TI: SEC Rule Fails to Curb Bribery by Extractive Companies

Published: 18 March 2020

oil wellsun1Oil pump jack extraction Credit: Paul Lowry (CC BY 2.0)

By Eli Moskowitz

The US Securities and Exchange Commission, in a 200-page memo, outlined measures intended to increase transparency of payments made by US companies to foreign governments that are used to secure contracts in the oil, natural gas, or mining sectors, but some argue that it will not go far enough. 

Transparency International stated in a press release on Monday, the last day to submit public comments to the proposal, that the proposed transparency rule “fails to require meaningful reporting of payments to foreign governments.”

It detailed that the measures proposed are effectively meaningless, given that they only require companies to disclose payments at the national and subnational level, meaning companies would not have to disclose payments for individual projects or contracts. 

 The proposal also exempts companies from having to disclose payments to foreign governments if a foreign law or previous contract prohibits the company from doing so, while also exempting smaller companies from having to disclose. 

 Scott Greytak, the Advocacy Director of Transparency International’s US office explained to OCCRP that given the means by which companies can conceal their payments – through slush funds, conduits, and other financial loopholes – the new proposal appears to be “immensely unhelpful”. 

In addition to not serving as an effective deterrent, TI’s press release also explains that the new laws could serve as an additional incentive for foreign governments to proactively eliminate their own transparency laws as a means to attract business from US-based companies.  

“Regrettably, the proposed rule falls far below the global transparency standards that have been effectively implemented by some 30 countries, and far below the intent of the enacting legislation,” the official TI comment said.  

“The US is getting lapped by EU legislation,” Greytak told OCCRP, explaining that it is hard to see who benefits from the holes in the SEC’s proposal.  

He explained that this rule will have to be rewritten at some point, given that even the business community is getting taken advantage of in this equation – most multinational corporations have EU operations as well, and so the measure will actually result in further business costs for them. 

“When payments remain secret, the intended beneficiaries of a country’s national resources – its citizens – are instead the first casualties of corruption, said Gary Kalman, Director of Transparency International’s U.S. Office.