    [Senate Hearing 115-811]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-811

                       A PROGRESS REPORT ON CONFLICT MINERALS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON AFRICA AND
                              GLOBAL HEALTH POLICY

                                     OF THE

                         COMMITTEE ON FOREIGN RELATIONS
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 5, 2017

                                   __________

           Printed for the use of the Committee on Foreign Relations

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. GOVERNMENT PUBLISHING OFFICE
     40-430 PDF               WASHINGTON : 2020

                       Available via the World Wide Web:
                             http://www.govinfo.gov

                     COMMITTEE ON FOREIGN RELATIONS

                    BOB CORKER, Tennessee, Chairman
    JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
    MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
    RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
    JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
    CORY GARDNER, Colorado               TOM UDALL, New Mexico
    TODD YOUNG, Indiana                  CHRISTOPHER MURPHY, Connecticut
    JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
    JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
    ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
    RAND PAUL, Kentucky                  CORY A. BOOKER, New Jersey
                      Todd Womack, Staff Director
                Jessica Lewis, Democratic Staff Director
                        John Dutton, Chief Clerk

                       SUBCOMMITTEE ON AFRICA AND
                          GLOBAL HEALTH POLICY

                     JEFF FLAKE, Arizona, Chairman
    TODD YOUNG, Indiana                  CORY A. BOOKER, New Jersey
    JOHN BARRASSO, Wyoming               CHRISTOPHER A. COONS, Delaware
    JOHNNY ISAKSON, Georgia              TOM UDALL, New Mexico
    RAND PAUL, Kentucky                  JEFF MERKLEY, Oregon

                                  (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Flake, Hon. Jeff, U.S. Senator From Arizona......................     1

    Booker, Hon. Cory, U.S. Senator From New Jersey..................     2

    Young, Hon. Todd, U.S. Senator From Indiana......................     4

    Coons, Hon. Christopher, U.S. Senator From Delaware..............     4

    Goss, Rick, Senior Vice President, Environment and
      Sustainability, Information Technology Industry Council,
      Washington, DC.................................................     5

        Prepared Statement...........................................     7

    Dizolele, Mvemba, Lecturer, School of Advanced International
      Studies, Johns Hopkins University, Washington, DC..............    11

        Prepared Statement...........................................    13

    Ganesan, Arvind, Director, Business and Human Rights, Human
      Rights Watch, Washington, DC...................................    15

        Prepared Statement...........................................    17

                  Additional Material Submitted for the Record

    Prepared Statement of Senator Richard Durbin.....................    34

    Series of Letters Relating to Section 1502 of the Dodd-Frank Act
      Submitted for the Record by Senator Cory Booker................    36

                                     (iii)

                     A PROGRESS REPORT ON CONFLICT MINERALS

                                  ----------

                            WEDNESDAY, APRIL 5, 2017

                                   U.S. Senate,
       Subcommittee on Africa and Global Health Policy,
                                Committee on Foreign Relations,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 2:00 p.m., in
    room SD-419, Dirksen Senate Office Building, Hon. Jeff Flake,
    chairman of the subcommittee, presiding.
        Present: Senators Flake [presiding], Young, Barrasso,
    Isakson, Paul, Booker, Coons, Udall, and Merkley.

                 OPENING STATEMENT OF HON. JEFF FLAKE,
                       U.S. SENATOR FROM ARIZONA

        Senator Flake. This hearing of the Senate Foreign Relations
    Subcommittee on Africa and Global Health will come to order.
        Today, we are going to look at Section 1502 of Dodd-Frank,
    the so-called conflict minerals provision, which was signed
    into law in 2010.
        For too long, armed militias in Eastern DRC have
    perpetrated unspeakable crimes against civilians in the absence
    of the rule of law. In an effort to deny these militias the
    revenues they collect from the mines in the area under their
    control, Congress included Section 1502 in Dodd-Frank.
        This provision required firms that file with the Securities
    and Exchange Commission to perform due diligence on their
    mineral supply chain. The thought behind Section 1502 is that
    the public disclosure of the source of minerals used in
    products would create an awareness of how these minerals can be
    exploited and facilitate human rights abuses in the DRC. This
    awareness would motivate shareholders and investors to ensure
    the minerals used in their products would be conflict-free.
        Section 1502 uses the SEC to achieve the foreign policy
    goal of preventing human rights abuses in the DRC, an approach
    that we will take a look at today. No hearings were held in the
    House or the Senate on Section 1502 prior to its inclusion in
    the conference report to Dodd-Frank.
        I think we can all agree that putting an end to the
    continued horrific abuses of human life in the DRC is a worthy
    goal of pursuit. After 7 years, however, it is past time for
    the Foreign Relations Committee to examine how the conflict
    minerals rule has affected events on the ground in the DRC and
    whether or not it is achieving its goal.
        There have been some positive results. Experts believe
    armed groups have become scarcer at the mine sites, as compared
    to before the law was written. The law has also created
    awareness on the part of consumers and investors around the
    world seeking to avoid indirectly supporting human rights
    crimes.
        There have also been some drawbacks. Section 1502's mandate
    on the private sector has been costly, and the Eastern DRC
    continues to see incidents of violence and human rights abuses.
        So this hearing is timely today. In late January, the
    acting chairman of the SEC indicated that his staff would
    reconsider whether the guidance on the implementing rule is
    ``still appropriate'' and whether any additional relief for
    SEC-listed companies is appropriate.
        Before action is taken on the SEC regulation that seeks
    primarily to solve a foreign policy problem, it is important
    for this committee to examine precisely what the regulation's
    impact has been on the region. Equally important is to
    understand how this law intersects with other factors at play
    in the rest of the DRC, which continues to be plagued by
    conflict and violence.
        In fact, we learned last week of the death of American
    Michael Sharp, a United Nations employee who coordinated the
    Group of Experts in the Congo. Mr. Sharp was kidnapped along
    with his colleagues in central DRC last March, and their bodies
    were discovered last week.
        Mr. Sharp's death serves as a stark reminder that keeping
    armed militias from having access to lucrative mines is just
    but one small slice of the larger problem the DRC faces.
        I look forward to hearing what our witnesses have to say
    about the conflict minerals laws and its impact in the Eastern
    DRC. And I appreciated the meetings we had in my office
    yesterday, and I appreciated looking at your testimony.
        With that, we will turn to the ranking member, Mr. Booker.

                    STATEMENT OF HON. CORY BOOKER,
                      U.S. SENATOR FROM NEW JERSEY

        Senator Booker. Chairman Flake, I just want to thank you.
    This is the first subcommittee hearing of this Congress. It is
    my first opportunity to be your ranking member. As somebody who
    considers you a friend and somebody I respect, I am grateful
    for this opportunity. I think that this committee could have a
    very consequential effect for the better on the continent of
    Africa, so I am grateful and really feel privileged to be here
    today.
        Senator Durbin, my much senior Senator in terms of
    experience, wanted to be here today. He has been a leader on
    this issue, and he has some testimony he would like to present,
    and I would like to be able to introduce that for the record,
    if possible.
        Senator Flake. Without objection.
        [The information referred to above can be found in the
    ``Additional Materials for the Record'' section of this
    Hearing.]
        Senator Booker. I want to thank the witnesses. I really got
    a lot out of reading your testimony. I know some time was spent
    with my staff as well.
        It is extraordinary how much commitment you all have given
    to this issue, how much time, energy, and focus on an issue
    that frankly needs more time, energy, and focus. So thank you
    for your leadership.
        I understand that I am in the company of not only experts
    but, frankly, people who have insights that can be really
    valuable because we have seen many of the positive aspects of
    increased international attention to conflict minerals over the
    past several years, and we have seen a lot of very valuable
    public-private partnership work.
        I think, Mr. Goss, you mentioned a lot of that in your
    testimony, which I think was really important.
        So we know today that, according to the Enough Project, 166
    out of 193 assessed mines in eastern Congo are now conflict-
    free. That is something that we should be proud of. And 2016
    showed a record high in legal mineral exports from the DRC.
    These are important benchmarks to recognize.
        The North Kivu province, the most 3T mineral rich province
    in Congo, reported record high conflict-free numbers as well in
    minerals.
        But only through a robust, consistent, multifaceted
    approach--I think more than one of the testimonies talked about
    having many tools in the toolbox--can we help, having lasting
    impact on the region.
        We know that efforts to curtail illicit mining and mineral
    traffic must be paired with a package of aid, a package of
    reform efforts, focused not only on the mining industry but
    also at the government level. We know that we need high-level
    diplomatic engagement, especially on the part of the United
    States. The U.S. must lead.
        So I know at a hearing before this committee back in 2009,
    witnesses emphasized that the root causes of the shockingly
    high levels of violence in the DRC and the Great Lakes Region
    was a deep-rooted conflict funded in part through this mineral
    extraction.
        The U.N. Group of Experts documented that same year that
    FDLR exploitation of mineral mining in the Kivus continues to
    deliver millions of dollars to direct financing to FDLR
    coffers. And in 2010, a bipartisan group of Members in this
    chamber came together to discuss and debate and ultimately pass
    a provision that would require reporting on the source of
    conflict minerals.
        Again, this is not a ban. It is reporting. It is about
    transparency.
        At the same time, Senator Durbin in his remarks about
    transparency, this is what he said: You could say we were doing
    nothing, but at least then consumers would have some options on
    ensuring the electronics in their pockets were not contributing
    to violence.
        We have made progress, but today we are facing a flashpoint
    in the DRC as it confronts its largest political and security
    challenge in years. It is something that should concern all of
    us. We have seen armed groups proliferate in central and
    Southeastern DRC, areas previously viewed as relatively stable,
    all while the threats to civilians in the east have not abated.
        Recent history suggests that conflict in the DRC can and
    often does spill over its borders, drawing in other actors from
    the region and providing safe havens for foreign-origin
    militias.
        Now is the time for more international attention to all the
    root causes of the conflict in DRC, not less. We need more
    action, more focus, more attention, more investment.
        The conflict mineral provision was not intended in any way
    as a panacea for the threat to DRC stability. We can be doing
    more.
        And I want to say that the urgencies are seen, as my
    chairman said, the urgency is when you see people like Michael
    Sharp dying--and, again, I do not want to single out his death
    because we know that there are thousands of innocent people who
    have died in this conflict over the years. We owe them a debt
    not only for their work, the kind of leadership that Mr. Sharp
    showed, but also to pick up the cause and ensure that heroic
    people like this do not die in vain. We cannot let their work
    stop. We have to carry on and move forward and ultimately
    vindicate them by bringing peace to a great country.
        So I am again, Chairman, really excited about being here,
    grateful for your leadership for many years before I was even
    in the Senate, and I look forward to working with you as we go
    forward.
        Senator Flake. Thank you. I can tell you I was very excited
    when I knew that you were joining the committee and, in
    particular, the Subcommittee on Africa. So I look forward to a
    long, productive relationship.
        I am also glad to have Mr. Young, who just came to the
    Senate in January, join the subcommittee as well.
        Do you want to say a couple things?

                     STATEMENT OF HON. TODD YOUNG,
                       U.S. SENATOR FROM INDIANA

        Senator Young. Thank you, Chairman, and thank you, Ranking
    Member, for convening this really important hearing. I have had
    an opportunity to review the opening remarks, and I will look
    forward to asking a question or two of our witnesses.
        But thanks so much for being here. I mean, it is really
    important that we shine a bright light on some of the
    challenges you are facing in DRC, and we are here to try to be
    part of the solution.
        I will be in and out over the course of this hearing, Mr.
    Chairman, but I look forward to engaging with your witnesses a
    bit later.
        Senator Flake. Thank you.
        Mr. Coons has joined us. Senator Coons, do you have
    anything to say?

                 STATEMENT OF HON. CHRISTOPHER COONS,
                       U.S. SENATOR FROM DELAWARE

        Senator Coons. Simply that I am eager to hear from the
    witnesses about the impacts that conflict minerals continue to
    have in Eastern Congo and what the impact is on industry and
    how we can strike an appropriate balance, both to make sure
    that supply chains are also value chains and reflect the values
    of American consumers and American people, but that we also
    have rules of the road that allow for transparent and
    appropriate development opportunities.
        And just my gratitude, Mr. Chairman and Ranking Member, for
    your long interest and leadership on all issues African.
        Thank you.
        Senator Flake. Thank you.
        We will turn now to our witnesses.
        Mr. Rick Goss joins us today from the Information
    Technology Industry Council, where he serves as senior vice
    president for environment and sustainability.
        Mr. Mvemba Dizolele, a Congolese-American, is a foreign
    policy analyst whose work has been featured in numerous
    publications like the New York Times and Newsweek. He also
    lectures at Johns Hopkins University of Advanced International
    Studies.
        Mr. Arvind Ganesan is the director of Human Rights Watch's
    Business and Human Rights Division, and his work has covered
    many countries, including Angola, Equatorial Guinea, Nigeria,
    and, of course, the DRC.
        We ask that you keep your comments to around 5 minutes,
    and, obviously, your full comments will be submitted for the
    record.
        With that, the committee recognizes Mr. Goss.

    STATEMENT OF RICK GOSS, SENIOR VICE PRESIDENT, ENVIRONMENT AND
       SUSTAINABILITY, INFORMATION TECHNOLOGY INDUSTRY COUNCIL,
                             WASHINGTON, DC

        Mr. Goss. Thank you, Chairman Flake, Ranking Member Booker,
    members of the subcommittee. Thank you for the opportunity to
    testify today regarding Central Africa and Section 1502 of the
    Dodd-Frank Act.
        As the chairman said, my name is Rick Goss. I am the Senior
    Vice President of Environment and Sustainability at ITI, the
    global trade association representing the world's most
    innovative technology companies. ITI has been central to the
    conflict minerals dialogue for years, and I have led ITI's
    engagement on this priority since 2007.
        The tech sector is committed to contributing to peace and
    stability in Central Africa, and we have proven this commitment
    by sourcing responsibly from the region. Our engagement has
    helped provide critical economic benefits to hundreds of
    thousands of people who depend upon mining activities for their
    livelihood.
        As Congress considers replacing or modifying Section 1502,
    we urge you to ensure that the U.S. continues to drive
    diplomatic efforts in the region and to advance responsible
    sourcing initiatives. Should the U.S. fail to do so, Central
    Africa could experience additional volatility, and we could see
    the rise of inconsistent regulatory regimes.
        Turning to the issues that the subcommittee asked us to
    address, Section 1502 has yielded mixed success in cutting off
    funding to armed groups and reducing violence in the region.
    While government, civil society, and the private sector have
    together realized some clear progress on responsible sourcing,
    this mixed outcome in the region is due in part to the
    continued smuggling of gold, ongoing interference by a spectrum
    of armed groups, and the ready availability of numerous other
    sources of illegal revenue.
        While the DRC is increasing the responsible production of
    tin, tantalum, and tungsten, the 3Ts, this progress does not
    extend to gold. In a December 2016 report, the U.N. Group of
    Experts on the DRC stated that, ``Gold exploitation and trade
    remain poorly regulated, and the mineral is by far the one most
    used to finance armed elements and criminal elements in the
    DRC.''
        In fact, criminal networks in the Congolese Army remain
    some of the chief offenders. These elements along with myriad
    non-state armed groups directly interfere in mining operations;
    set up illegal roadblocks; and levy unlawful taxes on local
    communities, miners, and minerals. They exploit products such
    as timber, charcoal, and cannabis; and engage in human
    trafficking, forced labor, slaughter of endangered species, and
    extortion.
        Ultimately, even if Section 1502 has generated a measurable
    increase in transparency for 3T supply chains, armed actors
    have turned to gold and other lucrative and illicit methods.
        The second issue, while Section 1502 has yielded some
    positive impacts, it has also generated unintended
    consequences. First, the provision contributed to the de facto
    embargo documented in the region beginning in 2010, causing
    significant hardships for countless vulnerable people living in
    what has been termed the survival economy. Second, Section 1502
    has had an inordinate impact on small- and medium-sized
    enterprises here in the United States and elsewhere. And
    finally, by focusing almost exclusively on the role of the
    private sector, Section 1502 diverted critical attention away
    from the indispensable role of governments in addressing the
    crisis.
        We have three recommendations to share today.
        First, the U.S. should expand existing efforts to drive
    peace, security, and governance in Central Africa through
    increased support for political and diplomatic solutions and
    through development aid to help formalize the regional mining
    sector.
        Second, the U.S. should maintain its leadership position to
    guard against unintended consequences. If our government stops
    driving responsible sourcing, the region may experience renewed
    or increased volatility. Moreover, other geographies will
    likely regulate U.S. companies, potentially disrupting existing
    private sector programs. The U.S. should further advance the
    uptake of the OECD due diligence guidance, the international
    model for responsible sourcing that already forms the backbone
    of Section 1502 compliance.
        Our third recommendation is that the U.S. should consider
    removing ineffective requirements that result in burdensome and
    duplicative paperwork exercises, generate little benefit in
    Central Africa, or dissuade companies from investing in the
    region. Congress should seek to remedy the competitive
    disadvantages that Section 1502 creates between companies.
        In conclusion, the geopolitical challenges facing Central
    Africa are so severe that only concerted actions by regional
    governments, coupled with ongoing support from the
    international community, can resolve them. The region continues
    to be beset by rampant conflict and corruption, and
    destabilized by chronic interference from neighboring
    countries. The underlying causes of this conflict are
    political, not economic, and are linked to entrenched ethnic
    hostilities and disputes over political power.
        Tech will continue to actively engage and contribute to the
    solution, but governments must ultimately create the necessary
    conditions to allow private sector and civil society
    initiatives to thrive.
        Thank you again for the invitation to testify today, and I
    would be pleased to answer any questions.
        [The prepared statement of Mr. Goss follows:]

                        Prepared Statement of Rick Goss

                                  introduction
        Chairman Flake, Ranking Member Booker, and members of the
    subcommittee--thank you for the opportunity to testify at today's
    hearing regarding the Democratic Republic of the Congo, conflict
    minerals, and Section 1502 of the Wall Street Reform & Consumer
    Protection Act, commonly referred to as the ``Dodd-Frank Act.''
        My name is Rick Goss, and I am the Senior Vice President of
    Environment and Sustainability for the Information Technology Industry
    Council, or ITI. ITI is a global trade association representing nearly
    60 of the world's most innovative companies in the broad technology
    sector.
        ITI has been centrally involved in the conflict minerals dialogue
    for years, and I have led ITI's engagement on this priority since 2007.
    This includes representing the tech sector during congressional
    negotiations; meeting with Securities and Exchange Commission (SEC)
    commissioners and staff throughout the Section 1502 rulemaking process;
    testifying before the U.S. House of Representatives; and advising the
    European Union and other jurisdictions as they seek to develop their
    own conflict minerals regulations.
        The tech sector is committed to contributing to peace and stability
    in the Congo, and our companies have made strong commitments to ethical
    sourcing throughout our supply chains. As Congress considers replacing
    or modifying section 1502, we urge you to ensure that the U.S. remains
    centrally engaged in driving diplomatic efforts in Central Africa and
    in supporting private sector initiatives to advance responsible
    sourcing. Should the U.S. fail to remain engaged, we could experience
    additional volatility on the ground in Central Africa, and inconsistent
    regulatory efforts arising in other jurisdictions.
        Along with governments and civil society, ITI and our members share
    a commitment to the fundamental principles of peace and security for
    the Congo, and we are dedicated to being responsible actors within the
    context of comprehensive, government-led strategies for Central Africa.
    First, we are committed to ethical sourcing throughout our global
    supply chains. We do not want to conduct business, either directly or
    indirectly, with any supplier that supports, prolongs, or perpetuates
    armed conflict or human rights abuses. Second, we want to source
    responsibly from Central Africa to help provide critical economic
    benefits to the hundreds of thousands of people who depend on mining
    and mining-related activities as their sole source of livelihood. With
    these twin objectives in mind, our sector has made a conscious choice
    to remain engaged in the region.
        With that depth of experience in mind, my testimony today will
    share our perspectives on three key points for lawmakers to consider:

       Expand existing diplomatic efforts to drive peace, security,
            and governance in Central Africa;

       Maintain U.S. leadership on sourcing transparency to support
            private sector progress in Central Africa and avoid unintended
            economic and political outcomes; and

       Consider removing the requirements of Section 1502 that have
            increased costs and burdens while failing to promote progress
            in the region.

        In support of these outcomes, I would like to note three major
    themes:
        First, ITI members recognize that the private sector has a defined
    role to play in helping drive transparency and responsible sourcing
    efforts throughout global supply chains, and we have embraced that
    responsibility through our public commitments and concrete actions.
    These include our role in developing the Conflict-Free Sourcing
    Initiative, our participation in the Public-Private Alliance for
    Responsible Minerals Trade, and our efforts in support of the
    Organization for Economic Co-operation and Development (OECD) Due
    Diligence Guidance.
        Second, during congressional negotiations on this issue in 2009 and
    2010, there was strong bipartisan support for the United States to take
    a more active role to confront the ongoing humanitarian crisis in
    Central Africa.
        Third, the geo-political challenges in the Democratic Republic of
    the Congo (DRC) and throughout Central Africa are so severe, enduring
    and complex that only concerted actions by regional governments,
    coupled with ongoing support from the international community, will
    resolve them. Governments must take the lead to bring about peace,
    security, and governance reform and to create the necessary
    preconditions to allow private sector and civil society initiatives to
    thrive.
        I will now turn to the three specific issues that the subcommittee
    has asked this panel of witnesses invited to testify to address:

        Section 1502 of the Dodd-Frank Act has had mixed success in cutting
    off funding to armed groups in the DRC and reducing violence in the
    region. The eastern DRC is plagued with countless militias, local
    criminal groups, and corrupt military and government officials, all of
    whom prey on vulnerable civilian populations. While Section 1502 has
    clearly helped deprive armed groups in Central Africa from exploiting
    certain illicit sources of funding, its ultimate record of reducing
    overall illicit income flowing to these actors is notoriously difficult
    to determine. This challenge is in part due to continued smuggling of
    gold; the ongoing presence at mines of non-state militias, corrupt
    government officials, and criminal networks within the Congolese Army
    (the Armed Forces of the Democratic Republic of Congo--FARDC); and, the
    ready availability of numerous other sources of illegal revenue.
        Following a rapid decline in 2010, artisanal mining jobs have been
    returning to the region, and the DRC is recording increased production
    and export of tin, tantalum and tungsten--the so-called ``3Ts''--from
    validated mines.
        Numerous governments and credible independent observers report
    recent positive trends on breaking the links between armed groups and
    mining for 3T minerals. These officials note a significant reduction in
    the presence of armed groups--including Congolese armed forces--at 3T
    mining sites, largely due to increased transparency, monitoring, and
    control measures. Importantly, the DRC government has increased its
    involvement by imposing greater controls, taxes, legal enforcement, and
    oversight. According to the OECD, non-traceable exports of 3T trade at
    a discount of almost 30% compared to traceable materials.
        Increasing governance over 3T mines is partially attributable to
    the effects of Section 1502. To be clear, this progress is not tied to
    the paperwork and reporting requirements of the provision, but to the
    commitment of leading companies--in coordination with governments and
    civil society--to implement programs and systems that enable
    responsible sourcing from the impacted region. Altogether, more than 40
    smelters now source from the region via validated programs. Responsible
    in-region sourcing programs still only generate modest global volumes
    of 3T, but overall conditions are improving.
        Unfortunately, this progress on 3T minerals does not extend to
    gold. Given its high value concentrated in low volumes, gold remains
    subject to rampant smuggling and chronic interference from armed
    groups. In fact, dominion over gold mining and trading has become the
    preferred source of illicit income for armed groups across the
    spectrum. In a December 2016 report, the United Nations Group of
    Experts reported that, ``gold exploitation and trade remain poorly
    regulated, and the mineral is by far the one most often used to finance
    armed elements and criminal networks in the Democratic Republic of the
    Congo.'' \1\
        In conjunction with the OECD, and with support from the DRC
    government, the International Peace Information Service (IPIS) is
    conducting a multi-year study of security conditions at over 1,100
    mining sites in the eastern DRC.\2\ IPIS estimates that up to 80% of
    artisanal miners in the troubled eastern provinces work in the gold
    sector and adds that, while only 21% of artisanal miners of 3T minerals
    work under the influence of armed actors, that number jumps to 64% for
    gold. In 2016, the U.N. Group of Experts also reported that, ``Foreign
    armed groups from Burundi, Rwanda and Uganda continued to operate in
    eastern Democratic Republic of the Congo.'' The United Nations
    identified these same countries as being routes for non-certified gold
    smuggled out of the DRC and into global markets.\3\
        Some of the worst and most chronic offenders include criminal
    networks within the FARDC. In fact, FARDC units and other non-state
    armed groups alike have become more sophisticated in raising revenue
    from miners and mine sites. In addition to interfering directly in
    mining operations, they often set up illegal road blocks and levy
    unlawful taxes on mineral shipments. They extract recurring payments
    from miners and mine owners, or impose monopolies over basic consumer
    goods in and around mine sites. Through these and other tactics, they
    nonetheless raise revenues from mines that are deemed ``green'' sites.
        Meanwhile, control over mining and minerals distribution is only
    one of many sources of illicit income for militias, roving criminal
    groups and corrupt officials. These elements exploit other sources of
    income, through the sale of products such as timber, charcoal, cannabis
    and wildlife parts, and through practices such as human trafficking,
    forced labor and extortion. Illicit actors routinely raid villages, run
    black markets for goods, and operate protection schemes. Armed groups
    have also established operations in the national parks and wildlife
    preserves, where they profit from illegal charcoal production and the
    rampant slaughter of threatened and endangered animals.
        Overall, Section 1502 has generated real progress in bringing
    increased transparency to 3T mines and supply chains in the region, and
    in raising global awareness across the public and private sectors.
    These advances are fragile and need to be encouraged. However, as
    controls have increased on 3T minerals, militias, corrupt officials,
    and criminal networks have increasingly turned to gold and other
    lucrative methods to generate illicit income.
        Section 1502 has generated unintended consequences that have
    detracted from the provision's effectiveness. While Section 1502 has
    yielded some positive impacts--many of which we noted in our 2013 House
    testimony \4\--it has also caused some negative unintended
    consequences. First, along with the 2010 mining ban instituted by the
    DRC government, the Dodd-Frank Act provision contributed to the de
    facto embargo that governments and independent observers documented in
    the region beginning in 2010. In brief, many companies abandoned the
    region to avoid the onerous and potentially severe legal, financial,
    and reputational risks associated with Section 1502. This caused
    significant hardship for hundreds of thousands of people who rely on
    artisanal mining for their sole subsistence in what has been termed the
    ``survival economy''.
        Second, Section 1502 has had an inordinate impact on small- and
    medium-sized enterprises here in the United States and elsewhere. While
    many of these businesses are not themselves obligated to report to the
    SEC, they are indirectly subject to the requirements if they are
    present in the supply chain of a regulated company or companies.
        Finally, Section 1502, by focusing almost exclusively on the role
    of the private sector, has diverted critical attention away from the
    indispensable role of governments in addressing the endemic political,
    security, and humanitarian crises in the region. Private sector
    initiatives alone cannot succeed in a region beset by rampant conflict
    and corruption, and destabilized by chronic interference and intrusions
    from neighboring countries. The underlying causes of this regional
    conflict are political, not economic, and are linked to entrenched
    ethnic enmities and disputes over political power, land rights, and
    citizenship. While control over natural resources is in part
    responsible for fueling violence in eastern Congo, it is striking to
    note that adjacent areas that are equally rich in resources are not
    plagued by conflict.
        Recommendations to maintain sourcing transparency, promote peace
    and security in Central Africa, and improve Section 1502 deficiencies.
    We have several specific recommendations to share, although not all of
    them are necessarily within the Security and Exchange Commission's
    purview to implement absent statutory changes.
        Overall, ITI and our members urge Congress to consider ways to
    overcome the deterrent effects of Section 1502 and provide incentives
    to companies that responsibly source from Central Africa. These efforts
    could include lowering the regulatory burden and providing public
    recognition to those companies that source through approved, in-region
    programs. The United States and other governments can also support in-
    region transparency and governance initiatives, place collective
    pressure on foreign smelters to participate in audit programs, and
    increase sanctions on those groups and individuals that continue to
    trade in illicit resources.
        Our specific recommendations are as follows:
    Expand existing diplomatic efforts to drive peace, security, and
            governance in Central Africa.
        Intensify U.S. Diplomatic Efforts. The United States should
    increase its support for political and diplomatic solutions that
    advance regional security, including security sector reform for the
    Congolese military and police forces, and efforts to protect civilian
    populations. This could include targeted sanctions, as well as
    continued support for the United Nations Stabilization Mission in the
    DRC, for the Public-Private Alliance for Responsible Minerals Trade,
    and for related regional governance and transparency initiatives.
        Provide Targeted Development Aid. The biggest advances in
    responsibly sourcing in the region have come from bringing the mining
    sector--including artisanal miners--into a more formalized process. The
    mining sector in the DRC desperately needs infrastructure development
    in the form of roads and electricity, and access to basic financial and
    banking resources for legitimate operators.
    Maintain U.S. leadership on sourcing transparency to support continued
            progress in Central Africa and avoid unintended outcomes.
        Maintain U.S. Leadership. By enacting Section 1502, the United
    States set the stage for global conflict minerals approaches. U.S.
    action sends a strong signal to global markets about the need to break
    the link between armed groups and natural resources, and the European
    Union and other jurisdictions have acted to complement the U.S.
    approach. Should the federal government cease its engagement
    altogether, we may collectively suffer two major unintended
    consequences:
        First, we may lose the tenuous progress we have achieved in the
    region through collective industry pressure on global supply chains.
    While many tech companies have publicly committed to continuing their
    due diligence efforts regardless of the fate of Section 1502, our
    influence will become significantly diluted should other sectors not
    remain at the table. This is especially true given that our sector is
    only a minor consumer of gold--the primary source of illicit mineral
    income in the region. Moreover, should the demand for conflict free
    minerals diminish, we could see detrimental impacts on the roughly
    1,000 3T mines that are validated as responsible, potentially
    increasing regional volatility and armed group activity.
        Late last month, here in Washington, I had the pleasure of meeting
    a government delegation from the Democratic Republic of the Congo,
    including the Congolese Ambassador to the United States and
    representatives from the Ministry of Mines. The DRC government
    reiterated its strong support for the proper application of the OECD
    Due Diligence Guidance in the region, and raised concerns that a
    contraction of U.S. engagement on natural resources could have several
    unwelcome consequences. The DRC delegation identified these potential
    consequences to include:

       Escalating in the activities of non-state armed groups;

       Weakening policies to promote good business practices around
            the responsible supply of minerals in the DRC and throughout
            the region; and,

       Discouraging regional governments from implementing the
            tools to combat the illegal exploitation of resources.

        Second, other geographies will almost certainly impose regulations
    on U.S. companies, causing a potential disruption in programs and
    systems due to inconsistent or conflicting requirements. ITI represents
    global companies, and the importance of private sector due diligence
    related to conflict minerals will not recede if Section 1502 is stayed
    or repealed.
        Advance the OECD Due Diligence Guidance. The OECD Due Diligence
    Guidance forms the backbone of Section 1502 compliance. It has also
    become the international norm as the European Union, the International
    Conference on the Great Lakes Region, and China now reference it. Where
    the U.S. approach is prescriptive, top-down and outcome-based, the OECD
    Guidance is process-based and risk-based, and assigns roles and
    responsibilities based on each actor's relative position within the
    supply chain.
    Consider removing the requirements of Section 1502 that have increased
            costs and burdens while failing to promote progress in the
            region.
        Remove the Provisions that Discourage Legitimate Businesses from
    Sourcing from the Region. Certain requirements of Section 1502 dissuade
    companies from remaining economically engaged in the region. While some
    of these obligations have been partially set aside by the recent
    federal court ruling, the most punitive provisions include the
    independent private sector audit, the preparation and formal submittal
    of the Conflict Minerals Report to the SEC, and the need to
    characterize products. These obligations result in costly paperwork and
    duplicative due diligence exercises that generate little or no benefit
    in the impacted region.
        Move Any Requirements from Securities Law. Section 1502 creates
    competitive disadvantages between publicly-traded and privately-held
    companies, and between U.S. and foreign companies. Any federal efforts
    on conflict minerals should apply evenly to avoid these competitive
    disruptions.
                                   conclusion
        While imperfect, Section 1502 has brought concerted industry
    pressure on global supply chains to responsibly source these minerals,
    and has helped bring desperately needed international attention to the
    ongoing conflict in Central Africa. Our member tech companies have
    established a strong record of dedication and achievement in driving
    transparency throughout our global supply chains to meet our public
    commitments even in the absence of legal requirements. Ultimately,
    though, our sector's commitment to sustainability and corporate social
    responsibility alone cannot bring peace and security to the Congo, and
    in the absence of concerted government and civil society engagement,
    the status quo will reign in Central Africa.
        Thank you again for the invitation to testify today. I would be
    pleased to answer any questions.

    ----------------
    Notes

        \1\ See ``Letter dated 23 December 2016 from the Group of Experts
    on the Democratic Republic of the Congo addressed to the President of
    the Security Council,'' December 2016, available at http://
    www.undocs.org/S/2016/1102
        \2\ See OECD ``Mineral Supply Chains and Conflict Links in Eastern
    Democratic Republic of Congo: Five Years of Implementing Supply Chain
    Due Diligence,'' 2015, available at http://mneguidelines.oecd.org/
    Mineral-Supply-Chains-DRC-Due-Diligence-Report.pdf
        \3\ See ``Letter dated 23 May 2016 from the Group of Experts on the
    Democratic Republic of the Congo addressed to the President of the
    Security Council,'' May 2016, available at: http://www.undocs.org/S/
    2016/466
        \4\ http://financialservices.house.gov/uploadedfiles/hhrg-113-ba19-
    wstate-rgoss-20130521.pdf

        Senator Flake. Thank you.
        Mr. Dizolele.

      STATEMENT OF MVEMBA DIZOLELE, LECTURER, SCHOOL OF ADVANCED
    INTERNATIONAL STUDIES, JOHNS HOPKINS UNIVERSITY, WASHINGTON, DC

        Mr. Dizolele. Chairman Flake, Ranking Member Booker, and
    Senator Coons, it is a pleasure to be here again. Thank you for
    the invitation to testify before you.
        Mr. Chairman, the views that I express today are mine and
    mine alone, and I wish to submit them for the record.
        The last time I testified before you 4 years ago, Congo was
    grappling with the M23 rebellion. The insurgents had seized
    parts of North Kivu, laid siege on the provincial capital city
    of Goma, and displaced thousands of civilians before
    withdrawing into neighboring Uganda and Rwanda.
        Today, 7 years since the Dodd-Frank Act became law, we have
    a clear horizon now over which to analyze the impact of Section
    1502. So here are the five things that I think worked, the
    merits of the law.
        Number one is the level of awareness that Dodd-Frank 1502
    brought to bear. Now we know that American consumers demand
    that suppliers mind the supply chain, and this is unprecedented
    and needs to be commended.
        Number two, the law had immediate psychological effects on
    the Congolese authorities; business operators; regional,
    political, and economic actors; as well as businesses,
    international firms. Even President Kabila sought to preempt
    the effect of the law by suspending mining once that law was
    coming through the pipeline.
        Number three, the law attempted to clean the mineral supply
    chain to curtail illicit and illegal mining exploitation and
    trade, and eradicate the scourge of conflict minerals.
        Number four, and this is very important, the law
    contributed to Congo's acceleration of the delimitation and re-
    situation of mining sites, inquiries, and the training of
    mining police, as well as capacity-building for mining agents
    and inspectors. And also, this spurred dialogue among the
    various parties concerned in this line of business.
        Number five, armed groups found it difficult to export
    minerals and raise revenues from mines in areas that they
    control.
        What did not work? Here are the seven things that I think
    did not work.
        From its inception, 1502 cast a negative shadow on
    otherwise legal and legitimate businesses and immediately led
    to a de facto boycott of products from the region.
        The boycott then led to closures of comptoirs, which are
    trading posts.
        And the other problem, number three, is that the trade
    itself, the mineral trade, was analyzed as a standalone
    process, divorced from everything else that was happening, be
    it local politics, national, and regional.
        And also, in many ways, it was represented as a silver
    bullet to a much more complex problem.
        The implementation of Section 1502 led to increased
    unemployment, loss of revenue for artisanal miners, and
    increased fraud.
        Number five, increased unemployment has caused a
    recrudescence of banditry, including kidnappings for ransom.
        And then, number six, the law did not account for other
    sources of revenue that militias have. They racketeer. They tax
    everything that is happening in the area that they control. And
    so it did not really cut their resources.
        Number seven, which I think is actually equally troubling,
    is that Rwanda has taken advantage of 1502 to launder and
    certify Congolese resources and has emerged as the world's
    largest exporter of coltan, when, in fact, they do not have
    significant resources of this. This can be linked directly to
    1502.
        So what are the unintended consequences here? I think
    captains of high-technology industry and policymakers in the
    U.S. and Europe invested a disproportionate amount of energy
    and capital to solve the mineral trade problem at the expense
    of the larger governance crisis that is the source, actually,
    of instability and conflict in Congo.
        So when we think about where Congo is today, we realize
    that Congo is much closer to a bigger--it is at the highest
    volatile level it has been at in 20 years, so we have sources
    of conflict all over the country, having migrated from the east
    to the south to the center and to central Congo. So we have
    groups like Bundu dia Mayala that are regularly massacred by
    the forces. You have violence in Butembo, in Erengeti, in Beni,
    where people get killed every night in their sleep by death
    squads that neither MONUSCO nor the FRDC have been able to
    preempt. Now we are facing a situation where President Kabila
    does not want to go and wants to stay.
        So when the Congolese take up arms or take to the streets
    for civil disobedience, the reasons remain the same. It is bad
    governance.
        So what should we do then? I think this legislation could
    have worked better if it was part of a larger, comprehensive
    process. As Dodd-Frank stands today, like I said, it allows to
    launder, legalize, and certify the looting of Congolese
    resources, which is a net loss for the Congolese, and that
    cannot continue.
        The U.S. should pursue what Ambassador Nikki Haley has
    started at the U.N. Security Council and ask for greater
    transparency and accountability for MONUSCO in delivering what
    they said they would deliver to Congo and also asking them to
    present an exit plan over the next 5 years, so they actually
    can allow Congo to start building its own state and its own
    military.
        So far, they are serving as an extension to the Kabila
    regime, and also as a broken crutch to the Kabila regime. As
    long as MONUSCO is there indefinitely, Congo will never get on
    its feet.
        The last point I would like to recommend is that the U.S.
    continue to exert pressure on the Kabila regime to open up the
    political space to protect the citizens' rights and liberties,
    respect the Constitution, and engage in a credible political
    process that will culminate in the election this year or early
    next year to bring a new President.
        Thank you.
        [The prepared statement of Mr. Dizolele follows:]

                  Prepared Statement of Mvemba Phezo Dizolele

        Chairman Flake, Ranking Member Booker and Distinguished Members of
    the Subcommittee on Africa and Global Health Policy:
        Thank you for the invitation and honor to testify before your
    subcommittee. I appreciate your continued interest in developments in
    the Democratic Republic of Congo (DRC) and your support for the
    Congolese people.
        Mr. Chairman, the views expressed in this statement are mine, and
    mine alone. With your permission, sir, I would like to submit my
    written statement into the record.
        The last time I testified before your subcommittee 4 years ago,
    Congo had been grappling with the M23 rebellion. The insurgents had
    seized parts of North Kivu, laid siege on the provincial capital city
    of Goma, and displaced thousands of civilians before withdrawing into
    neighboring Uganda and Rwanda.
        That crisis reflected yet another escalation of the protracted
    violence that has come to define Congo. The rebels exploited the Kabila
    regime's unwillingness to raise an adequate professional army to defend
    the country's territorial integrity and protect the Congolese. The M23
    also exposed the limitations of the United Nations peacekeeping
    mission, which has been reticent to apply its Chapter VII mandate and
    use force to protect civilians. Troop contributing countries lack the
    required political will and adequate personnel level and equipment to
    carry out their mission.
        The United Nations Security Council is notorious for its
    schizophrenic Congo policy, which consistently places the interests of
    the Kabila regime above the aspirations and rights of the Congolese
    people.
        It is this regime of suffering, violence and unbridled looting of
    natural resources that inspired Section 1502 of the Dodd-Frank Act.
    Proponents of 1502 sought to bring peace to Congo's eastern provinces
    of North and South Kivu by regulating mineral trade through United
    States law, cleaning up the supply chain and reducing armed groups'
    access to financial means. The regulation would de facto curb the
    violence and human rights abuses, they claimed.
        Today, nearly 7 years since the Act became law, there is a clear
    horizon over which we can analyze the impact of Section 1502.
                        what are the merits of this law?
        1. Section 1502 supporters mobilized media and social networks in
    an unprecedented manner to raise American consumers' awareness of the
    links between the conflict in Congo and their electronics. By and
    large, consumers now expect technology firms to mind the supply chain.
        2. The law had an immediate psychological effect on Congolese
    authorities and business operators, regional political and economic
    actors, and international firms. For instance, Congo's President Joseph
    Kabila sought to pre-empt the impact of the law before it went into
    effect and temporarily suspended mineral exploitation in the Kivus.
        3. The law attempted to clean the mineral supply chain to curtail
    the illicit and illegal mineral exploitation and trade, and eradicate
    the scourge of conflict minerals, so to speak.
        4. The law also contributed to Congo's acceleration of the
    delimitation and registration of mining sites and quarries; the
    training of the mine police; increased capacity-building for mining
    agents and inspectors. These initiatives encouraged consultations
    between concerned parties.
        5. Armed groups found it difficult to export minerals and raise
    revenue from mines in areas they controlled.
                            where did the law fail?
        1. From its inception, Section 1502 cast a negative shadow on
    otherwise legal and legitimate businesses and immediately led to a de
    facto boycott of mining products from Congo's eastern provinces.
        2. The boycott caused closures of trading posts, known locally as
    comptoirs.
        3. This law treated the mineral trade as a stand-alone process,
    divorced from local, national and regional politics, and its proponents
    presented the regulation as a silver bullet to a much more complex
    problem.
        4. The implementation of Section of 1502 led to increased
    unemployment, loss of revenue for artisanal miners, and increased
    fraud. Artisanal mining has sustained hundreds of thousands of families
    since the collapse of the agriculture sector in the Kivus in the early
    1980's and the collapse of state-owned mining giant Gecamines in the
    former Katanga Province.
        5. The increased unemployment has caused a recrudescence of
    banditry, including kidnappings for ransom.
        6. The law did not account for other sources of revenue at the
    disposal of armed groups, i.e., taxation of commercial activities and
    racketeering in the areas they controlled.
        7. With a better organized state administrative infrastructure,
    Rwanda has taken advantage of Section 1502 to launder and certify
    mineral resources from the illicit and illegal trade in Congo and
    export them as Rwandan products. Despite insignificant mineral
    deposits, Rwanda has become the world's largest exporter of coltan. In
    other words, Section 1502 legalized the looting of Congolese mineral
    resources.
                            unintended consequences
        Focused on the so-called conflict minerals in the Kivus and their
    certification, Section 1502 provided a false sense of progress on the
    security front. Captains of the high technology industry and
    policymakers in the United States and Europe invested disproportionate
    amount of energy and political capital to solve the mineral trade
    problem at the expense of the larger governance crisis that fuels
    insecurity and instability in DRC.
        In the 7 years that the Dodd-Frank Act has regulated this mineral
    trade, Congo is no closer to peace than it was in 2010. On the
    contrary, the situation is arguably at its most explosive level in two
    decades, as violence has spread both geographically from the east to
    the south and the west, and intensified in scale.
        The heightened volatility stems from President Joseph Kabila's
    determination to subvert the Constitution and stay in office beyond his
    second and last 5-year term, which ended in December of 2016. Efforts
    by the international community and the Catholic Church to broker an
    interim power-sharing agreement have failed. President Kabila has
    remained silent throughout this process, sustaining the impasse.
        The Congolese people now view Joseph Kabila and his government as
    extra-constitutional, illegal and illegitimate. Within this volatile
    context, they fear a resurgence of the wider conflict that engulfed DRC
    from 1996 to 2003 and caused an excess of 6 million deaths.
        Beyond the mobilization of armed militias in the eastern Kivus, the
    years 2015 and 2016 were particularly violent as new centers of
    instability emerged in other parts of Congo, including western Kongo
    Central, southern Tanganyika and southern Kasai Central.
        In Kongo Central, Bundu dia Mayala partisans have regularly met
    violent death by gunfire from security forces. In North Kivu, residents
    of Butembo, Beni, Erengeti and other localities, are massacred on a
    daily basis in their sleep by elusive death squads that the U.N.
    peacekeepers and the Congolese Army have failed to either apprehend or
    vanquish.
        The populations of Kasai Central have witnessed never-before-seen
    violence reminiscent of ISIS. Beheading is now a common practice in a
    region that had not experienced armed conflict since the 1960's. It is
    uncertain at this point as to whom--the Congolese Army or the militia--
    is most to blame for this violence. The conflict resulted from the
    Government's mismanagement of a royal succession dispute in the Bajila-
    Kasanga's Kamwina Nsapu chieftaincy.
        Michael Sharp, the American who coordinated the United Nations
    Group of Experts in Congo, was killed in this conflict along with
    colleagues.
        Whether the Congolese embrace civil disobedience or armed struggle,
    their grievances are rooted in blatant violation of democratic
    principles by the Kabila regime, bad governance, mismanagement of
    resources, and incompetence. This popular discontent has nothing to do
    with minerals.
        Over the past 2 years, pro-democracy protests brought thousands of
    young people and political opposition partisans to the streets in
    several cities to demand the respect of the Constitution and better
    governance. The ensuing police and military repression in the capital
    city of Kinshasa resulted in tens of youths being either killed by
    gunfire or arrested.
        Political opposition leaders, civil society leaders, youth
    activists and other proponents of the respect of the Constitution
    remain the primary targets of this campaign of repression.
        President Kabila and his supporters' intransigence to remain in
    power no matter the cost will continue to fuel tensions and exacerbate
    violence.
        Due to its myopic approach, Section 1502 misdiagnosed the mineral
    trade as the root of the conflict, not as a symptom, and offered
    inadequate prescriptions and no reprieve from the aforementioned
    incidents.
        Proponents of the law ignored the multidimensional nature of
    conflict and failed to adjust their narrative as it became clear to
    independent analysts that Section 1502 would not and could not bring
    peace.
                              what should be done?
        1. This legislation might have worked better had it been part of a
    comprehensive political process. As it now stands, Dodd-Frank Section
    1502 launders, legalizes and certifies the looting of Congolese
    resources--a net loss for DRC. This law should be folded and
    discontinued.
        2. The United States should pursue what Ambassador Nikki Haley has
    started at the United Nations Security Council, demand greater
    accountability of the U.N. peacekeeping mission along with a credible
    exit plan to be implemented over the next 5 years. MONUSCO has long
    been part of the problem, serving as an extension of and a broken
    crutch to the Kabila regime, and stifling the emergence of a functional
    state and an adequate professional army in Congo.
        3. The United States should continue to exert pressure on the
    Kabila regime to open the political space, protect citizens' rights and
    liberties, respect the Constitution, and engage in a credible political
    process that will culminate in the election of a new president.
        I thank you.

        Senator Flake. Thank you.
        Mr. Ganesan.

       STATEMENT OF ARVIND GANESAN, DIRECTOR, BUSINESS AND HUMAN
               RIGHTS, HUMAN RIGHTS WATCH, WASHINGTON, DC

        Mr. Ganesan. Thank you, Mr. Chairman, Ranking Member
    Booker, and members of the subcommittee. Thank you again for
    the opportunity to testify today on Section 1502.
        Since 2005, we at Human Rights Watch have documented the
    pernicious effect that the trade in gold has had on civilians
    in Eastern Congo. Armed groups, foreign-backed rebels, and, at
    times, the Congolese Army have killed, raped, pillaged, and
    forcefully conscripted child soldiers as they tried to control
    the lucrative gold trade. That was why Human Rights Watch
    supported 1502 as an important tool to help stop the flow of
    mineral funds to abusive armed groups.
        This hearing comes at a critical time for the Congo. Over
    the past 2 years, government officials and security forces
    carried out a brutal campaign of repression against those
    opposed to President Kabila's efforts to stay in office after
    his two terms expired last year. New elections are supposed to
    be held at the end of this year, but the deal is stalled, and
    violence between militia groups and Congolese security forces
    have escalated, along with alarming increases in human rights
    abuses.
        Just last month, as you noted earlier, two members of the
    U.N. Group of Experts, Michael Sharp, an American, and Zahida
    Catalan, a Swede, were killed while investigating large-scale
    human rights abuses. It remains unclear who was responsible,
    but it is important to note that the Group of Experts has been
    instrumental in exposing the links between natural resources
    and the conflict.
        Without 1502, an already explosive situation in Congo could
    get worse. Abusive armed groups, factions of the security
    forces, and other opaque mafia-like networks allegedly linked
    to government officials, could return to the mines in Eastern
    Congo. This could further destabilize this volatile region,
    which is clearly not in the U.S. interests. That might also
    lead to efforts to look at alternatives like targeted
    sanctions, like what happened in Burma several years ago.
        In mid-March, Bloomberg News reported that the Congolese
    Minister of Mines wrote the Securities and Exchange Commission
    warning that eliminating 1502 would lead to ``escalation in the
    activities of non-state armed groups.''
        And just last month, my colleagues were in Eastern Congo
    and met with miners and former child soldiers from the NDC-R,
    an abusive and violent group working there. They told us how
    NDC-R is taxing the gold trade at dozens of mining sites,
    making over $20,000 a month and allegedly trading gold for
    weapons.
        These problems could actually become more severe if the
    administration cuts support for U.N. peacekeeping in Congo and
    makes further cuts to foreign assistance. That would perversely
    make it easier for abusive armed groups to make money from
    conflict minerals while simultaneously reducing funds to
    entities meant to curtail them.
        While imperfect, 1502 is having an impact. Since 2012,
    mining at the Kalimbi tin mine in South Kivu, for example, has
    had a traceability scheme so that production of tin benefits
    local workers and not abusive armed groups or corrupt
    officials.
        Stopping 1502 would also hurt responsible U.S. companies
    such as Apple, Intel, and Tiffany, and it would create a race
    to the bottom. They and others would be placed at a competitive
    disadvantage against other companies that operate opaquely in a
    way that could fund armed groups. And these companies, along
    with Warren Buffett's Richline Group, have publicly expressed
    support for the law.
        Instead of abandoning the law, what the U.S. should do is
    do what it has successfully done over decades, which is be the
    first country to enact a law ensuring that companies act
    responsibly and then work diligently to make sure others do the
    same. That is what the U.S. did in 1977 with the Foreign
    Corrupt Practices Act. And this is starting to happen with 1502
    since just last month the European Parliament passed its own
    rules on conflict minerals.
        On the ground, there are currently more than 200 conflict-
    free smelters and key parts of Congolese civil society support
    it, including, recently, the president of the DRC Catholic
    Bishops Conference as well.
        But we cannot deny the law has had problems. Between 2010
    and before final rules were implemented in 2012, the
    uncertainty, misinformation, and other factors led to a de
    facto boycott by companies of the sector, and they avoided
    sourcing from Congo. There is also evidence that mineral-
    related violence during that time did not subside.
        However, those problems are not solely due to 1502. For
    example, the Kabila government did order a 6-month halt to
    mining in the Kivus in 2010.
        And today, companies are still slow to comply with the law,
    and the trade in gold, as others have mentioned, is harder to
    control.
        We support constructive proposals to ensure 1502 is more
    efficient and effective. But in fairness, we have not heard
    those types of specific proposals from leading industry critics
    of the law.
        There are also indications the costs of 1502 are
    decreasing. So, for example, ELM Sustainability Partners found
    the actual cost of implementation for industry are 15 percent
    to 26 percent of what the SEC originally estimated. And as
    others noted, there are record highs in Eastern Congo for the
    export of conflict-free tin and tantalum in 2016.
        In general, we think at Human Rights Watch the cost of
    capital should be lower for responsible companies, and we would
    support proposals to advantage 1502-compliant companies in
    government procurement. And while we are not experts on tax, we
    think that Congress and others should examine using tax credits
    or other comparable incentives to help support 1502
    implementation.
        We would also like to see broader growth of the conflict-
    free economy in the Congo, perhaps through institutions like
    the World Bank or other institutions.
        The situation in Congo is complex. But without 1502,
    instability in Congo would grow, responsible companies would
    suffer, and armed groups would be emboldened. That would be a
    very, very unfortunate outcome.
        Thank you, and I look forward to your questions.
        [The prepared statement of Mr. Ganesan follows:]

                      Prepared Statement of Arvind Ganesan

        Chairman Flake, Ranking Member Booker and other members of the
    subcommittee, thank you very much for the opportunity to testify today
    on Dodd-Frank Section 1502 and its impact on addressing the trade in
    ``Conflict Minerals.'' Human Rights Watch has documented abuses in the
    Democratic Republic of Congo since the fall of Mobutu Sese Seko and
    throughout the country's vicious civil war and the violence and abuses
    that continue.
        Since 2005, we have documented the pernicious effect that the trade
    in gold has had on civilians in eastern Congo. Numerous armed groups,
    foreign-backed rebels, and at times the Congolese army have killed,
    raped, pillaged, and forcibly conscripted child soldiers as they sought
    to gain or maintain control of lucrative gold mines, which in turn
    helped finance their abusive movements. We've also documented how a
    major mining company paid a rebel group to explore for gold in its
    concession area in 2005.
        It is for these reasons that Human Rights Watch supported and
    continues to support Dodd-Frank 1502. We never saw it as a panacea to
    stop the abuses or violence in Congo completely. Rather, we saw it as
    an important tool to help address a specific goal: stopping the flow of
    funds to abusive armed groups who were exploiting Congo's lucrative
    mining resources through increased transparency and accountability.
        Today, we are here because Dodd-Frank 1502 may be suspended or even
    revoked. We know legislation can sometimes be a blunt tool and that it
    can have unintended consequences. With that in mind, we welcome a
    discussion on how Section 1502 can fulfill its objectives more
    efficiently; however, we strongly believe that its suspension or
    revocation would be damaging for security, human rights, and for
    responsible companies. To be crystal clear: if the president suspends
    the law or if Congress revokes it, we believe that the repercussions
    would be very serious.
        This hearing comes at a critical time in Congo. Over the past 2
    years, government officials and security forces have carried out a
    brutal campaign of repression against those opposed to President Joseph
    Kabila's efforts to stay in power beyond the December 19, 2016 end of
    his constitutionally mandated two-term limit. Scores of peaceful
    protesters have been killed, pro-democracy activists and opposition
    leaders have been imprisoned, and media outlets have been shuttered.
    After significant pressure from the international community--including
    targeted U.S. sanctions against top officials and other strong measures
    backed by this Congress--President Kabila made some important
    concessions in an end-of-the year deal mediated by the Catholic Church.
        This agreement calls for presidential elections to be held by the
    end of this year and says clearly that there will be no changes to the
    constitution or a referendum to allow Kabila to run for a third term.
    Yet implementation of the deal has stalled, as violence between militia
    groups and the Congolese security forces have escalated in many parts
    of the country, along with an alarming increase in human rights
    violations. Some of these situations are directly linked to Kabila
    staying in power beyond the end of his constitutional mandate. Kabila
    has agreed to hold elections and step down from power, and the
    prospects for stability likely hinge on whether he abides by that
    commitment. Continued U.S. engagement and strong pressure on Kabila to
    do so is critical.
        Last month, two members of the U.N. Group of Experts on Congo,
    Michael Sharp, an American, and Zaida Catalan, from Sweden, were killed
    while investigating large-scale human rights abuses in Congo's central
    Kasai region. It remains unclear who was responsible for the murders.
    The Group of Experts has been instrumental over the years in exposing
    the links between the trade in natural resources, armed groups,
    sanctions-busting, and the violence in Congo.
        In this context, suspending or eliminating Dodd-Frank 1502 would
    make an already explosive situation in Congo worse. Abusive armed
    groups, factions of the security forces, and other opaque mafia-like
    networks allegedly linked to government officials could then easily
    return to the lucrative mines in eastern Congo to finance their
    activities. This could lead to new security problems throughout the
    volatile region--where some of Congo's nine neighboring countries have
    illegally benefited from the country's vast mineral wealth. And it
    could also create direct security risks for the United States, which
    has a clear interest in promoting a more stable and peaceful central
    Africa region.
        Suspending Dodd-Frank 1502 would also harm responsible American
    companies that have embraced the law and the principles that underpin
    it, including some of this country's most successful and well-known
    companies, such as Apple, Intel, and Tiffany. They and others would
    suddenly be placed at a competitive disadvantage against other
    companies that prefer to operate opaquely in a way that could fund
    armed groups. Eliminating the rule would punish responsible companies
    and reward irresponsible ones by creating a ``race to the bottom,''
    legalizing opaque sourcing of conflict minerals while disadvantaging
    companies that choose to keep their supply chains clean.
        In the absence of 1502, it is possible that civil society groups
    could end up pressing for targeted sanctions on the Congolese minerals
    sector if it becomes clear that abusive armed groups are profiting from
    this trade. Such targeted sanctions are typically the approach the
    international community has taken in recent years to address similar
    problems. While understandable, this is a much more draconian approach
    than the transparency and auditing procedures 1502 require. These are
    serious consequences for Congo, for major U.S. companies, and for human
    rights.
       suspending 1502 will make it easier to fund armed groups secretly
        The fundamental purpose of Dodd-Frank 1502 is to keep money out of
    the hands of armed groups that trade in and profit from certain
    minerals. Human rights groups, responsible companies, and the U.S.
    government have shared this goal for many years. It is important not to
    lose this aspect of the law: it is a rare instance where key
    institutions in and out of government agree on what the problems is,
    want to stop it, and have managed to put a law in place to help do it.
    That is something Congress and the administration should support.
        Without the law, it would be easier for abusive armed groups to
    fund themselves secretly, which could help to further destabilize parts
    of Congo. In mid-March, Bloomberg news reported that the Congolese
    Minister of Mines, Martin Kabwelulu, wrote the U.S. Securities and
    Exchange Commission, warning that eliminating 1502 would lead to an
    ``escalation in the activities of non-state armed groups.'' The U.S.
    has sought for decades to help de-escalate these activities; removing a
    tool that can help do that undercuts longstanding U.S. foreign policy
    objectives.
        This problem could be exacerbated by the administration's possible
    budget cuts for U.N. peacekeeping in Congo and by possible further cuts
    to other foreign assistance to Congo. The combination of suspending or
    eliminating 1502 while cutting support to peacekeeping and other
    foreign assistance could make it easier for abusive armed groups to
    make money from conflict minerals while simultaneously reducing funds
    to entities meant to curtail conflict and foster stability.
        Considering Congress' longstanding interest in Congo, the fragile
    situation on the ground, and the billions of dollars the U.S. has spent
    on peacekeeping efforts in the country, this scenario would be
    extraordinarily counterproductive to U.S. geopolitical and security
    interests.
        While imperfect, Dodd Frank has already had some tangible positive
    effects for the people of eastern Congo and those seeking greater
    transparency. Since 2012, mining at the Kalimbi tin mine in Nyabibwe,
    South Kivu, for example, has had a functional traceability scheme,
    which allows for the continuous production of tin that benefits the
    local workers, and not the abusive armed groups or corrupt army or
    government officials.
        Global Witness reported that in 2012, the Congolese government
    suspended the operations of two Chinese companies because they failed
    to carry out proper due diligence and suspected they may be sourcing
    from armed groups. But it is troubling that the same year, Global
    Witness reported that two Congolese army officers were caught trying to
    smuggle more than 1,000 pounds of minerals, including coltan. The
    government refused to press charges, but the officer who stopped them
    and tried to stop the smuggling was suspended from his post. At
    present, however, we have some indications that Congolese government
    officials are starting to take actions to prevent mineral wealth from
    illegally profiting armed groups or army officers.
        It is also important to remember the types of groups that could be
    emboldened and enriched without the transparency and systems Dodd-Frank
    requires. Human Rights Watch and others have documented the abuses by
    several armed groups that benefited from this trade and the harm they
    have caused. This includes the armed group known as the Nduma Defense
    of Congo-Renove (NDC-R), one of the most abusive groups operating in
    eastern Congo that benefits greatly from the uncontrolled and illicit
    exploitation of gold there. Traceability efforts so far have had a much
    greater impact on tin, tantalum, and tungsten than on gold. The NDC-R
    has committed serious human rights violations, including the killings
    of dozens of civilians and recruitment of children over the past 2
    years.
        Last month, my colleagues were in eastern Congo's Walikale
    territory in North Kivu and met with several former child soldiers from
    NDC-R and miners. They told us how the group led by Guidon Shimiray
    Mwissa is systemically taxing the lucrative gold trade in dozens of
    mining sites. By holding a monopoly on things like alcohol and
    cigarettes in the mining pits and illegally taxing those who work in or
    near the mines, Guidon is making over $20,000 a month. According to
    some of his former cadres, he's also allegedly trading gold for
    weapons.
        Suspending Dodd-Frank 1502 would make it easier for other abusive
    armed groups and corrupt officials to enrich themselves the way Guidon
    is by making the trade even more opaque and easier to do business with
    armed groups. This would make an already bad situation even worse.
                suspending or eliminating dodd-frank 1502 will
                    disadvantage responsible u.s. companies
        Suspending or revoking Dodd-Frank 1502 would hurt some of the
    United States' leading companies, such as Tiffany, Intel, and Apple.
    These firms have taken meaningful steps to keep their supply chains
    free from links to abuses in Congo and would be placed at a competitive
    disadvantage against companies inclined to operate less responsibly.
        Responsible companies have worked hard to comply with the
    requirements of 1502. In March 2016, Apple announced that 100 percent
    of its conflict mineral supply chain had been audited to ensure
    compliance with Dodd-Frank 1502. That move was widely praised by human
    rights groups. While its supplies were not fully conflict-free, it has
    achieved the kind of oversight needed to eliminate conflict minerals
    from its supply chain. It took the company about 6 years of steady work
    on the ground and with its suppliers to meet this goal. But Apple is
    not just focusing on its legal requirements; it is also trying to clean
    up its cobalt supply chain after facing scrutiny over problems in it.
        Intel began to examine conflict minerals in 2008 and has reported
    that its microprocessors have been conflict free since 2013. The
    company has said that it was on track to make its entire product base
    conflict-free. It took several years for the company to get control
    over its supply chains and build the capacity to source from properly
    audited mines.
        Also, Intel commissioned an important study on Millennials'
    attitudes towards conflict minerals. The survey provides useful
    insights into the minds of key consumers. 97 percent of those surveyed
    believed that companies should ``act in a way that benefits society.''
    Almost 70 percent would avoid companies that they think are not
    socially responsible. About 70 percent cared about conflict minerals
    once they learned about them, and a similar percentage said that how a
    company dealt with conflict minerals would influence whether they
    bought its products. Dodd-Frank 1502 gives consumers the information
    they need to make decisions, helps companies meet those expectations,
    and isolates companies that do not.
        Tiffany & Co., one of the world's most recognizable and prestigious
    jewelry companies, has also invested a considerable amount of time and
    resources to ensure that it monitors its supply chain to exclude
    conflict minerals. It conducts detailed reviews of its global supply
    chains. It works, like other companies, with programs to support
    conflict-free smelters and other initiatives. The company has made the
    investment to ensure its products are conflict-free.
        Each of these companies is an American icon and a leader in their
    industries. And each of them does not want Dodd-Frank 1502 or
    comparable regulation to go away.
        When it became apparent that 1502 might be suspended, Tiffany
    issued a statement noting ``we firmly believe that the continued
    existence of Federal regulation that addresses the sourcing of conflict
    minerals provides an important framework for industry, laying the
    foundation for protection of human rights and responsible sourcing
    efforts in Congo and beyond. We urge Congress to support legislation
    that effectively promotes due diligence and transparency for the
    sourcing of all conflict metals and gemstones.''
        Richline Group, a jeweler owned by Warren Buffet's Berkshire
    Hathaway, has also come out in support of 1502 and noted that ``Section
    1502 has proven to be an important and effective first step in the
    effort to create a conflict-free mining industry in Congo that benefits
    legitimate business rather than extortion and violence'' and said ``we
    fully support the continued implementation of Section 1502.''
        From personal experience, I know that the CEO of one of these
    companies had strong reservations against Dodd-Frank 1502 when it first
    became law, but ultimately saw that it was something the company could
    and would implement it in part because it was far less costly and
    laborious than he originally expected and because it was the right
    thing for the company to do.
        The support from major companies highlights a perverse consequence
    that suspending or repealing Dodd-Frank would cause: it would create an
    uneven playing field placing major U.S. companies at a competitive
    disadvantage relative to companies that did not want to disclose their
    supply chains, or worse still, do not care whether their activities led
    to the secret funding of armed groups in Congo. In this sense repealing
    1502 would create a perverse incentive to behave less responsibly, and
    would harm the efforts of responsible companies. Tiffany, Apple, Intel,
    and Richline have said they believe keeping conflict minerals out of
    their supply chain is the right thing to do and that they will continue
    to do it. But without regulation, they will bear a steep cost for being
    responsible. Dodd-Frank levels the playing field and makes sure
    responsible companies are not penalized for doing the right thing while
    requiring others to meet minimum standards.
        Additionally, 129 investors with assets worth approximately $5
    trillion under management have also urged the U.S. government to keep
    the law in place and to ensure its continued implementation and
    enforcement.
        The U.S. should maintain the same path it has successfully pursued
    over decades: be the first country to enact a strong law ensuring that
    companies act responsibly and then work diligently to make sure others
    do the same. This is what the U.S. did with the Foreign Corrupt
    Practices Act. It passed the law in 1977, worked to get other countries
    to pass similar statutes, and now there is an important global anti-
    corruption regime that includes many countries with strong anti-
    corruption laws of their own. Multilateral institutions like the
    Organization for Economic Cooperation and Development (OECD) and the
    U.N. have also developed their own standards. The U.S. played a leading
    role in these efforts--in part because it led by example.
        This approach has also been true with 1502. U.S. adoption of 1502
    led the EU and OECD, for example, to start developing their own
    standards on conflict minerals that will, at least in the case of the
    EU, apply to a broad swath of companies beyond U.S. jurisdiction. Just
    this March, the European Parliament approved new conflict minerals
    regulations. That approach creates a race to the top where U.S.
    companies lead, versus suspending 1502 and creating a race to the
    bottom where U.S. companies are hurt.
        Five years after the rules went into force, there is progress.
    There are more than 200 conflict-free smelters and major companies, as
    noted previously, are working towards full compliance and do not want
    the rule to end. And other jurisdictions are developing their own,
    similar, rules.
        Internationally, the London Bullion Market Association and the
    Dubai Multi-Commodities Center are putting policies into place to deal
    with illicit funds derived from minerals. In Congo, the International
    Tin Supply Chain Initiative is also working to support company due
    diligence. These are relatively new initiatives and their efficacy is
    not yet known, but they are examples of the momentum 1502 is creating
    and what could be lost if is eliminated.
        On the ground, significant parts of Congolese civil society
    generally support the law. As Dr. Denis Mukwege wrote in the New York
    Times in 2015, ``A conflict-free minerals industry would greatly
    benefit the people of Congo and contribute to ending the unspeakable
    violence they have endured for years. The legislative tools to help
    make this a reality are available to international policy makers, but
    they must be enacted and enforced.'' Those views are echoed by a number
    of civil society groups.
                        challenges with dodd-frank 1502
        There are very compelling reasons to keep 1502, but we do not want
    to downplay the fact that this law has had its challenges, claim that
    implementation of the law has been perfect, or suggest that it is the
    sole answer to conflict and abuse in eastern Congo.
        During the period after Dodd Frank became law in 2010 and before
    its implementing rules were finalized in 2012, uncertainty,
    misinformation, and other factors led to adverse consequences on the
    ground. That uncertainty before the final rules were issued led to a de
    facto boycott as companies avoided sourcing from Congo. There is also
    evidence that mineral-related violence during that time did not
    subside.
        However, those problems are not solely due to Dodd-Frank 1502. The
    Kabila government exacerbated the negative economic impacts when it
    ordered a 6-month halt to all mining in the Kivus in 2010. Between 2010
    and 2012, the period between enactment of 1502 and implementation of
    its final rules, companies chose to boycott Congo since nothing in the
    law required that companies stop doing business with Congo. These
    measures, coupled with the uncertainty over Dodd-Frank's final rules,
    created problems.
        There are still reports of problems facing artisanal miners ranging
    from low prices affecting artisanal coltan miners.
        Another key issue is that U.S. companies are still slow to comply
    with the law. In 2015, Global Witness and Amnesty International
    reported that as much as 80 percent of covered companies were not
    properly disclosing and auditing their conflict minerals supply chain.
    This is an important area for growth and development--as it could help
    strengthen the positive impact of the law and enable a more level
    playing field for all companies down the road.
                                the way forward
        We support constructive proposals to ensure Dodd-Frank 1502 is more
    efficient and effective. Suspending or scrapping the law will not do
    this and will instead disadvantage responsible companies, while likely
    creating more instability in parts of Congo and making it easier for
    abusive armed groups to pay for their activities.
        If industry groups or companies have specific ideas on how to make
    1502 more efficient or effective, you should make sure they are sharing
    them. There are already indications that costs of implementing 1502 are
    decreasing significantly as new tools are developed to make it easier
    to comply. ELM Sustainability Partners did an assessment of the law and
    found that the total industry costs are about 15-26 percent of the
    original costs that the SEC reported. Meanwhile, eastern Congo reported
    record highs for conflict-free exports of tin and tantalum in 2016.
        You should also request a study--perhaps from the GAO--on how to
    promote conflict-free minerals on the ground, and stronger incentives
    to promote and reward responsible companies.
        Unfortunately, the main industry critics, namely the National
    Association of Manufacturers, have not put forward specific proposals
    that would tweak 1502 to make it more effective. Many organizations are
    regularly discussing implementation with key companies and have
    listened closely to their concerns and challenges.
        As a general principal, we believe that responsible companies in
    any sector should be rewarded for safeguarding human rights in their
    operations and others should be incentivized to do the same. Broadly,
    the cost of capital should be lower for responsible compliant companies
    than noncompliant ones and the opportunities for responsible companies
    should be greater.
        In that context, we would encourage you to support proposals that
    have been made by industry associations to advantage 1502 compliant
    companies in government procurement and efforts by responsible
    investors to favor and support those companies over others. And while
    we are not experts on tax policy, it is worth Congress and others
    examining how to use tax credits or comparable incentives to help
    support 1502 implementation because it could help lower the costs of
    implementation for companies.
        Finally, we suggest Congress encourage efforts to support and
    promote conflict-free smelters on the ground. The principal way to do
    this is to make sure more companies are complying and sourcing from
    responsible mining and smelting sources. Given that the U.S. is still
    the largest donor to the World Bank, it would be worth examining how
    that institution can help the Congolese government and industry grow a
    conflict-free market.
                                   conclusion
        The situation in Congo is complex. But it is highly likely that
    suspending Dodd-Frank 1502 or eliminating it will contribute to greater
    instability, create a competitive disadvantage for responsible
    companies, and it could create a troubling paradox where, as U.S. aid
    to Congo and U.N. peacekeeping may decline, the opportunity for abusive
    armed groups to make money off from conflict minerals will increase.
    The U.S. would also fall behind its peers on an issue where it set the
    global example--this is not what Congress should seek to encourage or
    support.
        Instead, we hope the administration and Congress will seek to
    refine 1502, support responsible companies, and look at holistic
    approaches to keeping conflict mineral revenues out of the hands of
    abusive armed groups, whether they be militias, rebels, mafias, or
    government.

        Senator Flake. Thank you.
        Thank you all for the testimony. I will start a round of
    questions.
        Mr. Goss, you mentioned in your testimony that while
    Section 1502 has clearly helped deprive armed groups in Central
    Africa from exploiting certain illicit sources of funding, its
    ultimate record of reducing overall illicit income flowing to
    these actors is notoriously difficult to determine.
        You mentioned a little in your testimony gold is not
    covered here and that is where a lot of the illicit activity
    comes. Can you talk a little more about this? Is this akin to
    squeezing a balloon and seeing the violence and illicit
    activity go elsewhere?
        Mr. Goss. Yes, Senator. In fact, that is the same analogy I
    typically use.
        Because there are so many discrete sources of illicit
    income for militias, non-state armed actors, corrupt government
    and military officials, by bringing in additional controls on
    3T, we have generated some positive benefits for communities.
        But at the same time, these illicit state and non-state
    actors have gone to gold mines. They have gone to illegal
    roadblocks, wildlife trafficking, extortion. They control basic
    goods in and around mine sites. You even have validated mine
    sites where there are illegal roadblocks or illegal taxation
    schemes right outside. So what appears to be a validated mine
    site may actually be contributing to conflict.
        So, yes, it is very much like the analogy that you used.
        Senator Flake. Does that argue for a more comprehensive
    approach? Mr. Dizolele has talked about this is enforcement by
    the SEC. They are not going to enforce on wildlife trafficking
    or roadblocks or kidnappings. Do we need something more
    comprehensive?
        Mr. Goss. One of the basic tenets of our testimony and the
    tech sector's approach is that our role is to build our systems
    and, along with government and civil society, bring along the
    peace and security that is needed for our systems to achieve.
        Right now, we have a situation, as my fellow witnesses have
    described here, where you have a largely lawless region in
    eastern DRC. You have almost a borderless region between DRC,
    Uganda, Rwanda, and Burundi, where armed groups pass back and
    forth here. It is one of the most corrupt areas in the world,
    and it is very difficult, despite our best efforts, to create
    clean and legitimate sourcing in that region.
        And what we are really calling for here is renewed activity
    from the U.S., from the European Union, and the international
    community to work with regional governments to increase peace
    and security for the people of the Congo and so our programs
    can thrive in that situation.
        Senator Flake. Thank you.
        Mr. Dizolele, Mr. Kabila is in charge now, will be in
    charge for a while, maybe for the foreseeable future, not
    knowing what is going to happen politically. Is that government
    capable of partnering with the United States on a more
    comprehensive approach to stop illicit activity beyond just the
    conflict minerals?
        Mr. Dizolele. Senator, the government in Kinshasa is one
    that exhibits schizophrenia in the sense that I think, on one
    level, when cooperation suits them, they will take on the
    cooperation. And when it does not, they will fight it.
        I will say, no. The current government is not capable of
    acting as a real partner. And I think this is the problem that
    we face with laws like Dodd-Frank, 1502, because it does not
    account as much for the weakness of the state. It puts a lot of
    faith into the consumer, into businesses. But pretty much
    absent in that proposition is the role of the state.
        And this is the frustration from the Congolese perspective,
    is that we can bring all the cleanliness we want in the
    process.
        One, it will not be as clean as we think. We have a lot of
    papers and certificates that are signed, but that is a
    different thing than to actually have it as a clean process.
        So long as the state is not strong, transparent,
    accountable to the people, they cannot be a reliable partner to
    the international community, sir.
        Senator Flake. All right. Thank you.
        Mr. Ganesan, you obviously would not try to assert that
    there is no illicit activity elsewhere, but I assume you would
    argue that, at least in this space, with the 3Ts, with the
    conflict minerals, that 1502 has had a positive impact?
        Mr. Ganesan. Yes, I think the most important thing to
    remember about rebel groups or mafias or others is, by
    definition, they are illicit, so they will engage in illicit
    economic activity.
        What 1502 does is it tries to install some kind of
    transparency and auditing regime to make sure that those
    commodities that hit the international marketplace are
    disclosed and, by doing so, raise the transaction costs for
    illicit actors and, hopefully, get clean actors working on it.
    So, yes, it is having an impact, particularly on the 3Ts.
        On gold, the problem is slightly different because of the
    value of gold and how it is smuggled. So, in 2005, we did a
    report looking at how gold was coming from the Congo through
    Uganda and making its way into Swiss refiners. And when we
    notified and worked with Swiss refiners to kind of change that
    trade, what we saw is gold started making its way to the United
    Arab Emirates through Dubai and elsewhere in the world.
        So our feeling with gold is, one, it is always valuable and
    it is always going to be a target for rebel groups or others to
    smuggle. But more importantly, to really get a control on the
    gold trade the way people have done with electronics, you will
    have to work with countries like the UAE, companies there,
    companies in India and elsewhere, who are major consumers of it
    to make sure that they are cleaning up their supply chains too.
        Now, Human Rights Watch is starting to do that with gold
    and some other commodities, and we are talking to Indian
    companies and others. But it has to do in part with the nature
    of the gold trade. However, that does not minimize the value of
    1502 and analogous schemes that Europe and others are putting
    there, because it is clearly having an effect.
        Senator Flake. Thank you.
        Senator Booker.
        Senator Booker. Thank you, Chairman Flake.
        So there is one chorus, if I hear correctly, that all of
    you are saying, that 1502 is just one part to what should be a
    much larger agenda that we have.
        Now, I just remind folks that we, as a part of this effort,
    1502, a lot more has been done. In fact, in foreign assistance,
    you have seen U.S. bilateral aid allocations totaling an
    estimated $295 million in fiscal year 2016 in addition to $62.5
    million in emergency food aid, $100 million in other additional
    emergency humanitarian aid, and $440 million in U.S.-assessed
    contributions to MONUSCO.
        So I guess what I am concerned about is that folks are
    isolating this one element of what should be a larger plan and
    weakening it.
        Mr. Goss, maybe I will start with you because on page 4 of
    your testimony, as Mr. Flake read, you say while Section 1502
    has clearly helped deprive armed groups in Central Africa from
    exploiting certain illicit sources of funding, its ultimate
    record of reducing overall illicit income flowing to these
    actions is notoriously difficult to determine.
        I love the tech industry because it is such a data-driven
    industry and having explicit measures is something that clearly
    is important for business. And I know this is very hard to
    measure, what was causation and what was correlation, but you
    admit on page 7 that, overall, Section 1502 has generated real
    progress in bringing increased transparency to the 3T mines and
    supply chains in the region, and in raising global awareness
    across the public and private sectors. That is just one element
    of you pointing out sort of the good elements of this.
        So you are not in any way suggesting throwing out this one
    specific tool in the larger toolbox. In some ways, it sounds
    like from your testimony, you are calling for us to lean in
    even further with some of the other actions. In other words,
    you do not see this as a bad action. It is having some very
    positive effect, many of which you note here. Is that correct?
        Mr. Goss. Yes, thank you, Senator.
        Certainly, we do see some positive effects from 1502. In
    2013, ITI testified on the House side, and we included a link
    to our testimony here, but we made several comments about the
    benefits of 1502, including increasing public awareness and
    consumer awareness, certainly driving more concerted effort.
    Other sectors joined with tech and electronics. And as
    Professor Dizolele mentioned, driving more activity on the
    ground from governments in the region here.
        So there are certainly positives that 1502 has generated
    here. There are also, and I think both of my fellow witnesses
    here have made a nod to this, there are some unintended
    consequences.
        What we would like to see, certainly, is a strong,
    continued U.S. presence on this issue. Certainly, there is a
    better way, in our view, to approach transparency in terms of
    mineral sourcing. There are portions or provisions of 1502 that
    discourage companies from sourcing in the region that we think
    could be reconsidered, and, frankly looking more toward that
    OECD due diligence guidance, which is now about to be used in
    the European Union. It is being used by the International
    Conference of the Great Lakes Region. Even China has adopted a
    version of it here as well. And again, it is part of the SEC
    compliance approach. We think that is a much more effective and
    balanced way of driving transparency.
        Senator Booker. Mr. Dizolele, am I pronouncing that right,
    Dizolele? Thank you very much.
        Mr. Dizolele. Yes, sir.
        Senator Booker. I just want to give respect to a fellow
    bald American.
        [Laughter.]
        Senator Booker. Mr. Dizolele pointed out very pointedly and
    correctly that the implementation of this in the short term, in
    a short period of time, had some immediate impacts that were
    ultimately corrected for over time.
        But as a guy who roots for American companies, obviously,
    and who is very invested in technology and innovation, it is a
    clear thing that if we suspended this rule at any point, it
    would be a disadvantage to the American companies that have
    already adopted many of the practices that this rule was
    intended to manifest and actually might create a perverse
    incentive because you are now going to have to compete against
    people that do not utilize these practices. Is that correct?
        Mr. Goss. Yes, I would agree with that. Our primary concern
    is that if 1502 were to be suspended or repealed, it would lead
    to increased volatility in an already very volatile region.
        Senator Booker. And stability and predictability are things
    that are good for American companies, yes?
        Mr. Goss. I would agree with that, yes.
        Senator Booker. All right.
        Mr. Goss. May I?
        Senator Booker. Please.
        Mr. Goss. I think as Mr. Ganesan said, we have several of
    our members who have already publicly come out and said that
    they are going to be continuing their commitments and their due
    diligence activities regardless because it is part of the tech
    sector DNA in terms of what we feel we owe to our supply
    chains, to our customers, and to our shareholders.
        Senator Booker. Right. Those people who operate with those
    values would be at a disadvantage should the rules be changed
    for those who want to do a race to the bottom.
        I want to stop here because I am trying to get on the good
    side of my chairman. This is our first hearing. I do not want
    to go over.
        Senator Flake. Senator Young.
        Senator Young. I thank the chairman, and the ranking member
    for his concise comments there.
        I thank all of you once again for being here.
        Mr. Dizolele, in your prepared statement, you touch on the
    performance of the United Nations peacekeeping mission in the
    Democratic Republic of the Congo. As you know, the U.N.
    Security Council extended last week the mission of MONUSCO, the
    U.N. stabilization mission in DRC. The Security Council
    reiterated that a strategic priority of that mission is the
    protection of civilians.
        Did I understand correctly in your earlier testimony you
    actually indicated that MONUSCO is doing more harm than good?
        Mr. Dizolele. Yes, Senator.
        Senator Young. Incredibly troubling, as the United Nations
    hears from the U.S. Mission to the United Nations about the
    importance of revisiting each of these peacekeeping missions
    and ensuring that they are doing good and that they are
    fulfilling their mission in advancing core U.S. interests.
        In your prepared statement, Mr. Dizolele, you discussed the
    massacre of civilians on a daily basis by death squads that the
    U.N. peacekeepers have ``failed to either apprehend or
    vanquish.''
        Does that not represent a failure of the U.N. peacekeepers
    to fulfill their mission in the DRC and to uphold Chapter 7 of
    the U.N. Charter?
        Mr. Dizolele. Yes, Senator Young. I have been embedded with
    U.N. peacekeepers as a reporter, so I have actually gone on
    patrol with them over periods of time. I have been with the
    Moroccans in Eritrea. I have been with the Uruguayans trying to
    intercept weapons.
        The question is, what is the problem we are trying to
    solve? That is what we typically forget when we analyze all
    these things, Dodd-Frank 1502 or the U.N.
        The U.N. came to help Congo transition from the chaos of
    the war to a functional state, and that has not happened. So
    the mandate that might have started as one page is about 20
    pages today. So when you read the mandate of MONUSCO, you are
    thinking you are reading the attribution of the Congolese
    State. That is not the role.
        So it is stifling the emergence of the Congolese State.
        Senator Young. So in peacekeeping, as with life generally,
    if everything is a priority, nothing is a priority.
        Mr. Dizolele. Correct, sir. And I think the priority in the
    case of the DRC has to get the functional state so that MONUSCO
    will exit and the Congolese will take full responsibility for
    their security. They are very capable people. It has been 20
    years, and every 6 months, we are clamoring for an extension of
    U.N. mandates and nobody is asking the tough questions about
    the Congolese Army, about the Congolese State, and why they are
    failing to protect their own citizens.
        The Congolese will appreciate U.S. contributions to the
    U.N. to go to them directly so they can use that money to
    rebuild their state.
        Thank you, sir.
        Senator Young. Continuing, Mr. Dizolele, would we in
    Congress be making a mistake if we conflated the broader
    peacekeeping mission with the intervention brigade, which, as
    you know, was established to neutralize armed groups and reduce
    their threat to civilians?
        Would you separate out the intervention brigade and assess
    their performance differently in the Congo than you would the
    broader peacekeeping mission? Or are they both doing more harm
    than good, to your mind?
        Mr. Dizolele. I would want to separate them, because if we
    remember the story or the history of the intervention brigade,
    it was supposed to act independently of the U.N. They had a
    mandate from the country. They were trying to solve specific
    problems. They were not to be there forever to support
    countries, except for South Africa, but they were very
    effective.
        The moment they got folded into the U.N., we forgot about
    their presence, in fact. We do not know they exist anymore
    unless somebody like you mention them because now they go by
    the SOPs of the U.N., and they are part of the units that are
    around the area that I described where civilians are being
    killed every night while the U.N. is standing there, and every
    night there are dead bodies.
        Senator Young. Well, hopefully, it provides a measure of
    reassurance that the United States Ambassador to the United
    Nations, Nikki Haley, has made improving these peacekeeping
    missions, going through each of the peacekeeping missions that
    the U.N. has commissioned and ensuring that they are actually
    out there doing more good than harm, to adopt your language.
        The U.S. assumes the presidency, as you know, of the U.N.
    Security Council this month. What do you believe should be the
    key priorities or areas, Mr. Dizolele, of focus when it comes
    to U.N. peacekeeping more broadly?
        Mr. Dizolele. I think, Senator, it is to make the mission
    limited in scope and time, because that is really where the
    devil lies.
        There used to be a mission in the Congo in the 1960s. It
    was only for 4 years, the grandmother of MONUSCO. It was called
    ONUC. They were there for 4 years. They delivered what they
    were to do, and they left. And the Congolese were able to
    emerge and do their own bidding.
        So the moment we leave them open-ended, that is where the
    problem starts because then the mission creep. That is when
    countries become very comfortable.
        And in the Congo, we have an example of this. Over the last
    17 years, the U.N. and MONUSCO have had to be bailed out of
    tough situations.
        In early 2000, the French intervened with Operation Artemis
    in Ituri. That mission was very small. The French came in for 3
    months, I think. They cleaned the place and left. They had no
    interest in staying longer. So they were effective. In 2006,
    the Germans came and helped MONUSCO. Recently, we see with the
    Force Intervention Brigade.
        Those are signs of failure, not of success. If a
    peacekeeping force has to be bailed out, that is troubling,
    just to illustrate my point, sir.
        Senator Young. Thanks so much for the benefit of your
    experience and perspective.
        Senator Flake. Thank you much.
        I should note, on the peacekeeping issue, I was in Namibia
    for a year while the U.N. was there under Resolution 435, UNTAG
    forces. That was a good example of one defined in scope,
    mission, and time. They were there for a year, kept the peace,
    had the process for elections, and drafted the Constitution. It
    worked. But too often, we have seen failures.
        Continuing on, Mr. Ganesan, can you describe the process
    that the European Union has put forward? How does that differ
    from Section 1502?
        Mr. Ganesan. It relies more on the OECD guidance, and there
    is about a 4-year implementation leeway for it, so it will not
    go into force until 2021. In our view, that is probably a
    little bit too long. Two or 3 years is probably more reasonable
    and more along the lines of what the SEC did. It gives some
    flexibility to companies but it is largely analogous to what
    1502 does.
        It is important because it shows that, in the European
    Parliament and in the European Union, companies will have to
    start following similar standards. And we know with large
    multinationals, they will gravitate towards one standard and
    support it.
        What I think it also shows is that, in looking at 1502,
    there is space outside of opening up the rule or anything else,
    to think about how one can provide, in a way, safe harbor for
    companies that are complying with other good rules and make
    sure that they are seen as complying here in the U.S. and
    taking steps like that. Because we know that there will be more
    scrutiny on what is going on with European companies as well as
    other companies around the world, and finding ways to do that.
        I would just want to add to something that Mr. Goss said
    and just clarify something.
        The boycott took place because the law passed in 2010 and
    the rules went into force in 2012. In that period in between,
    nobody knew what the rules would look like, and that created
    uncertainty. Some institutions interpreted that far more
    aggressively than others and did not operate in the Congo.
        One of our fears in thinking about how to tweak 1502 is
    that, if you open up the rule or the rulemaking process, you
    may just be setting up another boycott because there will be so
    much uncertainty for a year or two. That is why, in thinking
    about how to address 1502, while also addressing the fact that
    what we really do not want us to inject new instability in the
    Congo as a whole, is to look at ways to modify it or tweak it
    outside of opening up the rule.
        So if one can provide safe harbor because of what Europe is
    doing, or if one can provide better incentives for companies to
    implement it better, it would be better to do it outside the
    rule than thinking about modifying or opening up the rule as
    well.
        Senator Flake. Mr. Goss, do you have any thoughts or not,
    in terms of modification, what can be done to ensure that we do
    not create the same kind of uncertainty that we had at the
    beginning?
        Mr. Goss. We would certainly be open to a safe harbor type
    approach. I will agree with my colleague here that, especially
    as ITI represents multinational corporations, having that
    certainty, having that alignment, is paramount for us. It is
    one of the reasons why we pointed to the OECD due diligence
    guidance, because it has emerged as the international norm
    here.
        I will note that the underlying language of 1502 is very
    particular, and so the SEC I think is somewhat delimited in
    terms of how they might be able to open up or change the rule.
    But we would certainly be open to a safe harbor or other
    similar type approaches that would avoid any uncertainty or
    volatility but make it a little more streamlined and a little
    more consistent with the emerging global practices.
        Senator Flake. Thank you.
        Mr. Dizolele, you talked a lot about having a more
    comprehensive policy that looks at governance. Is part of the
    problem, as you see it, that the SEC, by definition, can only
    enforce the law but without looking at the broader context,
    like legislation that might be passed by this committee or
    Congress as a whole? Is that one of the limitations, problems,
    that it is just so narrow in terms of what the SEC can and
    cannot do?
        Mr. Dizolele. Yes, Mr. Chairman. I think, for one, the SEC
    I do not think is really equipped for this kind of challenge.
    It is a political issue in nature. That is how I see it,
    primarily.
        And then, two, it is really an issue of foreign relations.
    So a commission like yours, USAID, the State Department, have a
    lot more to do with this. So far, they are doing a lot of
    things already, the public-private alliance, and many other
    issues that are taking place or projects that are taking place
    now. So I think we should focus on those.
        I just do not believe a regulation from the U.S. is going
    to solve this issue in that way. There are many more campaigns
    in the world that are successful, and they are not always
    regulated from Congress. In this case, as I said, there are
    added troubling issues.
        So if we establish that Congolese resources have been
    siphoned off to Rwanda, how does 1502 account for that? There
    is a clear net loss to the Congolese year in, year out. I am
    talking about hundreds of millions of dollars.
        So how can we allow a law to continue knowing very well
    this is a clear effect, and then telling the Congolese we are
    helping you increase your own welfare?
        I think just to conclude on that point, there is a wealth
    of platforms. I think groups like Human Rights Watch, groups
    like ITI and others can come together to continue enforcing. I
    think the greatest value of Dodd-Frank 1502 is bringing that
    heightened awareness they have brought to bear. I think we
    cannot underestimate that.
        I do not think there is a serious company out there that is
    saying, gee, how can we go and mess up Congolese more and get
    more out? It is costly. It is costly to do business in a place
    like the DRC. I have tried to do business in the DRC.
        Senator Flake. Thank you.
        Senator Booker.
        Senator Booker. Mr. Dizolele, I really appreciate your
    insights and value the way you are looking at this.
        You and I probably both have the same perspective, that
    there are some times, when it comes to African peoples, a sort
    of pernicious paternalism in trying to dictate to other
    countries about how to deal with their own issues and their
    problems. Would you agree with that?
        Mr. Dizolele. Yes, Senator Booker.
        Senator Booker. And I have seen it in the American context.
    I still remember Frederick Douglass, in a very famous meeting
    with Abraham Lincoln, where Lincoln in a very paternalistic way
    said, okay, we are going to solve your problems and send you
    all out of the country. And Frederick Douglass was like, do not
    tell me what is best for blacks. We want to stay in this
    country and be a part of it.
        So this is something that is problematic with the continent
    as a whole. And I am grateful for you talking about, even in
    terms of how we do aid and funding, to think about empowering
    local communities and listening to the government as well. That
    is where I really appreciate that sentiment.
        And that is why, in all the things that I read in
    preparation for this hearing on this critical issue, when I
    looked at what the Congolese people are saying about this rule,
    111 different Congolese civil society organizations based in
    Congo wrote to the SEC over the past 2 months asking that the
    U.S. conflict minerals law not be repealed, suspended, or even
    weakened. In multiple separate letters, these organizations all
    stated that a suspension or repeal would increase violent
    conflict, and that while the law had a rough initial
    implementation stage, which I have already talked about, it is
    now leading to what they are saying--these are Congolese
    voices--it is now leading to increased rule of law and
    decreased incentives for armed groups.
        I want to read also from the Congolese Government itself.
    They wrote advocating for it. They submitted and stated in
    their letter, and I quote, ``The DRC Government through the
    Ministry of Mines recognizes that Section 1502 of the Dodd-
    Frank Act provides a major opportunity to break the link
    between recurring conflicts, the production and trade of
    minerals in the DRC.''
        I am an American United States Senator, and I want to do
    what is in the interests of my country, but I do believe that
    when it comes to--and I am new on this committee and new on
    this subcommittee--but I value the voices of Africans. I value
    the voices of indigenous people about determining their own
    destiny. And here is a chorus of folks from government to civil
    society organizations, multiple letters, all saying not only do
    not repeal this rule but do not suspend it or modify it.
        Could you just give me some insight in response?
        Mr. Dizolele. Thank you, Senator. A very important point
    you are making.
        I read those letters. I know some of the people who signed
    those letters. I have been to the mines. I was writing about
    the mines and filming the mines before they became a fad. I had
    on guard and drove like I am going to die to go to the mine,
    film, and come out. This was 13 years ago. I will give you a
    couple examples.
        Senator Booker. Please.
        Mr. Dizolele. If the Congolese Government is calling for
    this, then that is actually a call for help. If the Congolese
    Government is saying do not repeal your law, and they are not
    doing anything on their own side to solve this problem, that is
    not a positive sign.
        I saw the minister, the representative of the government
    when he was here last week, and I asked him this question. He
    had no answer. He could not even realize that Rwanda had
    certified Congolese mineral.
        So I asked two points, then we can continue. I asked a
    fellow who is one of the foremost experts in this area just as
    I was preparing for this presentation. I said, look, I have
    seen what you sent. You sent me press releases. They do not
    send analysis. ``This is why we believe this.'' It always goes
    to, ``If we do not do this, there will be a war.''
        There is no evidence of that. It is all like this or that.
        So I said, look, I do not agree with you. I recommend that
    this law be folded and discontinued.
        If, in fact, the U.S. folded this law and discontinued,
    what will happen? And he said, ``Well, nothing. It is, after
    all, an American law. We are trying to do things.''
        They have already set things in motion that are now
    continuing, some of the things that I have mentioned
    positively.
        Senator Booker. Mr. Dizolele----
        Mr. Dizolele. He did not think it was the end of the world.
        Senator Booker. Thank you for that candid response.
        In the larger activities of the Senate, there have been a
    lot of accusations of hypocrisy, probably little of them are
    true. But in this case, I am about to be a hypocrite and go
    over my time for a minute, if I can have the minute?
        Thank you very much.
        Mr. Ganesan, I would like to ask you the same thing, from
    your perspective. This is incredible insight from somebody who
    has been on the ground, been to the mines, talked to the
    various leaders.
        I have these letters, and if you will allow me to submit
    them for the record?
        Senator Flake. Without objection.
        [The information referred to above can be found in the
    ``Additional Materials for the Record'' section of this
    Hearing.]
        Senator Booker. I would like for you to comment on that,
    and then let me just pile on a question, and then I am done, on
    top of that one, comment on that.
        But I also want you, because the biggest concern I have
    right now, which I am grateful--in fact, the two men to my
    right have been very loud on this concern as well, that the
    budget that we have just seen from President Donald Trump, at a
    time when everybody on this panel is asking for more
    engagement, it cut back a lot of critical programs even beyond
    what we are talking about today.
        You are out there working on these issues. I would just
    love for you to answer the question I asked, but then also
    comment on the so-called skinny budget in terms of what it does
    to the State Department and diplomacy, and how that threatens,
    that lack of leadership, essential American leadership, what
    that might do to regions like DRC.
        Mr. Ganesan. I think I would start by saying that I have
    been working on the flow of revenue from oil and other natural
    resources around the world since about 1998 or 1999. And the
    one thing that is always important to remember with 1502 or
    elsewhere is that a 1502 is not meant to solve every problem.
    It is meant to solve a specific problem, which is to raise the
    transaction costs of illicit actors getting control of those
    funds, and making the trade more transparent and accountable
    for major companies and the like.
        So it can only address that specific narrow problem of the
    overall situation in the Congo. The overall situation in the
    Congo is there are many factors that would not be affected by
    the law, but the part that is is important. And in that
    context, it is quite illustrative because it is rare to see
    industry organizations, major companies in the world like Apple
    and Intel and Tiffany, and very large parts, including the
    Catholic bishops of Congo, saying this law is a good idea.
        I know working on businesses, it is rare that you will hear
    all of us agree on anything, and we all seem to agree on the
    same thing in this case.
        So I think it is important to note that it does help in a
    certain way, but it is not a panacea for all the problems in
    the Congo. And my view would be that that is a good thing, that
    more companies are trying to implement it. More jurisdictions
    like the European Union are putting in their own laws. And we
    assume that in the next 5 to 10 years, this will be a global
    norm.
        And on civil society, they are seeing it is helping in some
    way.
        Now a good analogy is what I saw with UNITA at the end of
    the Angolan civil war, who made a lot of money and fueled their
    conflict in its last few years off of diamonds.
        When that war ended, we interviewed the leadership of UNITA
    and we asked what did the whole issue of blood diamonds, in
    that case the Kimberley Process, how did it affect you? And
    they said very clearly to us: ``It made it extraordinarily
    expensive to procure weapons. We had to retreat further in the
    bush. And it was harder to do things.''
        So I would accept that when you are dealing with mafia
    networks, rebel groups, or corrupt officials, they will always
    find ways to steal or siphon off money. But to the extent that
    you can control a part of that trade, make it more transparent,
    and make it more legitimate so that responsible actors are the
    ones benefiting from it, that is a good thing, as long as you
    recognize that it will not solve every problem.
        Senator Booker. Thank you, sir. And maybe you can submit
    for the record that second part of my question about your
    perspective, especially when it comes to conflict in Africa
    specifically with the DRC, what your concerns might be about
    the budget that was submitted.
        I would prefer, just out of respect to my colleagues, maybe
    you submit that in writing.
        Senator Flake. It is all right, if you want to answer.
        Mr. Ganesan. So I think, in this particular context, it is
    threefold.
        Number one is how it impacts specific programs for the
    Congo itself. And right now, there seems to be a pause in
    cutting funding to the Congo, as we have seen from Ambassador
    Haley and others, but that may not be true in multiple years.
        The second part is how it impedes the State Department's
    ability to conduct the diplomacy or undertake initiatives
    globally to try to address these types of issues, whether it is
    the issue of conflict minerals or others, and work with
    companies and other governments to lay out standards.
        And the third, and it is not with the State Department, is
    the proposal to cut $600 million from the World Bank. The World
    Bank, through the IFC, which lends to the private sector as
    well--it is development assistance--is one of those
    institutions that is perfectly poised to help build a conflict-
    free economy in countries like the Congo, and the U.S. is the
    largest donor to it. But if you cut $600 million out of their
    budget, it is going to be less likely that that can happen.
        So I think it is the panoply of, if the goal is to build a
    stable and accountable country through accountable, transparent
    governments and industries that benefit people, you need all of
    those institutions funded in a way that they can actually put
    their resources into these kind of activities.
        Senator Booker. Thank you, sir.
        Thank you, Chairman, for the indulgence.
        Senator Flake. Thank you.
        Senator Young.
        Senator Young. Mr. Dizolele, in your prepared statement,
    you say of the United Nations Security Council, quite
    damningly, they are notorious for their schizophrenic Congo
    policy, which consistently places the interests of the Kabila
    regime above the aspirations and rights of the Congolese
    people.
        Can you elaborate on that assertion, sir?
        Mr. Dizolele. Yes, Senator Young.
        As I said earlier, there was a specific mandate for the
    mission when it came, and that mandate was to help with the
    departure of foreign troops. That mandate has mutated over
    time, including helping organize the elections and many other
    things.
        So if I were to take a couple examples of the organization
    of the elections, the U.N. will not be involved in organizing
    the election. But when the Congolese people, whether it be the
    opposition or civil society, calls for changes or denounces
    certain things, they do not act. So for the people, they do not
    see them anymore as the force that they were supposed to be.
    This is the part of the problem that I alluded earlier on to.
        And then they also undermine the emerging of an adequate
    military for the Congolese. So the area where MONUSCO is very
    present, they do everything, including buying gas for the
    Congolese Army. So without MONUSCO, the Congolese Army cannot
    do anything. And then in the areas where they are there with
    the FRDC, they do not act, just like the FRDC.
        So it creates this confusion of what exactly they are
    doing.
        And the last point is, Michael Sharp was killed several
    days ago. You know, the Group of Experts, if you read their
    reports over time, it is amazing how much knowledge they have
    collected over time. When they go brief the Security Council,
    most of the time, the Security Council does not act on the very
    recommendations of the people they send to risk their lives.
    And that is something very important.
        Senator Young. So you have offered a couple of very
    powerful examples. Thank you.
        One of the things that I hope to get to, in consultation
    with yourself and others, is the source of such schizophrenic
    policies at the U.N. Security Council. What do you believe is
    the source at the Security Council of this schizophrenic Congo
    policy?
        Mr. Dizolele. National interests of each country, sir.
        So the French may vote for one thing on the Security
    Council, but in the field, in Congo, the engagement with the
    Congolese Government dictates something else.
        Senator Young. So this is structural. This is formidable,
    if one wants to try to address the structural challenges of the
    U.N. Security Council. I do not anticipate the membership or
    the prerogatives changing anytime soon.
        And this is a difficult question, but I ask if you have any
    recommendations to at least mitigate some of these challenges
    which lead to schizophrenic policies?
        Mr. Dizolele. Senator, I think, as I said earlier, at least
    from the U.S. perspective, it will be important for the U.S. to
    just demand greater accountability. This is why I think the
    approach that Ambassador Nikki Haley is taking is so
    refreshing. So that the role of the U.S. on the Security
    Council is not to rubberstamp MONUSCO, because that is really
    what has been happening, but to push and push further.
        Senator Young. Well, I am going to interject and just tell
    the chairman I could not agree more with our witness. I think
    using what leverage we have as a country to try to effect some
    change within the Security Council is very important, so I
    commend our Ambassador and her efforts on that front.
        Mr. Dizolele. Thank you, Senator.
        Senator Flake. I want to thank you all on behalf of the
    committee, and my colleagues here, for your expertise and your
    testimony and your willingness to share it. This will be
    invaluable to us as we consider these policies moving ahead,
    and also to the SEC as it considers its policy and decides what
    to do going forward.
        For the benefit of the members, the hearing record will
    remain open through Friday.
        Senator Flake. And with the thanks of the committee, this
    committee stands adjourned.
        [Whereupon, at 3:09 p.m., the hearing was adjourned.]
                                  ----------

                  Additional Material Submitted for the Record

                  Prepared Statement of Senator Richard Durbin

        Chairman Flake and Ranking Member Booker, thank you for the
    opportunity to say a few words today on this issue. The law we are
    discussing today was originally led by Senators Sam Brownback, Russ
    Feingold and myself--as well as Congressman McDermott in the House.
                    congo conflict/rape capital of the world
        It is isn't very often that Congress can make a policy change that
    has life-or-death consequences for millions of people, but in 2010 a
    law was enacted that is changing the money supply for warlords in the
    Democratic Republic of Congo.
        Many here may not realize that more than five million people have
    been killed during the long-running conflicts in the Democratic
    Republic of Congo, which have been the most deadly since World War II.
        Tragically, women and children have suffered the most, as we too
    often see in conflict. Millions have been displaced from their homes,
    and the prevalence of rape and sexual violence as a weapon of war is
    almost beyond belief . . . earning eastern Congo the grim distinction
    of being the ``Rape Capital of the World.''
        Sam Brownback first took me there in 2005 and I returned again in
    2010.
        At the time we were working on this law, the U.N. reported that
    about 1,000 women were assaulted every day in Congo . . . roughly
    equivalent to 12% of all Congolese women.
        One of the drivers and funders of this conflict was paradoxically
    that which fills the DRC with such potential . . . its natural
    resources.
        Instead of paying for the nation's peace, education, roads and
    public health programs, the DRC's mineral wealth was being siphoned off
    to fund the armed groups that vie for local and regional control of
    vast areas far from Congo's capital, Kinshasa.
                             conflict minerals law
        Tin, tantalum, tungsten and gold are found in everyday electronics,
    jewelry, airplanes and manufacturing equipment. But these minerals also
    have provided weapons and salaries to fighters, including conscripted
    child soldiers, who then visit unspeakable horrors on innocent
    civilians in return.
        That is why in 2009, I joined Brownback, Feingold, and McDermott in
    drafting a simple reporting requirement for U.S.-registered
    corporations that source these four minerals from the DRC or its
    neighbors.
        It wasn't a ban.
        It was simply a transparency measure that said if you used any of
    these key minerals from the eastern Congo region you had so say what,
    if anything, you were doing to not source from those fueling the
    region's violence.
        You could say you were doing nothing, but at least then consumers
    would have some options on ensuring the electronics in their pockets
    weren't contributing to the violence.
        And on a broader scale, it aimed to use collective industry action
    to clean up the supply chain of these mineral . . . which I am proud to
    say has worked.
        You see, before these rules, not a single smelter of tin, tungsten,
    tantalum, or gold had submitted to and passed an audit to prove they
    weren't dealing in conflict minerals. Today, 76 percent of the world's
    smelters of the 3Ts or gold have passed such an audit.
        This is remarkable and due to many industry leaders on the issue,
    including Intel, Apple, Kemet and a number from Illinois including
    Motorola and AAR Corp.
        And it is due to a cleaning up of the mining industry in eastern
    Congo.
        For example, in 2014 the Enough Project noted that 112 out of 155
    surveyed mines passed as conflict free.
        Obviously, this process is far from complete or perfect . . . but
    it is one that has helped ease the grip Congolese warlords had on the
    mining sector.
        I also realize there is chance today to explore important lessons
    learned from this law and its consequence . . . but I hope we do not
    undermine the larger effort.
        That the Administration is considering weakening this law is
    senseless and immoral, and I fear would lead to more bloodshed.
        I think as Americans become increasingly conscious about the
    origins of the products they buy, reducing transparency and eliminating
    incentives for responsible sourcing in this industry would be a grave
    mistake.

                                  ----------

       Series of Letters Relating to Section 1502 of the Dodd-Frank Act
                Submitted for the Record by Senator Cory Booker

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