Role of EITI in Addressing Corruption in Extractive Sectors
The Extractive Industries Transparency Initiative (EITI) plays a crucial role in combating corruption in the oil, gas, and mineral sectors globally. By exposing vulnerable practices, providing contextual information, supporting citizen engagement, and advancing anti-corruption norms, EITI helps deter corrupt behaviors through transparency. The prevalence of corruption in the extractive sector underscores the importance of EITI's efforts in promoting good governance and accountability.
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The The EITI s EITI s role role in in addressing addressing corruption corruption 19 October 2020 The global standard for the good governance of oil, gas and mineral resources.
Background Background: : Consultation (January-February 2020): Broad support from implementing countries for EITI to engage in anti-corruption efforts Board strategy retreat in February 2020: Confirmed anti-corruption as a priority. Identified next steps: Articulate the EITI s role in addressing corruption (gobal and national level) Provide implementation support to MSGs Engage companies and partners
Corruption Corruption Risks in Risks in the the Extractive Extractive Sector Sector Panama Papers Panama Papers Unaoil Unaoil Leaks Car Car- -Wash Wash Scandal Malaysian Malaysian 1MDB Scandal Scandal Suspicious Suspicious behavior by by companies companies and individuals individuals behavior and Leaks Scandal 1MDB Investigation Investigation and prosecution prosecution related to to corruption corruption charges charges and related Some Some Extractive Extractive Companies Companies
Prevalence Prevalence of of Corruption Corruption in in Extractive Extractive Sector Sector FCPA FCPA enforcement enforcement actions actions Extractive sector Extractive sector 20% 20% About About 50 50 actions actions out out of of 242 242 OECD Report OECD Report on on Foreign Foreign Bribery Bribery About 85 85 actions actions out About out of of 427 427 According to the Global Financial Integrity, Illicit Financial Flows Hit US$1.1 Trillion in 2013. US$7.8 Trillion drains from Developing World from 2004-2013. Sub-Saharan Africa Still Suffers Largest Illicit Outflows as % of GDP.
How How does address address corruption corruption? ? does the the EITI EITI help help Exposing Exposing practices are are vulnerable to vulnerable to abuse Exposing Exposing suspicious suspicious deals practices in in natural natural resource abuse deals and and transactions resource governance governance that that transactions Providing Providing valuable valuable contextual contextual information information Supporting citizens discussion, monitoring and Supporting citizens discussion, monitoring and advocacy advocacy Advancing Advancing global norms and policies related to anti global norms and policies related to anti- - corruption corruption Deterring corrupt behavior through transparency Deterring corrupt behavior through transparency
Shining Shining a a light The EITI requires disclosure in many of the areas most prone to corruption risk The EITI requires disclosure in many of the areas most prone to corruption risk light in the right in the right places places Beneficial Beneficial Ownership Ownership Contracts Contracts Risks: capture, compliance with laws on fiscal conflict of interest EITI Requirement 2.4: requires disclosure contractula terms of new or contracts from 2021 onwards. SOEs SOEs Licenses & License Licenses & License Allocation Allocation political non- Risks: authority, COI, opaque financial misappropriation funds abuse of Risks: interest, illicit financial flows, shell companies, money laundering conflict of Risks: bribery, collusion, political capture, undue influence, absence competitive process flows, regimes, of of EITI Requirements 2.6, 4.5 & 6.2 mandate disclosures on revenue retention, flows, and quasi-fiscal spending EITI Req. 2.5 names and details of BO, legal owners, PEPs full of EITI Requirements 2.2 & 2.3 license processes, and criteria for award allocation amended financial
Shining Shining a a light The EITI requires disclosure in many of the areas most prone to corruption risk The EITI requires disclosure in many of the areas most prone to corruption risk light in the right in the right places places Payment Payment Flows Revenue Collection Revenue Collection Risks: misappropriation, money laundering, false invoicing, understatement/evasion, unfavourable exemptions EITI Requirement disclosure of payments which can referenced with laws (Reqt 2.1) and production/export data Reqts 3.2,3.3 (e.g. when used as tax base) Flows & & Other Other topics Areas of high corruption risks: production data (3.2), infrastructure provision arrangements transportation revenues (4.4), distribution of extractive revenues (5.1), revenue management (5.3) and social expenditures (6.1). topics Subnational Subnational Payments Payments Risks: misappropriation, diversion opaque mechanisms EITI Requirement and 5.2: subnational direct payments and transfers, allocated transfers First Trades First Trades Risks: inappropriate benchmarks, trading terms, unqualified buyers, price manipulation opaque tenders,, trading unbalanced tax & barter (4.3), of funds, transfer tax EITI buyers, commodities, price, volume, Requirement 4.2: 4- industry 4.6 be cross formula, actual vs
AUTHOR AUTHOR Gay Ordenes & Catherin Greene MAILsecretariat@eiti.org PHONE ADDRESSEITI International Secretariat, R dhusgata 26, 0151 Oslo, Norway PHONE +47 22 20 08 00 E E- -MAIL ADDRESS www.eiti.org @EITIorg
