The last decade has seen a sharp increase in global legislative actions, with new laws and regulations being enacted in relation to bribery, corruption and money laundering in various parts of the world, including the UK, China, Russia, India, Brazil and France.
The implementation of anti-bribery and anti-corruption laws and regulations (referred in this article as ‘ABC laws') has resulted in new regulatory bodies being established and new compliance obligations and controls being imposed on companies. As more ABC laws come into force, an increased amount of enforcement actions are being taken against those who fail to comply with the ever-growing myriad of rules, regulations and guidelines that are introduced.
The mining industry is particularly exposed to the risks of bribery and corruption due to the multinational nature of mining projects, which are often located in remote, high-risk and lightly regulated locations, where facilitation or similar payments might be more common and perceived as a manner of doing business rather then improper behaviour. When combined with a high level of interaction with public officials at virtually all stages of the development and operation of a mining project, high reliance on local third-party agents, high-value assets and technical and structural complexity of the mining projects, it is unsurprising that the mining industry accounts for the highest number of enforcement actions in the bribery and corruption sphere for any given sector.
Enforcement agencies increasingly cooperate at an international level. In July 2011, the UK Bribery Act 2010 came into force, and it is considered to be one of the toughest anti-corruption laws, particularly in relation to the range of actions it recognises as illegal, its application to both the public and private sectors, and UK and foreign companies "carrying on business or part of its business in the UK". It provides for two general offences of bribing another person and of requesting or receiving a bribe, a separate offence of bribing foreign public officials and a corporate offence of failing to prevent corruption. Its "consent and connivance" provisions expand the above further and apply to senior officers of companies providing for their personal criminal liability if their company is deemed liable for one of the principal offences and such senior officer "consents or connives" in the commission of the offence. The corporate offence of failing to prevent corruption may be committed if any entity or person "performing services" for the company (including employees, agents and consultants) pays a bribe in relation to the company's operations anywhere in the world.
The stakes are therefore high, and to ensure compliance with the applicable ABC laws companies around the world have been creating new compliance programmes and building or expanding their compliance and audits teams, all to ensure that they don't inadvertently get caught by any of the restrictions imposed by ABC laws. In addition, having adequate anti-bribery procedures in place may avail a company of defence options if they are investigated for breaches of ABC laws. The guidelines issued by the US Department of Justice (A Resource Guide to the US Foreign Corrupt Practices Act - FCPA Guidelines) and the UK Ministry of Justice (Bribery Act 2010 Guidelines - BA2010 Guidelines), highlight the importance of the implementation and regular monitoring of anti-corruption programmes and provide helpful advice on principles that should be applied.
Move towards greater transparency
Transparency International, an organisation that leads a movement toward a transparent world with no corruption, looked at the mining industry across a large number of jurisdictions to consider where in the mining value process the risks of corruption are most often present or significantly higher. The results of this research have been presented in a number of publications, including the Mining Awards Corruption Risk Assessment Tool.
Danuta de Vries
The risks of bribery and corruption in the mining sector have been most commonly linked to a lack of clarity or transparency in the process and criteria for opening land to mining, inadequate due diligence in the mining licence application process and a lack or clarity around decision-making criteria (often vulnerable to ministerial interference), inadequate verification of environmental and social impact assessments and a lack of clarity as to criteria for environmental approvals, the information about projects or its potential impacts not being accessible to many community members (other than local elites) and the inevitable exposure to local third-party agents and suppliers, which is expected of mining companies as part of their contribution to the development of the local area. Many mining companies have experienced challenges in managing these risks, particularly in locations where local or central government officials have different interests, and where the level of bureaucracy in the relevant administrative processes is high.
Mitigating the risks
In light of the FCPA Guidelines and the BA2010 Guidelines, implementing and ensuring compliance with adequate procedures and policies, third-party due diligence and effective management of contractual relationships is of the utmost importance. The FCPA Guidelines identify ten elements that help create an effective compliance programme for and within a company. These include (1) commitment from senior management (or a "top-down" culture of compliance), (2) code of conduct and compliance polices and procedures (including proper controls and monitoring actions), (3) oversight, autonomy and resources (to ensure that compliance is properly monitored and reported to the management), (4) risk assessment to ensure that any compliance programme is designed around the specific risks applicable to the company, (5) training and continuing advice at all employee levels in a company, (6) incentives and disciplinary actions implemented consistently and timely throughout the company with any disciplinary procedures being clearly defined, (7) confidential reporting and internal investigation, (8) third-party due diligence and payment, and (9) continuous improvement involving period testing, audit and review of the policies in order to monitor compliance and identify any new risks, (10) adequate due diligence prior to a merger or acquisition.
Risk Assessment; ABC policies and programmes. To ensure that anti-corruption policies of a company at all times adequately address the risks to it, a thorough, diligent assessment of external and internal risk factors applicable to the company and its operations must be conducted and periodically updated and then properly communicated and documented. This does not only ensure the company's compliance with legal requirements but it also identifies and helps create procedures that are proportionate to both the bribery risks that it faces and the nature, scale and complexity of its operations. Any procedures adapted by a company should be clear, practical, accessible, effectively implemented across its multinational locations and enforced.
Top-level commitment, communication and training. In order to achieve business-wide awareness and compliance with implemented policies, the top-level management must be committed to preventing bribery by those associated with the company and fostering a culture in which bribery is never acceptable or tolerated. This is particularly important in locations where facilitating payments and similar actions are common and generally acceptable.
The management of a company must promote and clearly communicate the company's stand on bribery and corruption to ensure that it is properly embedded and understood within the entire company and where possible, change long-standing perceptions that some cases of bribery might be acceptable. This might require involving employees at different levels, including local managers, in developing the bribery prevention policies and procedures and frequent training and reminders throughout the company. It might be possible (or necessary) to introduce whistle-blower channels to help enforce the policies bearing in mind however, that the cultural and social environment will have a significant impact on its efficiency. Policies and procedures should also include appropriate escalation and consultation processes, which employees will be able to follow when needed.
Due diligence and contract management. In an environment where cooperation with third parties is not only highly encouraged but often necessary, companies must implement adequate due diligence procedures, proportionate to the identified risks, in respect of those who perform or will perform services for or on behalf of the company. As part of this process, it is essential to properly assess the nature, scope and value of the intended relationship with third parties and the transactions to be entered into with them. This due diligence should extend to a review of any proposed contractual terms and include, where possible, the introduction of anti-bribery and anti-corruption terms and appropriate payment provisions to ensure that the transfer and use of funds under any contract are properly controlled and audited, if needed.
In conclusion, a robust compliance programme is essential for any mining company to enable it to mitigate the risks of violating the increasing number of ABC laws and stay on top of the latest developments in this sphere in the jurisdictions relevant to them and their operations. Although no policy, however detailed and prescriptive, can guarantee breach free operations, a company which invests in creating a comprehensive compliance programme will stand a much better chance of operating clear of bribery and corruption troubles.
Danuta de Vries is London counsel in Banking & Finance at law firm Mayer Brown