Resource World Magazine

a u g u s t / s e p t e m b e r 2 0 1 5 www.resourceworld.com 31 miNiNg T his past June, the establishment of the Extractive Sector Transparency Measures Act (ESTMA) brought into focus the efforts and commitment of the Canadian government, and governments around the world, in the fight against corruption. The ESTMA, along with the Extractive Industry Transparency Initiative (EITI), highlight the anti-corruption efforts made by the government of Canada as well as other authorities around the world who promote greater transparency and accountability in business transactions. Additionally, the increased enforcement action by the RCMP and their international law enforcement partners demonstrates their commitment to investigate and pros- ecute companies and individuals who partake in corrupt action. By the nature of its activities, in high risk countries, the extractive industry is partic- ularly at risk of being entangled in bribery and corruption schemes. At every stage of the life cycle of an extractive project, con- tacts with foreign government officials are constant and numerous, exposing one to potential opportunities and pressure for corruption to occur. The OECD 2014 Foreign Bribery Report, a recent study by the Organization for Economic Co-operation and Development (OECD) concluded that since 1999, the mining and extractive industry has been involved in the high- est number of prosecution and concluded enforcement action of any industry (19%). The impact to a company facing a con- viction under the Corruption of Foreign Public Officials Act (CFPOA) goes beyond the criminal sanctions stemming from it which may include unlimited fines for the company and up to 14 years in jail along with fines for individuals. The following additional costs and consequences asso- ciated with a corruption investigation, prosecution and conviction should give pause to executives who may look at anti- corruption compliance as too costly and burdensome to implement. Legal and auditing costs: Past corrup- tion cases in Canada (Niko and Griffiths) and elsewhere (Siemens) have shown that the legal and auditing costs resulting from internal investigations and the reme- diation process equals and often surpasses the actual cost of the criminal fine. Court imposed probation conditions also add to these costs. impact on productivity: Company officials and other resources are diverted to dealing with the repercussions of cor- ruption instead of concentrating on core business. Issues of employee morale, reten- tion, hiring and other HR issues as a result of a corruption investigation can also nega- tively impact productivity. Civil liability with shareholders: The increase in corruption related pros- ecutions of companies globally has been followed by an increase in class action lawsuits against these companies and exec- utives deemed responsible for the resulting decline in share value. successor liability: Where the goal of many junior mining and exploration com- panies is to secure an M&A deal, potential buyers or joint venture partners will walk away or demand deep discounts and waiver conditions rather than assuming the liability of a company facing criminal sanctions for bribery. impact on brand and potential busi- ness: A company's brand and reputation can be seriously impugned by a corrup- tion investigation and conviction, which can impair its ability to obtain financing, secure business relationships and obtain contracts. International arbitration of dis- putes will not be available when a contract is secured through a bribe. higher costs to prove legitimacy and remediation: There will likely be higher costs resulting from the need to meet greater due diligence requirements to secure financing, insurance and other sup- port from private and government agencies. Proceeds of crime: Any profits stem- ming from contracts and agreements secured through a bribe could be consid- ered proceeds of crime and thus possibly be forfeited. The costs and consequences of brib- ery and corruption cannot be ignored. The changing business landscape for the extractive industry requires companies to be pro-active in reducing their risk and exposure by implementing a robust anti-corruption compliance program. Leveraging available cost effective tools, anti-corruption compliance should be viewed as an investment that increases a company's ability to manage risk, control costs and adopt an ethical governance model that will improve their ability to effectively prevent, detect and address bribery and corruption risk. Implementing a robust anti-corruption compliance program can reduce the risk of being sub- jected to a CFPOA (or foreign) prosecution and it is now being viewed as a competi- tive business advantage when dealing with potential M&A and joint venture partners. The RCMP is committed in its efforts to combat bribery and corruption. This com- mitment also involves working with and helping Canadian industry reduce their risk and exposure to bribery and corrup- tion through outreach and prevention activities. For more information and links to material and anti-corruption compliance tools, visit www.rcmp-grc.gc.ca/ottawa/ corruption/index-eng.htm n Bribery and corruption in the extractive industry – it stops with you! by Sgt. Pat Poitevin, Senior Investigator – Outreach Coordinator Sensitive and International Investigation Unit Royal Canadian Mounted Police

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