On April 28, the Enough Project submitted a statement in response to the request from the U.S. Department of State for comments from interested parties on supporting best practices in responsible minerals sourcing in the Great Lakes region of Africa.
The Enough Project opposes any suspension, weakening, or repeal of the current Conflict Minerals Rule. Read the full comment below or click here.
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To: U.S. Department of State
From: The Enough Project
Date: April 28, 2017
Re: Recommended Policy Steps on Conflict Minerals
In response to the request for comment on supporting best practices in responsible minerals sourcing in the Great Lakes region of Africa, Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Securities and Exchange Commission’s Conflict Minerals Rule should remain in place and unchanged, without any action that would weaken the Conflict Minerals Rule in its current construction or suspend, defund, otherwise weaken, or repeal Section 1502 of the Dodd-Frank Act. Any efforts to review or change the Conflict Minerals Rule should be done with the proper authority and using the proper channels as afforded by the Administrative Procedures Act.
Additional complementary policy steps by the U.S. government, if paired with full implementation of Section 1502 and the Rule in their current constructions, can deepen efforts to break links between armed actors and the minerals trade in the DRC and surrounding countries; eliminating the Rule now would significantly undermine the progress made to date. Such policy steps are detailed below. Also see attached our submission to the SEC public comment request, which contains information directly applicable to this consultation, in particular describing the positive impacts 1502 and the Conflict Minerals Rule have on security in DRC and transparency in global minerals supply chains, as well as the overwhelming support for 1502 and the Conflict Minerals Rule by Congolese civil society organizations, electronics and jewelry companies, the Congolese government, investors, and individuals.
Combating the conflict gold trade
Dodd-Frank 1502 has had a significant positive impact delinking the tin, tantalum, and tungsten trades in eastern Congo from armed actors, as 79 percent of miners working in 3T mines surveyed in eastern Congo work at conflict-free mines. There has also been an impact on gold, but more work must be done on gold, as it remains a key source of funding for armed groups and Congolese army units in eastern Congo, according to the UN Group of Experts. Conflict gold from artisanal and small-scale mines in eastern Congo is smuggled mainly through Uganda, Burundi, and then the United Arab Emirates, according to a long series of UN GOE reports. While there has been measurable progress in combating the conflict 3Ts trade, as 79% of miners surveyed in eastern Congo in the 3Ts work in conflict-free mines as of October 2016, a small number of powerful smugglers continue to trade conflict gold around international regulations and the ICGLR certification system without consequence. Targeted work on conflict gold should be a priority for the U.S. government. Recommended steps to combat the conflict gold trade are listed below. None of the following should be understood as alternatives to 1502 and the Conflict Minerals Rule, but instead as complementary:
- Designating major conflict gold smugglers for targeted sanctions. The U.S. government, both unilaterally and multilaterally through the U.N. Security Council, should designate well-documented conflict gold smugglers in Congo, Uganda, and Burundi for targeted sanctions. Additionally, the U.S. State Department and U.N. Special Envoy for the Great Lakes Region Said Djinnit should pressure Uganda to cut its links to the gold smugglers and tighten airport checks on gold smuggling. The U.S. State Department should also urge the International Criminal Court to prosecute the most powerful illegal gold smugglers.
- Facilitating regional negotiations to harmonize gold taxes that strongly incentivize smuggling. The State Department, both on its own and together with the Public-Private Alliance on Responsible Minerals Trade (PPA), should work with the Congolese Ministry of Mines and governors of South Kivu, North Kivu, and Ituri provinces to significantly reform the fiscal and parafiscal regime for ASM gold, so as to make it regionally competitive. This would increase tax receipts for national and provincial treasuries. They should also work with Uganda to harmonize its gold taxes with the region, which recently were reduced by the Ugandan government to zero. This would significantly disincentivize the illegal trafficking of gold to those neighboring countries offering a significantly lower fiscal burden.
- Related to this, the State Department and USAID should work with national and provincial governments in Congo to institute a significantly reduced tax burden, or tax exemption, on traceability and certification pilot projects. This will offer the opportunity to demonstrate that the vicious circle can be transformed into the virtuous circle, with increased declaration of gold along the supply chain, and concomitant increased tax receipts.
- Anti-money laundering: The Departments of State and Treasury should engage with banks and financial institutions in the region to ensure they incorporate key FATF anti-money laundering (AML) guidance about recognizing red flags for criminal activity into due diligence regarding artisanal gold and related financial transactions from these countries. Further, State and Treasury should engage with banks and financial institutions in North America, the Middle East, Europe, and Asia with clients that may conduct gold business in the Great Lakes region, as well as other international gold refiners, to incorporate and practice vigilance against trade-based red flags identified in the FATF gold report in their dealings with refiners and other gold purchasers from their region.
Building a conflict-free, responsible minerals trade overall
The U.S. government should engage both bilaterally and through the Public-Private Alliance on Responsible Minerals Trade (PPA) to continue helping to build up a conflict-free, responsible minerals trade in the Great Lakes region. All of the below measures should be taken in concert with thorough and enhanced implementation of 1502 and the SEC Conflict Minerals Rule.
- Improving artisanal mining. The State Department and USAID should urge the DRC Ministry of Mines and the Mining Cadastre (CAMI) to designate more mines as Artisanal Mining Zones (known as ZEAs in Congo), and allow mining cooperatives to apply for mining licenses.
- Improving Security: The Congolese government should increase the number of mining police forces in mining areas and trade routes and carry out its commitment to demilitarize the 3TG mining sector in the Kivus, especially in gold mining areas. In doing so, they should comply with the Voluntary Principles on Security and Human Rights, and insist on compliance by mining companies operating in Congo. Along with local authorities, the U.S. Department of State and International Organization on Migration (IOM) should introduce anti-corruption measures into training initiatives with mining police, integrating the Voluntary Principles guidance on interactions with public security and Principle 10 of the Global Compact.
- Helping Incorporate Financial Investigations into Prosecutions of Serious Crimes:Congolese military courts and the International Criminal Court (ICC) should incorporate financial investigations into cases concerning war crimes and crimes against humanity in the DRC. The U.S. State Department’s initiative with U.S. Institute of Peace (USIP) to train justice officials in economic crimes should include training on international crimes and asset tracing. U.S. The State Department should build on this by supporting and encouraging targeted sanctions and prosecutions for minerals pillage and high-level corruption crimes.
- Improving mine inspections. The U.S. government, in partnership with other donors, should provide additional funding to mine inspection missions (“validation mission”) currently led by the IOM in order to increase the number of mines that are assessed. Mine assessments should be made public by Congo’s Ministry of Mines, and assessment teams should comply with mandates to re-assess mines every six months.
- Improving Livelihoods: The State Department and PPA should invest in artisanal mining health and safety and alternative livelihood programs. USAID’s Development Credit Authority (DCA) together with other donors should conduct assessments in eastern Congo to determine the viability of implementing village savings and loans and microcredit initiatives in mining communities.