A government body sat on clear evidence of corruption by Airbus for more than a year before raising the alarm, documents reviewed by SourceMaterial show
Earlier this year the aeroplane-maker paid a record €3.6 billion to settle corruption allegations in the UK, France and the US. The investigation was first triggered by a curious exchange of emails between Airbus employees and UK Export Finance (UKEF) officials, which raised the possibility Airbus was paying $17 million to the wife of an executive of Sri Lanka’s national airline in return for securing orders for its aircraft.
Despite UKEF officials’ suspicions being aroused in February 2015, civil servants did not pass on the matter to the Serious Fraud Office for more than 13 months, until after Airbus had been allowed to carry out an internal investigation. Companies that proactively report themselves after uncovering wrongdoing are treated more leniently and Airbus was praised by the judge for the manner in which it co-operated with the SFO.
“It raises the whole question about UK Export Finance, which is does it act in the public interest or does it act in the commercial interest of its clients?” said Robert Barrington, professor of anti-corruption practice at Sussex University and former UK head of the campaign group Transparency International. “It can never be in the public interest to avoid reporting law-breaking by a large company.”
Airbus had been hoping to secure from UKEF a loan guarantee for its customer, Sri Lankan Airlines. UKEF’s role is to bolster British trade by helping to provide financing for UK exporters and their customers or by stepping in to help if an overseas buyer defaults on payment.
Under the Proceeds of Crime Act, private companies are obliged to report suspicions of money laundering as soon as possible through a “suspicious activity report” (SAR). But UKEF told SourceMaterial that it does not fall under the SAR regime, which means that one of the government’s key commercial agencies has less arduous bribery compliance requirements than a high street solicitor or accountant.
Questions about UKEF’s anti-bribery controls come as the government faces criticism for its backing of fossil fuel projects. Since 2010 UKEF has financed £7bn of oil and gas projects, which studies suggest carry increased corruption risk.
“This episode raises serious questions about UKEFs commitment to tackling international corruption,” said Adam McGibbon of campaign Global Witness. “UKEF believe that ethical and environmental rules don’t apply to them.”
Barrington, at Sussex University, said that UKEF’s backing for fossil fuels and its chequered history in tackling corruption were examples of it acting within a narrow commercial framework while contradicting other government policies. “The government has a target of zero net carbon emissions and yet UK Export Finance continues to support non-sustainable fossil fuel investments around the world”, he said.
Airbus had asked that its request for financial assistance from the UK government was treated using a “special handling process”, a controversial system UKEF had in place for protecting the identities of confidential agents or intermediaries.
This secrecy procedure effectively represented UKEF turning a blind eye to corruption by its customers, campaigners say. The special handling process was requested by clients six times in the three years to April 2017 and granted by UKEF each time, UK said in response to a Freedom of Information request by SourceMaterial.
The process was discontinued in April 2017, three months after Rolls-Royce, a major UKEF client, paid £671 million in penalties as it admitted corruptly using agents in episodes of “egregious criminality” between 1989 and 2013. Some of those corrupt deals, including the sale of gas compression technology to Gazprom, received UKEF backing, prompting a UKEF investigation.
UKEF has refused to disclose to SourceMaterial how many times it has passed on suspicions of wrongdoing to the relevant authorities, arguing that disclosure would risk identification of clients despite giving its backing to more than 100 entities a year.
UKEF did however reveal that it had reported suspicious activity fewer than ten times between 2015 and 2019, a period in which it backed £14 billion of business often in high-risk jurisdictions
Airbus’s ill-fated request for assistance from UKEF for the Sri Lankan Airways deal came in 2015. The wife of a Sri Lankan Airways executive had set up a straw company in Brunei to receive commission for the purchase of ten Airbus aircraft and the lease of four more.
When UKEF raised a concern that the agent shared a name with the wife of the Sri Lankan Airways executive, Airbus’s employees lied and said the agent was a male with a similar name. On February 13, 2015, UKEF asked follow-up questions and received a reply that referred to the agent as both a “he” and a “she” and failed to mention a second commission agreement.
UKEF’s questions prompted unease at Airbus, with one employee writing to another on March 2 that “the truth is most unfortunate”. Ten days later Airbus withdrew its request for export credit financing.
Yet it was not until Friday April 1, 2016, that UKEF, alongside Airbus, reported its concerns to the SFO. On the Tuesday after the tip-off the SFO met Airbus executives.
In a judgment handed down earlier this year Dame Victoria Sharp praised Airbus’s “exemplary” cooperation with the SFO investigation after a “slow start”. She also added that it was a “credit” to UKEF’s “watchfulness” that its questions triggered the investigation, without alluding to UKEF’s role in the delay in the investigation.
Picture: by Kitmasterbloke, licensed under Creative Commons.