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Corruption risks in mining remain despite UK probes dropped

Mining companies must remain vigilant to corruption risks despite recent announcements by the UK’s Serious Fraud Office (SFO), an expert in managing bribery and corruption risk has said.

Edward James of Pinsent Masons was commenting after the SFO confirmed on 24 August that it had dropped two corruption investigations in the mining sector – one into Rio Tinto, the other into Eurasian Natural Resources Corporation (ENRC).

The SFO began investigating suspected corruption in the conduct of business in the Republic of Guinea by Rio Tinto, its employees and others associated with it, in 2017. Its separate investigation into ENRC was commenced in 2013. The SFO has now said it is “not in the public interest to proceed with a prosecution in the UK” against Rio Tinto, while it concluded that is does not have sufficient “admissible evidence” to prosecute ENRC.

The SFO’s investigation into Rio Tinto was carried out with cooperation from other authorities around the world, including in the US. Earlier this year, the US Securities and Exchange Commission (SEC) announced that Rio Tinto had agreed to pay a $15 million penalty to settle charges it had raised under the US Foreign Corrupt Practices Act (FCPA) in relation to alleged bribery.

In its statement, the SEC said it had found that a consultant hired by Rio Tinto to help it retain mining rights for the Simandou mining project in Guinea, had “offered and attempted to make an improper payment of at least $822,000 to a Guinean government official in connection with their efforts to help Rio Tinto retain its mining rights”.

The regulator said the consultant had worked on Rio Tinto’s behalf but “without a written agreement defining the scope of his services or deliverables”. He was paid $10.5m for his services, but the SEC said Rio Tinto had not properly accounted for the payments to the consultant, who acted as the company’s agent, nor had “sufficient internal accounting controls in place to detect or prevent the misconduct”.

Rio Tinto settled the charges brought against it without admitting or denying the SEC’s findings.

In a statement issued at the time, Charles E. Cain, chief of the SEC Division of Enforcement’s FCPA Unit, said: “Even well-designed controls need committed managers to be effective. Here, deficient controls were no match for managers determined to hire a consultant whose only ostensible qualification was a personal relationship with a senior government official.”

James said the Rio Tinto case is an example of how complex corruption cases can be and how different global regulators can land on different positions. He said it further highlights the extraterritorial reach of some anti-corruption legislation – such as the US FCPA and the UK’s Bribery Act – and the associated scrutiny given to activities in foreign jurisdictions by regulators in the US, UK, among other countries.

Mining companies and other stakeholders in mining projects can learn some lessons from the SEC’s findings in the Rio Tinto case in respect of engaging agents, James said.


“Mining companies should be careful when they hire overseas agents, especially if the agents are going to engage with government or public officials on high-stakes issues like the renewal of a mining right,” James said.

“Before appointing an agent, proper due diligence should be undertaken to identify any ‘red flags’ – including their potential political exposure. A written agreement is an essential control, and it should provide clear and comprehensive details of what the agent is tasked with doing. The fees paid should be proportionate to the work carried out. Success fees should be avoided,” he said.

“Proper oversight of an agent should be exercised, and they should not be permitted to engage with government or public officials without someone from the company being present. When the agent invoices for their work, the fees should be carefully checked against tangible evidence of actual work done and against what they were mandated to do,” James added.

Simandou is a mountain range in Guinea thought to offer the largest untapped source of high-grade, low-impurity, iron ore anywhere in the world. The iron ore mined from Simandou is expected to be highly sought after because of its high-grade, low-impurity qualities and the desire of businesses in many industries and sectors to develop a sustainable steel supply chain amidst growing pressure on those businesses to respond to the climate emergency from policymakers, regulators, investors and environmentalists.

Steel is a core material in several industries, sought, for example, by the construction industry to deliver new buildings and other infrastructure, by automotive companies for manufacturing vehicles, and by renewables developers seeking to harness the power from wind turbines.

Beyond rights to mine the iron ore itself, the Simandou project is expected to provide opportunities for global businesses to win infrastructure and supply contracts – new infrastructure will be needed to facilitate the importation of vehicles, equipment and other supplies, and the exportation of the mined iron ore.

James said: “Whilst the lessons learned from the Rio Tinto case should guide mining companies generally, mining companies and contractors looking to get involved in Simandou projects should pay specific attention to the risks highlighted and adopt enhanced controls to ensure that the high risks don’t spoil the potentially high rewards.”

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