Anti-bribery investigations and enforcement actions involving international mining projects are breaking out all over.
In April, the U.S. DOJ charged six foreign nationals, including a Ukrainian businessman and a government official in India, with an alleged racketeering conspiracy to bribe officials in India to gain titanium mining rights.
The U.K. Serious Fraud Office said last year it had launched a criminal investigation of London-listed mining company ENRC plc.
“The sheer scale of mining projects and the sums involved can make it difficult to account for all payments and there are many touch-points with government officials, such as securing concessions, customs clearance and obtaining permits,” according to Casie Neitzke of CKR Global, quoted in a story last week in Mining Weekly.
The report said because some resource-rich countries “lack the capacity or will to pursue matters themselves,” enforcement agencies in the U.S., Canada and the UK have stepped up investigations and prosecutions against companies operating in those countries.
Indigenization policies can force foreign investors into local partnerships with elites, increasing corruption risks, CKR’s Neitzke said.
Late last year, prosecutors in Romania launched a criminal investigation into Rosia Montana Gold Corporation, the company operating the largest open-pit gold mine in Europe. The investigation is focusing on money laundering and tax evasion, according to reports. Gabriel Resources of Canada owns 80% of Rosia Montana, and state-owned mining company Minvest Deva holds nearly 20%.
In March this year, Frederic Cilins — an associate of Israeli mining billionaire Beny Steinmetz — pleaded guilty in the Southern District of New York to obstructing a federal criminal investigation into whether Steinmetz’s company, BSG Resources, paid bribes to win mining rights in Guinea.
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For graft risk, the Mining Weekly story singled out South Africa, a world leader in gold and diamond production.
A 2014 OECD report knocked the country for failing to prosecute a single foreign corruption case since signing the OECD Anti-Bribery Convention in 2007.
The report said,
The lead examiners have significant concerns regarding the lack of foreign bribery enforcement actions in South Africa and the seemingly passive approach to and lack of significant investigative efforts in existing foreign bribery investigations. Only ten foreign bribery allegations have surfaced since South Africa became a party to the Convention in 2007, although the evaluation team was only able to assess six of these allegations. These allegations have not resulted in a single prosecution.
“South Africa is underperforming in its fight against bribery and corruption, with potential knock-on effects for the mining industry,” Adam Ross from CKR Global told Mining Weekly.
Last year, South Africa’s Gold Fields, which has a secondary listing in New York, said it was the target of an SEC investigation.
The probe reportedly concerns the propriety of a financial stake granted by the gold miner to an official of South Africa’s ruling ANC party. South Africa didn’t investigate the allegations.
The OECD’s Phase 3 Report on Implementing the OECD Anti-Bribery Convention in South Africa (March 2014) is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.