This is the third part in our blog series about defence corruption risks leading up to the launch of our Government Defence Anti-Corruption Index.This time, our Programme Office Manager Tamas Godo looks into how your money can be wasted by defence.

An effective national security system largely depends on a well-functioning defence and security sector. The complex defence sector is an essential institution to guarantee our safety. However, for many people, the real dynamics and dangers of the defence sector go unnoticed, and the concept of providing protection against external threats is frequently undermined by inflammatory headlines on pricey defense scandals. These scandals all have to do with money and the manipulation of defence budgets. These budgets are made up of tax payers’ money, your money. In fact, year after year many governments allocate enormous amounts of money to security and defence purposes in national budgets, which may be an easy target for corrupt officials.

Defence corruption risks involving money can take various forms:

Financial risks in the defence and security sectors frequently include the disposal of surplus assets. This process could relate to the disposal of military resources such as armoured vehicles, aircrafts and helicopters, or less obvious economic resources including buildings and even land that belongs to the military. Corruption in asset disposals is likely to happen during the sale of such valuable resources or by the misappropriation of these resources when, for instance, a military is downsizing. The case of Ukraine is vivid example of corruption in asset disposals. Left with large stockpiles of military equipment at the end of Cold War, of the $89 billion worth of military equipment, a massive $57 billion went missing. This equipment eventually resurfaced in critical conflict zones including Angola, Sierra Leone or Iraq, which perpetuated conflict by illicit means.

The oversight and monitoring of national defence budgets is another critical area where corruption can rear its ugly head. Civil oversight of defence budgets, which should serve as the basis for democratic control of governments and armed forces, can be easily impaired by secrecy and opaque financial practices. These practices make it easier for public officials and officers of rank to misuse defence budgets, creating a common problem area in defence corruption. It is fair that some degree of secrecy will always be necessary. However, in many nations defence budgets are not published at all and citizens have very little or no information on how the government spends their hard-earned money. This is supported by the findings of a report on Defence Budget Transparency, which ranked 93 countries according to their defence budget transparency and accountability, and found that nearly 65 per cent of countries studied have only moderate transparency in their defence budget or below. These alarming signs demonstrate serious risk of poor budget transparency.  According to the report, citizens of developing and least developed countries are affected most, and bad practices seem to be the rule, not the exception. More surprisingly, European Union and NATO countries can be rife with such poor controls.

The ownership of businesses by the military and the existence of illegal private enterprises run by, or associated with defence personnel are other sources of financial corruption risks. On the latter, imagine if military personnel gain income from state-owned assets but misuse them to pay inflated fees to their associates for services; for instance, in a form of phony consultancy fees. Such dealing may also involve a kickback at a later stage. The circle of corruption closes in and the case of corrupt conduct becomes evident. Read more.

Read the full blog 'Financial defence corruption risks: How your money can be wasted' at Reuters TrustLaw.

Learn more about our Governments Defence Anti-Corruption Index, to be launched on 29 January 2013.

Read more about Our Work and Focus Areas.

Read other blogs we've written.