According to a recent report by the anti-genocide group Enough, the combination of s.1502 of the Dodd-Frank Act, related international mineral reforms and the protection of brand reputations has resulted in a dramatic reduction in the financing of armed conflict in the Democratic Republic of Congo, the demilitarization of mines and renewed confidence in Congolese mining investment.
S.1502, which requires end-user companies to find out and report where their 3Ts (Tin, Tungsten and Tantalum) and gold minerals are from and to disclose whether or not the minerals funded armed groups, has made unvalidated extraction much less economically viable (between 30%-60%).
So far, the main driver for this would appear to be the need for international corporate end-users to demonstrate a clean source of supply. As this consideration does not yet apply to gold, it’s perhaps not that surprising that the results have so far proved less promising. The report refers to a U.N. estimate that 98% of “artisanal gold” is smuggled out of the Congo from mines operated by armed militias.
The report expresses considerable concern about current U.S. special interest lobbying efforts and litigation to remove and dilute the conflict minerals rule and fears that if either proves successful many of the positive developments in the last four years will unravel.
The report recommends that sanctions should be applied to traders of conflict gold, particularly, those in adjoining countries, the introduction of a Congolese gold formalization process and an expansion of conflict free mining projects.
In addition to the recorded improvements, the report quotes the 2011 conclusion of the UN Group of Experts that “The [Dodd-Frank] Act has had a huge impact on awareness and implementation of… due diligence guidelines both in the United States and globally”.
For all this to result from a lowly section, fourth from the end, is quite a remarkable legislative achievement.
A copy of Enough’s report is available here.
Alistair Craig is a commercial barrister practicing in London.