United States Has Singled Out Africa’s Extractives Industries for Scrutiny, More Anti-Corruption Enforcement May Follow
DOJ Probing Glencore for Potential Corruption and Money Laundering in Africa
The U.S. arm of Glencore, the global commodities trading and mining giant, has been served a subpoena by the U.S. Department of Justice, according to news accounts. The DOJ’s subpoena reportedly seeks documents and information pertaining Glencore’s business in the Democratic Republic of Congo (DRC), Nigeria and Venezuela to assess potential violations of U.S. anti-money laundering laws and the Foreign Corrupt Practices Act (FCPA), the principal U.S. law essentially prohibiting the bribery of foreign officials for business gain by U.S. companies and others subject to United States’ jurisdiction (broadly construed and applied).
Glencore in Context: Trump Administration Has Singled Out Corruption in Africa and Africa’s Extractives Sector
News of the Glencore subpoena should come as no surprise, given Glencore’s size, global footprint and business in the high corruption risk extractives industry, including in jurisdictions that rank high for corruption and other legal risks. Nevertheless, the Glencore subpoena may not be a one-off and it should be viewed– at least for risk assessment and compliance improvement purposes– as potentially part of a larger U.S. strategy to proactively target corruption and, by extension, money laundering, in Africa and Africa’s extractives industries. (The wider context is that the Trump Administration views U.S. anti-corruption, anti-money laundering and sanctions laws and their enforcement as “tools of economic diplomacy”, including to advance trade and other policy objectives).
More broadly, the Trump Administration’s legal enforcement posture toward Africa should be viewed in light of its broader money-saving priorities and aversion to foreign aid and assistance, which the Administration has threatened to diminish or cut off, particularly in response to corruption on the continent. Rather than continue to provide foreign aid and other assistance, the Trump Administration would prefer to build mutually beneficial commercial relationships and facilitate opportunities for American business in Africa, including by clamping down on corruption and other illegal (and “unfair” trade practices) that undermine the competitiveness of American businesses in Africa generally and vis-a-vis Chinese firms, and, ultimately, perpetuate the need for foreign assistance. In short, the Trump Administration is taking a trade-not-aid approach to Africa that is expected to become more evident in the near to medium term.
Anti-Corruption Enforcement Without Borders: United States v. Chi Ping Patrick Ho
As discussed in this February MassPoint note, the Trump Administration’s National Security Strategy (NSS) for Africa targets corruption on the continent– particularly among Africa’s “elites”–as well as China’s dominance. The Trump Administration’s stated interest in combating corruption in Africa, particularly in the extractives sector, is backed by potent legal tools.
The FCPA and U.S. anti-money laundering laws are sufficiently broad in scope and jurisdictional range to capture corrupt activities overseas, and carry stiff civil and criminal penalties for violations. For an example of how the FCPA and anti-money laundering laws reach corrupt activities and money laundering in Africa, see the eight-count criminal complaint in the case of United States v. Chi Ping Patrick Ho, which is pending in the Southern District of New York against a former Hong Kong home affairs secretary being prosecuted for FCPA, money laundering and related U.S. law violations for allegedly facilitating and executing the bribery of the Chadian president to obtain oil rights and other benefits for the Shanghai-based Chinese conglomerate, CEFC China Energy. The bribery scheme was allegedly hatched and furthered in Chad, New York (at UN headquarters) and elsewhere, and payments to effect/in furtherance of the scheme were made in U.S. dollars and routed through New York (acts in furtherance of the alleged scheme and payments routed through the United States are, among other facts of the case, bases for U.S. jurisdiction).
(The criminal complaint against Chi Ping Patrick Ho, first unsealed in November 2017, named a second defendant, Cheikh Gadio, a former foreign minister of Senegal (Gadio reportedly was/is discussing a deal with prosecutors). The complaint also set out allegations of a parallel scheme to bribe the foreign minister of Uganda for the business benefit of CEFC China Energy in Uganda. A related and noteworthy development is that the chairman of CEFC China Energy, after the U.S. case against Chi Ping Patrick Ho ramped-up and garnered abundant news coverage (particularly by the South China Morning Post), was reportedly detained and investigated by Chinese authorities for financial crimes–this apparent follow-on effect in CEFC China Energy’s home jurisdiction demonstrates, as other cases have, the multi-jurisdictional ripple effects of U.S. enforcement actions).
Global Magnitsky Sanctions: Powerful Anti-Corruption Tools in Africa and Worldwide
In addition to the FCPA and U.S. anti-money laundering laws, the United States has a fairly new and powerful anti-corruption sanctions program– the Global Magnitsky Sanctions— which was promulgated in December 2017, targets corrupt acts and human rights abuses worldwide and imposes financial and immigration sanctions. The Global Magnitsky Sanctions define corruption broadly (more broadly than the FCPA and prevailing anti-corruption laws and standards) and directly target current and former government officials for corrupt acts and human rights abuses.
To date, African officials and private parties/entities based in or involved with Africa have been sanctioned for corruption and human rights abuses under the Global Magnitsky Sanctions. Notable among them here is Dan Gertler, the Israeli businessman with extensive DRC mining interests and a widely-known close relationship with the President of the DRC, Joseph Kabila.
(For more information about the scope, mechanics and potential impact of the Global Magnitsky Sanctions, see MassPoint’s Global Magnitsky Sanctions publications and dedicated Global Magnitsky Sanctions site.)
Now is the Time to Reassess Corruption and Money Laundering Risk and Improve Compliance; Potential Impact on Cobalt, Other Elements Supply Chains
While it is always a good time for U.S. and foreign businesses and others with cross-border relationships and activities to assess corruption, anti-money laundering and related risk, current U.S. policy and high-level views of legal enforcement and recent enforcement actions merit a reassessment of risk and compliance.
Such reassessments should be high priorities for parties with business in or involving Africa, and particularly the extractives industry and/or China-based or affiliated firms. Businesses, such as technology companies and automakers that rely on cobalt, other elements and minerals should also take note of developments and how they might adversely or otherwise affect their supply chains. Assessments should, of course, take into account jurisdiction and industry risk, as well as the potential risks posed by business partners, vendors and other counter-parties or third parties.
For enhanced precision and effectiveness, reliable, locally sourced information (from trusted sources) should be used where available, to complement international data (such as corruption indexes and rankings). Internally, the right persons and departments (such as business managers, sales/contract or concession managers and other on-the-ground personnel, and legal and compliance) should be involved in re-assessing risk and compliance effectiveness, with the benefit of accurate and current information about local developments, as well as information concerning U.S. policy and enforcement objectives and actions.
Finally, and perhaps most importantly, companies with international business, particularly in Africa, must ensure that their compliance messaging is adequately communicated (i.e., heard and understood) by all relevant personnel, counter-parties and third party vendors/others, including through clear and digestible compliance policies (and updates) transmitted through formats most effective in particular contexts (e.g., in compliance documents, emails, text messages, and/or videos, etc.). These messages should be enforced by education, training and other methods that are tailored for audience, rather than standardized offerings that simply provide information as to applicable or potentially applicable rules.
At minimum, U.S. and foreign companies with international business and interests, particularly in Africa and more so in its extractives industries, should take concerted steps to understand the current U.S. anti-corruption and anti-money laundering policy and enforcement posture, as articulated by the Trump Administration and evidenced by recent actions.
More Information, MassPoint’s Services
Select Related Publications
Global Magnitsky Sanctions
- Global Magnitsky: The Swiss Army Knife Of Sanctions, Law360, August 7, 2018 (view at Law360).
- New Global Magnitsky Regulations Confirm U.S. Multinationals and Dual Citizens Have Heightened Sanctions Exposure, MassPoint PLLC, June 29, 2018.
- U.S. Lawmakers Raise Possibility of Magnitsky Sanctions on Chinese Officials, Magnitsky Laws and Sanctions Update, April 21, 2018.
Congress Members Urge Trump Administration to Apply Global Magnitsky Sanctions to Sudan, Magnitsky Laws and Sanctions Update, April 14, 2018.
- Some U.S. Individuals and Entities Have Direct Sanctions Exposure Under Global Magnitsky Sanctions, No. 5, April 10, 2018.
- Departing from Prevailing Legal Standards, United States Directly Sanctions Foreign Government Officials for Corruption, MassPoint Magnitsky Series, No. 4, April 6, 2018.
- How the Trump Administration Supercharged Global Magnitsky Corruption and Human Rights Sanctions (section-by-section analysis of Executive Order 13,818 promulgating the Global Magnitsky Sanctions), MassPoint Magnitsky Series, No. 3, April 3, 2018.
- From Sergei Magnitsky to Global Magnitsky: United States Asserts Universal Jurisdiction Over Corruption and Human Rights Abuses, MassPoint Magnitsky Series No. 2, March 27, 2018.
- New U.S. Sanctions Are a Powerful Weapon Against Corruption and Human Rights Abuse Worldwide, MassPoint Magnitsky Series No. 1, March 5, 2018.
International Trade and Sanctions/Export Controls/Anti-Corruption/Anti-Money Laundering/Business Conduct
- U.S.-China Trade War on Three Fronts (Tariffs, Intellectual Property, Law), May 2018.
- ZTE and U.S. Law as Trade War Weapon, Law360/MassPoint PLLC, May 21, 2018.
- House Bill “Blocks Bailout” of ZTE After Export Ban, May 19, 2019.
- OFAC Further Tightens Russia Debt Prohibitions Pursuant to the Countering Russian Influence in Europe and Eurasia Act of 2017 (OFAC DIrective 1 As Amended September 29, 2017), October 2017
- From Anti-Money Laundering to Immigration Enforcement: Time to Reassess the Law Enforcement Role of Banks, Credit Unions and Other Financial Intermediaries, September 2017.
- Nonfinancial Risk For Banks: Incorporating Environmental, Social and Governance (ESG) to Identify and Manage Banks’ Legal, Commercial and Reputation Risk, April 2017.
- FIFA, the U.S. Financial System, and U.S. Jurisdiction Over Foreign Parties and Events
- MONEY IS NOT ENOUGH:Emerging Markets-Based Private and State-Owned Enterprises Need Entrepreneurial Governance to Advance Strategic Objectives
- BNY Mellon to Pay $14.8 Million to Settle “Corrupt” Hiring Charges for Providing Internships to Sovereign Wealth Fund Officials’ Family Members
- United States Adds Russian Direct Investment Fund, Other Russian Financial Services Actors to Sectoral Sanctions List, August 2015.
- A Great BRIC Wall? Emerging Trade and Finance Channels Led by Non-Western Nations Could Curtail the Global Reach of U.S. Law, June 2015.
- Cross-Compliance for Financial Institutions: the Anti-Corruption-AML Nexus, September 2014.
- Globalized Anti-Corruption Enforcement: Direct and Collateral Consequences for Private and State-Owned Enterprises (financial institutions focus), MassPoint Occasional Note, November 2013.