4.1 Divergence of mission resources to criminal networks and to adversaries

Explanation of risk area

Contracting relationships not only create tangible financial flows, but also result in intangible, social and political links between mission forces and local service and goods providers. As local contracts become the sources of key supplies needed by the missions, financial, political and social relationships grow on that basis. They can be an important resource for local stakeholders, who can use them to build up their own political and economic position.

This can be helpful if it serves to differentiate the host nation power base and support change agents attempting to build resilient, inclusive governance structures. But reflexive and unscrutinised support of local powerbrokers who could supply land, building materials and labour force for the construction of military bases can also enable the creation of vertically integrated criminal syndicates, hollowing out security institutions and extorting the population. In Afghanistan, for example, the twin levers of financial and political support for local actors supported malign networks and effectively undermined ISAF’s ability to achieve its goals, including provision of security, stability and governance.

Examples

Case Study: Afghanistan: Corruption and the making of warlords

Gul Agha Sherzai and criminal patronage networks in Afghanistan

In the southern province of Kandahar, a close relationship between warlord and governor Gul Agha Sherzai and the forces of Operation Enduring Freedom enabled Sherzai to build up a privileged position in supplying labour and materiel to international forces, often at extortionate prices. At the same time, US political support and significant amounts of money allowed Sherzai to consolidate a political and economic empire in the province, feeding (often criminal) patronage networks and controlling the populations’ access to resources and jobs.

“In a few swift strokes, he made the desert bloom with American installations — and turned an extravagant profit in the process. He swiped land and rented it to U.S. forces to the tune of millions of dollars… He furnished American troops with fuel for their trucks and workers for their projects, raking in commissions while functioning as an informal temp agency for his tribesmen.”

Anand Gopal, No Good Men Among the Living

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Case Study: Afghanistan: Corruption and the making of warlords

Host Nation Trucking Contract: Afghanistan

The Host Nation Trucking contract, which as of 2009 covered over 70% of the US Department of Defense’s transport needs inside Afghanistan, quickly became a vehicle of illicit enrichment and had significant force protection repercussions. With at least $360 million available annually to each one of 8 contractors, the contract was a significant source of income and resources. Widespread subcontracting to unvetted companies with links to the insurgency; allowing companies to act as security-providing militia; and lack of response to reports of widespread bribery-for-passage schemes and contractors’ collusion with the insurgency created an opportunity for resources to flow to adversaries and in effect endanger the force.

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Indicators & Warnings

Refusal to divulge the identity of beneficial owners and/or company officers, i.e. those who draw benefits from companies and those who direct companies' actions.

Shareholders, owners or company officers who are, or have recently been, public officials

History of allegations and investigations against companies or individuals

History of companies or individuals being suspended or debarred by governments or international institutions

Overcharging for services - rates above reasonable/market rates

Reports of bribery and extortion

Requests for payments in cash or other untraceable instruments

Requests for payments to offshore companies

Requests for advance payments with no subsequent accounting for expenditure

Requests for additional payments or contract modification after the bidding process is concluded (it could indicate that the initial offer was under-valued in order to influence the bidding process)

Poor or no documentation for travel and other expenses

Use of ‘general purpose’ or ‘miscellaneous’ accounts/line items in budgets

Use of shell companies (no employees, no offices, little or no work history) and/or subcontractors whose role is unclear

Discrepancies between the details contained in bids and specifications in the final contract

Company refusal to agree to audits and/or adopt compliance measures

Contractor willingness to violate or evade laws

Attempts to explain misconduct by referring to ‘customs’ or ‘the way it is done’

Product substitution: products of lower quality than foreseen are delivered

One person or group becoming the key contractor and intelligence source at the same time