President Kiir’s Associates Tied to 32 Mining Companies; High-Level Corruption in Minerals Sector Risks Fueling Armed Conflict, Report Warns
April 2, 2020 (Washington, DC) – At a time when South Sudan’s government most needs to generate resources for urgent public health-related challenges including the Covid-19 pandemic, one of its promising revenue streams is beset by mismanagement and corruption. The Sentry’s latest investigative report reveals how South Sudan’s promising gold-dominated minerals sector is riddled with corruption involving President Salva Kiir’s relatives and inner circle, military leaders, and other high-level officials. Published today, the report further exposes illegal mining now underway in Eastern Equatoria state, where the governor has ties to numerous mining businesses, as well as the Ministry of Defense’s involvement in problematic mining licensing deals.
“Untapped and Unprepared: Dirty Deals Threaten South Sudan’s Mining Sector” warns that, without strong reforms, abuse in the minerals sector could spur the same kind of resource-driven violence that plagued the petroleum industry throughout civil wars fought on South Sudanese soil dating back to the 1980s.
John Prendergast, Co-Founder of The Sentry, said: ”Through close relatives and allied government officials, President Salva Kiir is linked to dozens of mining companies in South Sudan. The president’s core network has used its control of the minerals sector to consolidate its grip on South Sudan’s state revenues and natural resources. If South Sudan’s people are to benefit from the country’s mineral wealth, including lifesaving healthcare urgently needed in the face of a global pandemic, financial institutions should take immediate steps to identify and monitor the bank accounts of those in power, their business networks, families, and inner circles.”
The Sentry further established that Kiir’s close associates and lower-level ministers have held shares in no fewer than 32 South Sudanese companies established to extract minerals. The government has yet to disclose crucial information about their ownership structures, activities, or open applications for licenses, undermining public scrutiny of a sector already at heightened risk for corruption and raising questions about who benefits from South Sudan’s mineral wealth.
Sophie Lombardo, Investigator for The Sentry, said: “Without swift action, South Sudan’s mining sector may fall into the same traps as the oil sector, which has helped drive war in South Sudan for decades. Military interests abound, either through joint ventures with private investors or companies controlled by the Ministry of Defense. The Sentry’s investigative findings reveal opaque and questionable deals that raise significant concerns about secret off-budget revenues within an institution marred by a history of abuse.”
J.R. Mailey, Investigations Director at The Sentry, said: “Today, widespread corruption, mismanagement, and poor oversight in the mining sector are intertwined in a vicious cycle. Individuals linked to criminal activities have received numerous mining licenses, as have companies with little technical or financial capacity, raising serious questions about how licenses are granted. The mineral sector in South Sudan is still in its early development stage, however, so the implementation of critical reforms can deliver enormous benefits for the future of the country. Policy action is needed now, such as the creation of a regularly updated public online register disclosing the beneficial ownership of mining sector businesses.”
- Although South Sudan took welcome steps to reform the mining sector in 2012, some government officials, their relatives, and their close associates have fostered a weak regulatory environment susceptible to exploitation.
- Memoranda and articles of incorporation reviewed by The Sentry reveal that politically exposed persons—both President Salva Kiir’s close associates and lower-level ministers—have held shares in no fewer than 32 South Sudanese companies established to extract minerals.
- Kiir’s daughter partly owns a company with three active mining licenses.
- A company with three mining licenses lists former Vice President James Wani Igga’s son as a shareholder.
- Ashraf Seed Ahmed Hussein Ali, a businessman commonly known as Al-Cardinal who was placed under Global Magnitsky sanctions in October 2019, reportedly owns the company currently holding the most mining licenses.
- In the gold-rich region of Kapoeta, state government officials have issued licenses independently of the central government, a probable violation of South Sudan’s Mining Act that has allowed illegal mining to take place on land previously allocated by Juba to other companies.
- South Sudan’s military has developed problematic mining interests in an effort to address budgetary shortfalls.
Key recommendations from the report:
South Sudan government:
- Create a public register disclosing beneficial ownership. Key company ownership information remains inaccessible to the public. A regularly updated public online register would promote good governance and serve as a vital accountability tool for anti-corruption advocates, civil society, and political parties. Moreover, such a move would encourage legitimate investment and demonstrate the government’s commitment to building a more transparent system.
- Conduct a retroactive audit of the mining sector. Numerous red flags in South Sudan’s mining sector highlight the country’s susceptibility to state capture. In order to assess the effectiveness of the process of awarding licenses to technically competent, legitimate enterprises, the Ministry of Mining should hire an independent external party to retroactively audit all mining companies currently operating in South Sudan. The ministry should further investigate the beneficial owners of mining companies and determine whether politically exposed persons have unfairly profited. As an example, independent audits have been required prior to resuming certified exports following the moratorium implemented as part of the government-led Kimberley Process initiative to clean up the diamond trade.
United States government:
- Issue responsible investment reporting requirements. The US Department of State should encourage responsible engagement in South Sudan’s mining sector by implementing investment reporting requirements for US persons. Much as it did in Myanmar, the agency should require companies to file publicly available reports detailing their due diligence, community engagement, human rights, anti-corruption, and environmental efforts within their operations and policies.
- Issue a public advisory listing typologies and enhanced due diligence measures. Building upon the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)’s two anti-money laundering (AML) advisories referencing political corruption in South Sudan, the United States should consider issuing an update or a separate advisory sharing with financial institutions the latest methods and trends used to launder the proceeds of illegal mining and the extractives industry.
- Expand US sanctions authorities. South Sudan’s conflict dynamics have evolved significantly since then-US President Barack Obama issued EO 13664 in 2014. The US president should issue a new executive order, or amend EO 13664, to provide additional authorities for targeting illicit financial activity.
- Update sanctions designation criteria to include family members. The current order should be amended to permit the designation of individuals who are the spouses or dependent children of (i) any person whose property and interests in property are blocked pursuant to EO 13664 or (ii) any South Sudanese person blocked pursuant to EO 13818.
- Target captured business sectors. A new executive order should limit or prohibit US persons from conducting business with foreign persons who are active in key sectors of South Sudan’s economy that are captured by regime elites, including the mining and oil industries. Business prohibitions or requirements to report publicly on due diligence measures could emanate from this effort.
United Kingdom and European governments:
- Issue a public anti-money laundering advisory to financial institutions warning about the extractives industry’s corruption risks. The UK’s National Crime Agency (NCA) and relevant national authorities across continental Europe should issue public AML alerts or advisories on corruption in the extractives sector, citing the risks of laundering the proceeds of corruption in oil, gold, and other natural resource sectors requiring licenses. In order to assist financial institutions in updating their customer due diligence and ongoing monitoring frameworks, an advisory should include typologies and red flags identifying methods that bad actors could use to siphon illicit funds out of South Sudan. These advisories would complement the alert issued by the NCA in February 2020 on illicit money flows related to South Sudanese political corruption.
Read the full report: https://thesentry.org/reports/
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ABOUT THE SENTRY
The Sentry is an investigative and policy team that follows the dirty money connected to African war criminals and transnational war profiteers and seeks to shut those benefiting from violence out of the international financial system. By disrupting the cost-benefit calculations of those who hijack governments for self-enrichment in East and Central Africa, the deadliest war zone globally since World War II, we seek to counter the main drivers of conflict and create new leverage for peace, human rights, and good governance. The Sentry is composed of financial investigators, international human rights lawyers, and regional experts, as well as former law enforcement agents, intelligence officers, policymakers, investigative journalists, and banking professionals. Co-founded by George Clooney and John Prendergast, The Sentry is a flagship initiative and strategic partner of the Clooney Foundation for Justice.
Learn more at www.TheSentry.org.