Lack of transparency enables corruption and shady deals that cost the developing world $1 trillion
WASHINGTON — As the U.S. Securities and Exchange Commission (SEC) released its rule to implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the ONE Campaign issued the following reaction from Tom Hart, ONE’s Executive Director for North America:
“Financial transparency is critical for rooting out the kind of corruption that keeps many poor countries trapped in poverty. Publishing payment information for natural resource extraction is essential for helping citizens — particularly those in developing countries — hold their governments accountable and curb widespread corruption and mismanagement of revenues. The SEC’s new rule is a welcome and overdue step forward, and while it contains several unnecessary exemptions, it appears that commissioners have stood up to industry pressure to weaken the rule. This rule is a win-win-win for investors, for governments, and for citizens – especially those living in the world’s poorest countries.
“The ONE Campaign has been a vocal advocate for transparency and accountability because of the importance of open and accountable institutions to combatting extreme poverty. In 2014, ONE published The Trillion Dollar Scandal, a report detailing the siphoning of more than $1 trillion dollars from developing countries each year through corruption and shady deals. As part of this work, ONE has advocated for implementation of Section 1504 that requires detailed project-by-project reporting without exemptions, aligning the U.S. with a rapidly emerging global standard.”
Section 1504 mandates that all oil, gas, and mining companies required to file an annual report with the SEC must report what they pay governments to extract natural resources. This payment information doesn’t only help citizens in the poorest countries hold their countries accountable for natural resource wealth, it also protects investors and markets.
The rule that was just released requires project level reporting, by company, and no categorical exemptions for supposed host-country prohibitions and aligns with similar payment transparency requirements already in effect in 30 countries.
Notes to reporters:
- The United States is home to the world’s largest extractives market. Implementation of Section 1504 will require payment disclosure by all six of the “supermajor” oil companies, including ExxonMobil and Chevron – as well as some Chinese and Brazilian state-owned oil companies.
- The United States now joins an emerging global standard of natural resource transparency. Mandatory disclosure legislation has been enacted all over the world, including in the UK, Norway, Canada and the European Union.
- Extractives firms such as Total, BHP Billiton and Eni have publicly urged the SEC to align the final 1504 rule with transparency laws in place in the United Kingdom, European Union, Canada and Norway.
- The rule contains two exemptions which ONE feels are unnecessary: 1) If a company acquires a company not previously subject to the final rules they will not be required to report payment information until filing a form for the first fiscal year following the acquisition; 2) There is a one year delay related to payments related to exploratory activities (concession to industry on competitive harm for new discovery). The SEC can also grant exemptions on a case by case basis.