Senator Lugar (R.-IN) helped insert Section 1504, a provision requires oil, gas, and mining companies to disclose all payments to governments in each jurisdiction in which they operate, into the Dodd-Frank Wall Street Reform and Consumer Protection Act. He delivered the keynote speech at Georgetown University for the annual USAID conference, “Frontiers of Development,” this week. He placed transparency at the heart of his speech,
This is vital not only to provide taxpayers a clear picture of how their money is being used, but also to reinforce U.S. leadership in transparent economic development. Transparency helps level the playing field for U.S. companies, counters the propensity of resource-rich developing countries toward wasteful spending, and combats the corruption that the World Bank has identified as “the single biggest obstacle to economic and social development.” Toward this end, the U.S. government should be moving forward with full implementation of the 2010 Cardin-Lugar Amendment, which requires all companies listed on the New York Stock Exchange to publish their payments to foreign governments for oil, natural gas, and mineral development. Failure to fully implement Cardin-Lugar would squander an opportunity to transform the development scenarios of resource-rich countries mired in poverty.
Dodd-Frank was passed in 2010, but the SEC has still not yet issued the final rule on Provision 1504. The deadline for the ruling is now over a year in the past (and counting). Earlier this Spring, on the one-year anniversary of the missed rule-making deadline for Dodd-Frank Provision 1504 (as well as other provisions), Task Force Managing Director Tom Cardamone commented on the matter,
A year after the deadline, established by Congress when Dodd-Frank passed, the SEC has still not yet issued the final rule on Section 1504. The delay comes as the regulator faces intense pressure from oil industry lobbyists, including from the American Petroleum Institute (API). The API wrote a letter to the SEC laying out the basis for a legal challenge to potential rules, which some have characterized as an implicit threat of expensive litigation. These demands include shifting the reporting requirement from a project-by-project basis, which is explicitly required in the statute, to a geographic basis, such as by a geological basin or province. This move would maintain opacity in the extractive industries, and allow an environment that fosters corruption and bribery to continue.
The SEC needs to stop delaying and issue the strong transparency rules that Congress passed nearly two years ago. Further delay only serves as an invitation to industry lobbyists to continue to push for loopholes that allow them to execute unaccountable deals with governments. These rules are already long overdue.
They are indeed “long overdue.” The developing world needs to know what business is happening between its governments and multinational corporations. Corruption is rampant. There are often very weak accountability laws and institutions in place to protect countries from being taken advantage of, or to prevent much-needed revenue from natural resource extraction from disappearing into the black box of a developing country’s treasury. Section 1504 of the Dodd-Frank bill would go a very long way in ameliorating these issues. Publishing payments for all to see helps light the shadowy system that invites corruption and abuse. People of the developing world cannot afford (literally) this type of financial system.
Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.