Following the release of Transparency International's report into due diligence and corruption risk in defense offsets Blenheim Capital announced it provides its full support to the report's recommendations and calls on all parties involved in offsets to work together to help offsets reach their full potential.

The report, based on interviews with 27 market participants has seven core findings and eight recommendations outlined below and targeted at each set of actors in offset transactions. At the heart of the findings is the need to have a detailed understanding of all parties involved in transactions, and processes and policies in place to ensure each party takes a pro-active approach to supporting full transparency.

Speaking of the recommendations Grant Rogan, Founder and CEO of Blenheim Capital Services Limited said:
“Well structured and managed offset programmes can provide significant benefit to procuring countries, as well as establishing long term relationships that support future sales by OEMs. We believe that for offsets to achieve their full potential there needs to be increased transparency throughout the process and welcome Transparency International’s report.

At Blenheim we have actively sought regulation from ITAR and FCPA to being authorised and regulated by the FSA. We are proud that our due diligence questionnaire is being held up as a best practice example, and call on all parties involved in offsets to take up the recommendations outlined.”

The key findings are:-

Offset due diligence practice is improving. Substantial variations in practice exist There are many examples of good practice Verification is the most troublesome area Scrutiny of offset corruption risk needs to be integrated into normal business conduct and compliance practice Governments should require more stringency and transparency in offset programmes Industry associations need to be more proactive

The key recommendations are:-

For defence companies

Recommendation 1:

Defence companies should review their own offset due diligence practices against the status described in this review, particularly in relation to the more difficult issues of verification and red flags

Recommendation 2:

Companies should ensure that contracts are clear in allocating responsibility for conducting due diligence.

Recommendation 3:Sub-contractors, brokers and other intermediaries and advisers should be required in their contracts to disclose to the obligor all information material to the offset programme, specifically including potential corruption related observations or concerns.

Recommendation 4:

Companies should ensure that their corporate compliance and business conduct policies explicitly include reference to responsibility and requirements for offset arrangements.

For service providers:

Recommendation 5:

Service providers who provide due diligence services, especially those who provide verification on red flag issues and on-the-ground investigators, should be encouraged to develop lowercost services for smaller companies.

For industry associations:

Recommendation 6:

Industry associations such as ASD, AIA, IFBEC, GOCA and DIOA should advise their members to review their offset due diligence practices, and provide them with guidance on good practice.

Recommendation 7:

Industry associations should find ways to encourage governments to strengthen their transparency and public reporting requirements. They might consider providing a checklist that government officials could use, specifying transparency, reporting and audit requirements. This checklist would set a good template that governments could follow. Or, they could facilitate an international forum that brings together company experts and
government offset officers.

For governments:

Recommendation 8:

 Governments could have a major impact in reducing corruption risk in offset programmes. They should review their policies and procedures so as to make their offset institutional frameworks more robust, more transparent and with greater public reporting

Full Report HERE