The challenges of compliance and corruption in the Latin American mining industry

15 Aug 2018
Article by Achilles

What are the challenges of compliance and corruption in the Latin American mining industry?

Eduardo Herrera, Director of Escudo Azul, will be joining us as a presenter at the next Encuentro de Compradores (Buyers’ Meeting), Achilles Connect Lima – Perú, which will take place on 23 August at [the premises of] the National Society of Mining, Petroleum and Energy (Sociedad Nacional de Minería Petróleo y Energía – SNMPE)

As a lawyer, researcher and consultant in compliance with criminal law, analysis of penal risks and anti-corruption strategies, his presentation will focus on the scenario currently facing mining companies in relation to corruption and compliance, as well as the risks and responsibilities faced by various companies and individuals.

Here is a preview of the issues he will be addressing in his presentation.

What is the current situation facing companies with respect to corruption and compliance?

There is a general feeling of anxiety on the part of companies regarding the risks they face in relation to the issue of corruption and its legal implications. Specifically, in the big companies a lack of transparency still prevails which nobody has endeavoured to rectify.

It is a state of affairs fraught with risk, and I believe that the companies do not know with any certainty what they are exposed to, who are the agencies involved and what action to take to alleviate their negative impact.

What are the principal vulnerabilities?

I take the view that each company is a separate world. The corporate actions of each have their own character. Apple and Samsung are not the same, they are completely different companies.

What is lacking is an accurate mapping of risk, that is where it all starts. There is also a problem of professional orientation. For example, one can’t contract somebody who deals with financial matters or internal controlling to tackle a legal or criminal matter, just as one would not contract an attorney-at-law to deal with financial matters. What is needed is somebody with experience in the field because, when it comes to corruption, the criminal justice system will be the body assessing the ways and means of mitigating the problem.

I believe that the principal problem is that companies have not learned to map and identify risk. If you don’t do that correctly, it will be difficult to combat or mitigate that risk.

In general terms, could you outline the risks faced by mining companies?

In the specific case of mining companies, I see major risks in relation to corruption, dealings with suppliers and conflicts of interest. Regarding this final point, it may for example be the case that a person working in mining also has parallel business dealings whereby he ends up selling to the same company. This practice is a problem which has become commonplace over time and is frequently tolerated by the industry. In these cases, for example, there are clear legal repercussions.

Speaking of the issue of corruption in public-private relations, anybody who is in a position to bribe a public employee in order to obtain or retain a permit or license in the name of the company, and does so using company funds, will almost automatically generate liability for that company.

Often unwittingly, the company will end up being a medium or vehicle for the crime.

That is the great problem currently facing companies.

In your view, what is the best way of confronting this issue? What would constitute good practice in this respect?

I have always thought that compliance ought to function as an individually tailored practice. A major failing at global level is that it has been transformed into a procedure which looks fine on paper and therefore generates an excessive degree of confidence. That is where the error lies.

Firstly, for me it is fundamentally important to identify the actual risks which the company faces, and to work from there towards specific set objectives. For example, identifying weaknesses and vulnerabilities. Secondly, work hard on the applied philosophy, that people should have a clear idea of what conduct the company expects of them.

During the event I will be sounding a contrarian note, aimed at shaking up the system and demonstrating that compliance, as it stands, is not fit for purpose. We need to put in place a new, integrated, multidisciplinary mode of compliance which addresses not only the legal issue but also psychological factors, regulatory matters, intelligence factors, etc.

Learn more about the Mining industry in Latin America.


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