Happy International Anti-Corruption Day, world! The Securities and Exchange Commission (SEC) is preparing to give you a fitting present: on Friday, it will vote to adopt a draft rule to require transparency in the financial dealings of oil, gas, and mining companies.
So, world, why should you be excited about this gift? Well, to start with, there’s a huge amount of corruption in the extractive industries. Companies give unaccountable, autocratic governments billions of dollars in bonus payments, taxes, and royalties for the privilege of extracting hyrdrocarbons, metals, and minerals – often from territories that are ecologically sensitive and occupied by traditional communities whose livelihoods can be devastated by pollution and loss of land.
The temptation to skim off the top – rather than ensuring that natural resource revenues are reinvested in the communities that are most negatively affected – can be irresistible. A few years back, ERI reported that hundreds of millions of dollars from the natural gas revenues that kept the Burmese military junta afloat for nearly two decades had been diverted into offshore accounts in the names of individual officials and their family members. A Nigerian watchdog group has claimed that almost $20 billion in oil revenues are still missing from federation accounts as a result of corruption and mismanagement. And an award-winning documentary revealed last year that corrupt payments by a British oil company at Virunga National Park in the Democratic Republic of Congo were fueling violence against community members and the destruction of one of the last refuges of the critically endangered mountain gorilla.
Friday’s vote comes in response to ERI’s successful lawsuit against the SEC on behalf of Oxfam America, in which a judge found that the SEC was unlawfully holding back on its obligation to move forward with regulations required by Congress when it passed Section 1504 of the Dodd-Frank Act in 2010. The rules, which will shine a spotlight on the payments that extractive companies make to governments, will deter corrupt deals and help citizens in resource-rich countries hold their leaders to account for the way that natural resource wealth is managed.
Of course, voting on the draft rules is only a first step. After they are adopted, the SEC still has to take comments from the public on the draft and then finalize the rules – a process that should be done by June 2016. And in some ways, these rules are way overdue, since Europe, Canada, and Norway have already passed laws requiring exactly the same sorts of disclosures.
But drafting rules is an important step, and here’s why. Most of the biggest extractive companies are listed on U.S. stock exchanges, and all those firms will be covered by the SEC’s regulations. The vote on Friday means that the U.S. is taking its place with the other countries that are doing their part to help you, world, become a place where public resources improve the lives of the needy rather than just lining the pockets of the powerful.
This post was written by Jonathan Kaufman, former staff.