The oil, gas and mining sectors cross national borders by their very nature and, as a result, so does the criminal activity embedded in it. Due diligence, investigative reporting and regulator enforcement must operate across borders, on the same breadth and scale as the commercial networks they seek to hold to account.
An age of consequence?
On Monday, news broke that police
in Israel have detained businessman Beny Steinmetz for questioning over alleged
bribery to obtain mining rights for one of the world’s most important iron ore
concessions. The Israeli police force made its investigation into Steinmetz
public on Monday “after a covert investigation found evidence supporting the
suspicions” of bribery, reported
the daily Haaretz.
Beny Steinmetz’s company BSGR confirmed his detention, saying it was part
of ‘obsolete investigations surrounding bribery and corruption against BSGR', and that it believed the
allegations to be baseless.
The case, which has been the subject of Global Witness investigations since 2012, involves the granting of lucrative mining rights to BSGR over the Simandou mountain range in Guinea, West Africa, in 2008. In 2010 BSGR sold 51% of its rights to the world’s largest iron ore company, Vale, for $2.5 billion—equivalent to twice Guinea’s entire budget at the time.
Earlier this month a further controversy in the sector hit the headlines surrounding Monaco-based oil services provider Unaoil in Australia and the USA earlier this year, and now the UK is intervening.
In late November, the UK’s Serious FraudOffice launched a criminal investigation into the activities of Unaoil and its personnel; Unaoil, for their part, is challenging the legality of the SFO’s use of its investigatory powers in the UK High Court. Among the legal filings, the SFO reportedly made the blistering criticism that it was “unpersuaded that Unaoil conducts any lawful business.”
the biggest leak of confidential files in the history of the oil industry
The affair has been unfolding in public since March 2016. Following a six month investigation and citing a document cache they dubbed “the biggest leak of confidential files in the history of the oil industry”. Fairfax Media and the Huffington Post launched an extensive report on what they claim to have discovered about Unaoil’s business dealings, labelling the company a “global bribe factory” and accusing it of paying millions of dollars on behalf of major multinational corporations to secure government contracts in Eurasia, Africa and the Middle East.
In July 2016 the SFO joined the fray, announcing a criminal investigation into Unaoil and its officers, employees and agents in connection, and securing a special funding boost to support the investigation.
Unaoil has strongly denied the corruption claims throughout. In a June press release, they dismissed the accusations as “sensationalist”, and the company has also claimed that some of the information that formed the basis of the allegations against it “has been gathered as a result of criminal activity including extortion”.
Global Witness are spectators on this one; but what really leaps out at us is the sheer geographical scale of the affair:
- The media investigation describes Unaoil’s business operations which range across at least 19 countries and it alleges misconduct in several of them (that’s before you count the home nations of Unaoil’s clients and other states through which it is alleged money may have passed)
- The claims have sparked probes on three continents, with the Australian Federal Police, the US’ Department of Justice and FBI and the UK’s investigative authorities Reported to be investigating Unaoil’s activities (which has involved the raid of Unaoil’s offices in Monaco).
That the energy industry carries heightened corruption risks is well documented: when the OECD analysed 427 anti-bribery enforcement actions in 2014, they found that almost one in five related to the extractive industries.
Beefing up global enforcement around corruption
The pattern of recent enforcement action shows that the globalised nature of the business is critical to understanding those risks:
- Earlier this year US hedge fund Och Ziff pleaded guilty to corruption offences relating to deals in Democratic Republic of Congo and Libya; the US Department of Justice also charged a Gabonese “fixer” with alleged bribery to secure mining rights in Niger, Chad and Guinea for Och Ziff and a partner company registered in Turks and Caicos.
- Brazil’s “Lava Jato” (car wash) investigation into state-owned oil company Petrobras, besides prompting the arrest of over 100 Brazilian officials, public servants and businessmen, has allegedly implicated multinational companies based as far afield as Denmark and Singapore, and last month saw a suspected “financial mastermind” of the corruption scheme apprehended in Spain.
- Rio Tinto, one of the world’s biggest mining companies has reported itself to anti-corruption authorities in three countries over a nebulous email scandal. It embarked on this course after company emails were published online discussing a $10.5 million consultancy payment to a friend of Guinea’s president. Heads have rolled, with Rio parting company with its chief lawyer and its head of energy and minerals. The email imbroglio is the latest development in a long-running scandal over the emerald green peaks of Guinea’s Simandou mountain range, touted by Rio as the world’s largest undeveloped repository of iron ore.
Whatever the judicial outcomes in these cases, it is clear anti-corruption is fast becoming a global law enforcement priority.
These episodes should lay to rest the myth that robust anti-graft legislation somehow puts a country out on a limb. Laws such as the UK Bribery Act, the Global Magnitsky Human Rights Accountability Act and Foreign Corrupt Practices Act should be seen as pillars of a shared defence of shared interests, confronting the threats to governance, development and national security posed by natural resource-related corruption.
Photo credit: Flickr/ Justin Vidamo: http://bit.ly/1Yvwpee