GAO Reports Ineffectiveness of Conflict Minerals Disclosure Rule…

The U.S. Government Accountability Office (GAO) reported that the SEC’s 2012 conflict minerals disclosure rule has not successfully reduced violence in the DRC. The rule is linked to increased violence in small-scale gold mining areas and has had minimal impact on violence in neighboring countries. Experts emphasize that armed groups rely on diverse funding sources, suggesting that broader strategies are necessary to address the complexities of conflict in the region.

On Monday, the U.S. Government Accountability Office (GAO) published findings indicating that the conflict minerals disclosure rule established by the Securities and Exchange Commission (SEC) in 2012 has not effectively mitigated violence in the Democratic Republic of Congo (DRC). This investigation uncovered that there is a lack of substantial evidence demonstrating any reduction in the frequency or intensity of violence in DRC’s eastern regions, which are characterized by numerous mines and armed groups. Furthermore, the report suggests a troubling potential correlation between the rule and an increase in violence, particularly in areas where informal, small-scale gold mining is prevalent. Armed groups may be increasingly competing for dominance over gold mining operations, which pose lower traceability challenges compared to other conflict minerals due to gold’s portability. The GAO’s report also emphasized that the rule has had minimal influence on violence levels in surrounding countries. Experts propose that armed factions in the DRC depend on a variety of funding sources that extend beyond conflict minerals, with external factors and governance issues significantly contributing to the ongoing conflicts in the region. Nonetheless, there is evidence that certain industry initiatives have made strides towards fostering transparency in conflict mineral sourcing. For example, a recent alert was issued by an industry association to smelters engaged in its assurance program regarding the risks of potential armed group involvement in mineral supply chains originating from the DRC and Rwanda. Enacted on August 22, 2012, under Section 1502 of the Dodd-Frank Act, the SEC’s conflict minerals disclosure rule requires companies to disclose the use of conflict minerals sourced from the DRC or adjacent nations. The rule, which came into effect on November 13, 2012, modified the Securities Exchange Act of 1934, necessitating that companies provide a Conflict Minerals Report following rigorous due diligence protocols regarding the sourcing and chain of custody for conflict minerals. Conflict minerals, which encompass tantalum, tin, tungsten, and gold, are linked to funding violent acts, including killings and human rights violations in conflict-affected areas such as the DRC. In the quest for responsible mineral sourcing and the prevention of financing human rights violations tied to mineral extraction, various voluntary and regulatory measures have been introduced over the years. Notably, the Organisation for Economic Co-operation and Development (OECD) released guidelines in 2011 focused on due diligence in mineral supply chains emanating from conflict-affected regions, guidelines which have garnered global acknowledgment as a framework for responsible practices and have been cited in subsequent U.S. legislation pertaining to conflict minerals.

The issue of conflict minerals has garnered significant attention, particularly in the context of the Democratic Republic of Congo, where the extraction of minerals such as gold, tantalum, tin, and tungsten is often associated with funding armed conflict and human rights abuses. The U.S. Congress implemented the conflict minerals disclosure rule as a response to allegations that these minerals have been linked to financing violence and perpetuating human rights violations in this region. The SEC’s rule mandated companies to perform due diligence in their sourcing practices, aiming to create transparency in the supply chain and reduce the financial incentives for armed groups operating in conflict zones. However, the effectiveness of this rule in achieving its intended goals has come under scrutiny, prompting investigations such as the one conducted by the GAO. The findings indicate a need to reassess the current regulatory framework and explore alternative solutions to fundamentally address the complex interplay of factors contributing to ongoing violence in the DRC.

In conclusion, the recent findings by the U.S. Government Accountability Office regarding the 2012 SEC conflict minerals disclosure rule suggest that the rule has not accomplished its primary objective of reducing violence in the DRC. Despite industry efforts towards enhancing transparency in sourcing conflict minerals, the correlation between the rule and increased violence in certain areas highlights the complexities surrounding the funding of armed groups. Additionally, the reliance on multiple funding sources by these groups indicates that the resolution of violence and human rights abuses in the DRC requires a broader and more nuanced approach. Policymakers must consider alternative strategies and frameworks to address the underlying conditions of conflict effectively.

Original Source: www.jurist.org