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Corruption in the Extractive Industries

Corruption risks exist across all business sectors, but some are more prone to corruption than others. The extractive industries are among the highest risk areas of business, accounting for one in five cases of transnational bribery according to the OECD.

Photo: Ian Simmonds / unsplash.com

Why are corruption risks so high in extractive industries?

Natural resources have the potential to generate large revenues and profits, which makes them attractive for businesses. Competition often results in heavy lobbying and even undue influence on policymaking. A recent report shows that in the three years after the Paris Agreement, the world’s five of the largest oil and gas companies spent over US$1 billion on climate-related branding and lobbying.

How does it affect you?

Lobbying and undue influence can distort policies and laws in favour of vested interests rather than the public good. Corporate bribery might lead state authorities not to enforce laws and turn a blind eye to illicit activities in the extractive sector. Reckless exploitation of natural resources also destroys the environment and deprives people of their livelihood, trapping them in poverty and fuelling conflict over resources.

Disposing of vast natural resources makes state revenue more independent of tax income. Free of public scrutiny, this can make it easier for governments to act in unaccountable ways and increases the risk of Grand Corruption.

Corrupt leaders might secretly benefit from natural resources, as many companies conceal the identities of their equity holders and subsidiaries. Inadequate financial statements make it easy to disguise corrupt deals, and impossible for any of us to monitor them.

What needs to be done?

A transparent and accountable mining sector can contribute to sustainable development. This begins with corruption-free approvals – the very first link in the mining value chain.

But corruption risks can occur at every step of the chain, from awarding of contracts and licenses to determining how to spend revenues.

Companies need to establish and enforce internal integrity mechanisms, and be more detailed in their financial reporting externally – especially at a country level. To track money flows and hold governments to account for the fees and revenues they receive, companies must publish details of their subsidiaries and the sites where they work to enable detailed monitoring.

Governments in producer countries need to be fully transparent and make information on income and royalties available. National oil companies must meet international accounting standards and publish independently audited accounts.

Governments can and must do more, irrespective of their country’s stage of economic development, political context or geographic region. Governments in developed nations, where many leading extractive companies are headquartered, often fail to punish corrupt activity by their companies abroad.

This impunity must end.

What we are doing

We are tackling corruption before ground is even broken. Together with our national chapters across the globe we are building the foundations for accountable and transparent mining that benefits communities, and supports sustainable social and economic development.

Photo: Dominik Vanyi / unsplash.com

Assessing and address corruption risks in mining

We look at where and how corruption can get a foothold in the mining sector, and shine a light on the often opaque process of obtaining mining or exploration permits. Who gets the right to mine and under what conditions?

Working collaboratively with governments, companies, civil society organisations and local communities, we are building a fairer and cleaner process for obtaining mining permits. This is part of our global strategy to build trust, improve transparency, and influence behaviour change in the mining sector.

More Information

Reports and research

Report: Combatting corruption in mining approvals: assessing the risks in 18 resource-rich countries

Read the Report

Anti-Corruption Knowledgehub

Good practice in mitigating corruption risks in the extractives sector

Knowledge Hub

U4 Anti-Corruption Center

Corruption and anti-corruption efforts in the oil, gas, and mining sectors

U4 Anti-Corruption Center

Publications

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Mining Awards Corruption Risk Assessment Tool

Publication •

This tool helps users to identify and assess the underlying causes of corruption in mining sector awards – the corruption risks that create opportunities for corruption and…

Projects

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Accountable mining

Project

Mining for sustainable development, run by TI Australia Lead by TI Australia to bring transparent measures to oil, gas and mineral extraction in 20 resource-rich countries.

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