A recent GAO report concluded that the SEC’s conflict minerals disclosure rule, implemented in 2012, has not reduced violence in the DRC, and may even have correlated with increased conflict due to competition over gold mines. The report suggests that armed groups depend on broader funding sources, and while the rule has shown negligible effects on violence levels in surrounding nations, some industry initiatives have improved transparency in sourcing conflict minerals.
The U.S. Government Accountability Office (GAO) released a report indicating that the conflict minerals disclosure rule established by the Securities and Exchange Commission (SEC) in 2012 has not been effective in diminishing violence in the Democratic Republic of Congo (DRC). The GAO’s investigation showed no evidence that the rule led to a reduction in violence in regions of the DRC notorious for mining and armed conflict. Rather, the report suggested that the rule may have been linked to an increase in violence, particularly in areas characterized by informal and small-scale gold mining operations. Such a rise in conflict potentially stems from armed groups vying for control over these lucrative gold mines, as gold is more easily transported and less traceable than other conflict minerals. Additionally, the GAO pointed out that the rule had minimal influence on reducing violence in neighboring countries. Experts believe that armed groups in the DRC depend on various funding sources beyond conflict minerals, and several complex factors, including external influences and weaknesses in governance, significantly contribute to continuing conflicts in the region. Despite the rule’s shortcomings, some positive developments have emerged from industry initiatives aimed at enhancing transparency in conflict mineral sourcing. Recently, an industry association alerted smelters involved in its assurance program of the risks posed by armed group interference in mineral supply chains originating from the DRC and Rwanda. Implemented under Section 1502 of the Dodd-Frank Act, the SEC’s conflict minerals disclosure rule mandates that companies disclose the use of conflict minerals sourced from the DRC and surrounding nations. Effective since November 13, 2012, this rule amended the Securities Exchange Act of 1934, requiring certain companies to assess their supply chain concerning conflict minerals essential to their products. The recognized conflict minerals include tantalum, tin, tungsten, and gold, with a well-documented association with financing violence and human rights violations in conflict-affected areas such as the DRC. In complementing regulatory measures, both voluntary and international standards, such as the OECD’s guidelines published in 2011 on due diligence for responsible mineral supply chains from conflict zones, have sought to ensure responsible sourcing and prevent financial support for human rights abuses linked to mineral extraction. These frameworks have gained international acceptance and have been referenced in subsequent U.S. conflict minerals regulations.
Conflict minerals, which primarily consist of tantalum, tin, tungsten, and gold, are minerals that are sourced from regions experiencing conflict, particularly the DRC. The extraction and trade of these minerals have been linked to funding armed groups that perpetrate violence and human rights violations. The SEC’s disclosure rule, part of the Dodd-Frank Act of 2010, aimed to increase transparency in the sourcing of these minerals and to provide consumers and investors with information on the supply chain origins of conflict minerals used in products. Despite these legislative efforts, the effectiveness of the rule in achieving its intended goals has come under scrutiny, leading to investigations and reports from various watchdog agencies, including the GAO.
In summary, the GAO’s report critically evaluates the effectiveness of the SEC’s conflict minerals disclosure rule, concluding that it has not led to a reduction in violence within the DRC. The rise in violence may be partly due to armed groups contending for control over small-scale gold mining opportunities. Furthermore, the report underscores the complexity of the funding sources for these armed groups, indicating that broader factors including governance and external influences play significant roles in perpetuating conflict. While the rule itself has not achieved its goals, some industry initiatives have emerged to promote transparency and mitigate the risk of violence in mineral supply chains.
Original Source: www.jurist.org
