"Member states have done a lot in recent years to fight corruption, but today's report shows that it is far from enough."

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