[Senate Hearing 116-190]
[From the U.S. Government Publishing Office]
S. Hrg. 116-190
ILLICIT MINING: THREATS TO U.S. NATIONAL SECURITY
AND INTERNATIONAL HUMAN RIGHTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON WESTERN
HEMISPHERE, TRANSNATIONAL
CRIME, CIVILIAN SECURITY,
DEMOCRACY, HUMAN RIGHTS,
AND GLOBAL WOMEN'S ISSUES
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 5, 2019
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web:
http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
40-426 PDF WASHINGTON : 2020
COMMITTEE ON FOREIGN RELATIONS
JAMES E. RISCH, Idaho, Chairman
MARCO RUBIO, Florida ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin BENJAMIN L. CARDIN, Maryland
CORY GARDNER, Colorado JEANNE SHAHEEN, New Hampshire
MITT ROMNEY, Utah CHRISTOPHER A. COONS, Delaware
LINDSEY GRAHAM, South Carolina TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
ROB PORTMAN, Ohio EDWARD J. MARKEY, Massachusetts
RAND PAUL, Kentucky JEFF MERKLEY, Oregon
TODD, YOUNG, Indiana CORY A. BOOKER, New Jersey
TED CRUZ, Texas
Christopher M. Socha, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
SUBCOMMITTEE ON WESTERN HEMISPHERE,
TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,
HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES
MARCO RUBIO, Florida, Chairman
ROB PORTMAN, Ohio BENJAMIN L. CARDIN, Maryland
TED CRUZ, Texas TOM UDALL, New Mexico
CORY GARDNER, Colorado JEANNE SHAHEEN, New Hampshire
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
(ii)
C O N T E N T S
----------
Page
Rubio, Hon. Marco, U.S. Senator From Florida..................... 1
Cardin, Hon. Benjamin L., U.S. Senator From Maryland............. 3
Filipetti, Carrie, Deputy Assistant Secretary, Bureau of Western
Hemisphere Affairs, U.S. Department of State, Washington, DC... 6
Prepared statement........................................... 8
Glenn, Richard H., Deputy Assistant Secretary, Bureau of
International Narcotics and Law Enforcement Affairs, U.S.
Department of State, Washington, DC............................ 10
Prepared statement........................................... 12
Haeni, Jeffrey, Acting Deputy Assistant Administrator, Bureau for
Economic Growth, Education and Environment, U.S. Agency for
International Development, Washington, DC...................... 18
Prepared statement........................................... 20
Lechleitner, Patrick J., Assistant Director for International
Operations and Homeland Security Investigations, U.S.
Immigration and Customs Enforcement, Washington, DC............ 22
Prepared statement........................................... 24
Thompson, Regina E., Deputy Assistant Director, Criminal
Investigative Division, Federal Bureau of Investigation,
Washington, DC................................................. 27
Prepared statement........................................... 29
Additional Material Submitted for the Record
Responses of Carrie Filipetti to Questions Submitted by Senator
Benjamin L. Cardin............................................. 43
Responses of Carrie Filipetti and Richard H. Glenn to Questions
Submitted by Senator Benjamin L. Cardin........................ 45
Responses of Richard H. Glenn to Questions Submitted by Senator
Benjamin L. Cardin............................................. 48
Responses of Jeffrey Haeni to Questions Submitted by Senator
Benjamin L. Cardin............................................. 49
Responses of Patrick J. Lechleitner to Questions Submtted by
Senator Benjamin L. Cardin..................................... 60
The Committee Received No Responses From Ms. Regina E. Thompson
for the Following Questions Submitted by Senator Benjamin L.
Cardin......................................................... 64
Miami Herald Article Submitted by Senator Benjamin L. Cardin..... 66
Venezuela, The Smugglers' Paradise Article Submitted by Benjamin
L. Cardin...................................................... 71
Global Witness Statement Submitted by Benjamin L. Cardin......... 75
(iii)
ILLICIT MINING: THREATS TO U.S. NATIONAL SECURITY AND INTERNATIONAL
HUMAN RIGHTS
----------
THURSDAY, DECEMBER 5, 2019
U.S. Senate,
Subcommittee on Western Hemisphere, Transnational
Crime, Civilian Security, Democracy, Human Rights,
and Global Women's Issues,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:08 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. Marco Rubio
presiding.
Present: Senators Rubio [presiding], Cruz, and Cardin.
OPENING STATEMENT OF HON. MARCO RUBIO,
U.S. SENATOR FROM FLORIDA
Senator Rubio. The Senate Foreign Relations Subcommittee on
the Western Hemisphere, Transnational Crime, Civilian Security,
Democracy, Human Rights, and Global Women's Issues will come to
order. We have the longest name. We've got to come up with an
acronym.
Anyway, the title of the hearing is, ``Illicit Mining and
Threats to Our National Security, and the Threat to Human
Rights.''
I want to thank the ranking member. Our offices collaborate
on a number of issues; in fact, on a lot of issues. But in
particular with regard to this hearing, they've been great in
terms of securing the panel of witnesses and so forth.
I also want to acknowledge the investigative reporting of
the Miami Herald, which shined a light on this issue last year
and in particular how it related to how illegally mined gold
was being transacted out of South Florida.
Last year I had the chance to visit the Summit of the
Americas in Peru, and I visited our embassy staff, which
briefed me and my staff on the environmental and ecological
impacts of illegal mining in Peru, and on the ongoing efforts
to fight these activities, which are associated with crime, and
I was really impressed with their work. I was also shocked to
see the scale of this activity that's ongoing in so many
places, not just Peru.
Illicit mining is a very lucrative business. In fact, at
times it's far more lucrative than drug trafficking. So during
this hearing we're going to hear directly from experts in our
government about the negative impacts of illegal mining and
about all the criminal activities that surround it, such as the
trafficking of firearms and explosives, human smuggling and
trafficking; and, of course, it's also very valuable for money
laundering.
Mining is an important income-generating industry for many
countries in the Western Hemisphere. In 2016, Latin America
produced 20.5 percent of global gold output, and supplied 58
percent of U.S. gold imports. According to these sources, like
the 2016 Minerals Yearbook, the production leads to water
contamination, it leads to mercury and cyanide releases,
deforestation and ecosystem damage. That actually is according
to a report called the Wires Act of 2017.
This mining has also been linked, in addition to those
environmental damages, to human rights abuses, and that
includes the displacement of the local populations from the
areas being mined. It's led to human trafficking and forced
labor, and even prostitution.
Illegal gold mining's effects are not limited to the
communities outside of the United States. They are, in fact, a
direct threat to our interests. Criminal organizations that
traffic in illicit gold, for example, operate right here in the
United States. Unfortunately, my home community in my home
state of Florida, South Florida, has become a major entry point
for this activity.
It's refined, it's made into jewelry or placed into our
electronics, and then it's sold to U.S. consumers, much of it,
if not all of it, untraceable. Criminal organizations are using
these anonymous shell companies to help launder funds that are
associated with illicit mined gold into the U.S. The Miami
Herald reported last year that in Latin America, ``criminals
see mining and trading precious metals as a lucrative growth
business carefully hidden from U.S. consumers who flaunt gold
around their necks and fingers but have no idea where it comes
from or who gets hurt.''
Illegal mining operates outside the law, and because it
does, international conventions and mining industry guidelines,
things that control toxic mining processes, inputs like cyanide
and mercury, are ineffective. Law enforcement presence in these
areas is often weak, too. That's due to corruption, but also
due to state resource constraints and the remoteness of these
mining sites, and deforestation is directly linked to illicit
gold mining, particularly extensive in the Amazon region, and
has contributed to widespread damage within tropical rain
forests.
I'm focusing here today on Latin America in particular
given its proximity to our borders and its direct threat to our
security and our interests. Specifically, countries like
Venezuela, Peru, and Colombia continue to have major problems
with illicit mining activity. This remains a major key factor
of instability as you have criminal networks violating
international standards of human rights within their borders.
In 2016, the government of Peru declared a temporary state of
emergency on widespread mercury poisoning in Madre de Dios, an
area in which four or five adults tested positive for high
levels of mercury.
In 2017, Colombia's Comptroller General reported that 80
percent of all mining activity in Colombia was illicit. Experts
estimate that these groups may annually earn as much as $2.4
billion from illegal mining, 3 times the value of Colombia's
cocaine production.
Our State Department describes illegal gold mining in Latin
America as ``a direct threat to U.S. national security and to
the integrity of the U.S. and international financial system.''
I want to commend the government of Peru, who at the
beginning of this year began a comprehensive plan against
illegal mining in that region I just mentioned earlier, in
Madre de Dios, and in September of 2019 Colombian President
Duque convened a regional group of leaders to coordinate action
to prevent further Amazon rainforest destruction. Various other
countries have responded by creating policies or laws
controlling mining, including a permanent ban which is now in
place in El Salvador.
In March of 2019 the Treasury Department imposed sanctions
on Venezuelan state-run gold mining company Minerven for
engaging in illicit transactions that have supported the
illegitimate regime of Nicolas Maduro. But the willing
countries that are trying to help us need to be equipped with
the necessary tools to combat this illicit activity. Mining
firms in countries can apply guidelines to reduce human rights
abuses, environmental degradation, and other negative impacts.
There is a major human toll if we do not get control of this
problem, and I look forward to hearing your responses to
questions.
What I really want to focus on today is how do we mitigate
the impact that illegal gold mining has on the health and human
rights of indigenous groups residing in these regions; how has
the presence of sex trafficking in and around mines driven the
recent sharp rise in HIV/AIDS cases and deaths in the region;
what can the U.S. do to play a leading role in countering
illegal mining in our hemisphere and beyond. It's my hope that
we can shed some light on this important issue and these
important questions.
I want to now recognize my colleague, the ranking member,
Senator Cardin.
STATEMENT OF HON. BENJAMIN L. CARDIN,
U.S. SENATOR FROM MARYLAND
Senator Cardin. Well, let me thank Chairman Rubio for his
leadership on this and for calling this hearing. I want to
thank all of our witnesses for being here today as we try to
deal with this issue.
The chairman mentioned the article that appeared in the
Miami Herald entitled ``Dirty Gold, Clean Cash.'' I would ask
unanimous consent that that article could be made part of our
record.
Senator Rubio. Without objection.
[The information referred to is located at the end of the
hearing]
Senator Cardin. I would also ask consent that the article
in regards to ``Organized Crime Controls Gold: Exploitation in
Venezuela,'' be made part of this record; and also ask consent
that the statement from Global Witness be made part of our
record.
[The information referred to is located at the end of the
hearing]
Senator Cardin. They all underscore the point the chairman
made, that illicit mining fuels corruption, conflict, human
rights abuses, and threatens the United States' national
security.
We can give many examples. I'll just give one global
example of this. In Burma, the Burma jade trade is well known
as being the financial source for the Burmese military and
their activities, and recently we've seen it used in regards to
the Rohingya crisis. So the Burmese gems are now known as
``genocide gems.'' I want to complement Cartier and Tiffany for
not purchasing jade that's sourced from Burma.
In Latin America, over 20 percent of the world's gold
supply comes from Latin America. Fifty-eight percent of U.S.
gold imports come from those countries. The challenge is it's
virtually impossible for us to be able to identify with
certainty the source as to where that gold is coming from, so
we could very well be supporting this illicit mining activity.
The State Department, as the chairman stated, and I'm going
to repeat exactly what he said, the quote, because it's kind of
chilling, that ``illicit mining is a direct threat on U.S.
national security and the integrity of the United States' and
international financial systems.'' So we're at risk.
There's also a great deal of evidence that in our
hemisphere, that we're going from narco-trafficking to illegal
mining. And what is really frightening is that those criminal
elements are finding it more profitable in the mining than they
did in narcotics. There are estimates that in the Andes $2.4
billion a year is earned in illicit mining, which is 3 times
more than they were able to earn in cocaine trafficking.
So what do we do about this? I mean, I think that's the
challenge. We know we have a problem; what do we do about it?
It should start with U.S. leadership. And quite frankly,
Mr. Chairman, I think there's a very easy way for us to start.
There is an international coalition known as the Extractive
Industries Transparency Initiative, EITI, which is, I would
suggest, a minimal effort to make sure that we have
transparency, because we know in many cases these resources are
in countries that are relatively poor even though they're
resource rich. And the resource becomes a resource curse
because it's used to fund corruption rather than the wealth of
the country.
The EITI is an effort to try to get at that by adding
transparency, and the United States should be a leader.
Instead, President Trump has removed the United States as an
implementing country. We need to reverse that. That was a
mistake. It's an easy one, I think, for us to show our
leadership in regards to dealing with transparency on
extractive industries.
Fighting corruption at the highest levels of government and
industry should be a cornerstone of U.S. foreign policy because
it impacts our national security and it's who we are as a
nation. Two pieces of legislation I authored, Section 1504 of
the Dodd-Frank Act and the Global Magnitsky Act, work hand in
hand to fight exactly that type of corruption that leads to the
proliferation of illicit economic sectors all over the world.
I want to talk a moment about Section 1504, also known as
the Cardin-Lugar anti-corruption provisions, requiring foreign
and domestic oil and mining companies listed on the U.S. Stock
Exchange to disclose their payments to governments, including
tax payments. The late Senator Lugar was a great champion of
1504, which essentially gives us the information, and civil
societies the evidence they need to hold leaders accountable
for what's happening to their mineral wealth. That part of
Dodd-Frank instructed the Securities and Exchange Commission to
write implementing rules for the law.
Well, it took them many years to get it done. They finally
got it done, they issued the rules, and then the Trump
administration came into power and one of the first things that
they supported was a Congressional Review Act that removed that
regulation from taking effect. Unfortunately, my Republican
colleagues supported that.
Now, remember the debate during that discussion. They felt
the rule was overly broad and that we would have a new rule.
Well, it's 2 years later, or 3 years later now, and we're still
waiting for that rule.
So we have a law, it's the law of the land, but we still
don't have the implementing regulations issued by the SEC. But
thankfully, the EU, Norway, and Canada all modeled their
disclosure laws on Section 1504, and because of these efforts
we've seen companies like Exxon exposed for their bad-faith
dealings with corrupt government actors in the extractive
industries.
So because we now have stock exchanges that require it, we
are moving in that direction. It was U.S. leadership that
provoked that activity, but the United States is now behind.
Major oil companies such as Shell, BP, Total, Eni, and BHP also
raise capital on the U.S. Stock Exchange to support the global
standard now enforced in 30 countries and have written to the
SEC to adopt similar rules. I hope we can get this done. We
need a strong rule in the spirit of 1504 that will help, and I
would hope we would have support on both sides of the aisle to
get this done.
The Global Magnitsky Act also establishes the U.S.
government to go after and enforce sanctions against corrupt
actors. I encourage the administration to use this as a tool to
create greater accountability in the illicit mining sector.
So I think we have some steps that we've already taken. The
chairman mentioned some countries that have stepped forward and
are doing some positive things. We know we have a problem.
Let's work together to solve this problem and get the United
States in the leadership in dealing with the extractive
industries so that the resources of a nation can truly be a
blessing rather than a curse.
I look forward to hearing from our witnesses.
Senator Rubio. Thank you.
Let me introduce the panel here, quickly.
Ms. Carrie Filipetti is the Deputy Assistant Secretary in
the Bureau of Western Hemisphere Affairs.
Mr. Richard Glenn is the Deputy Assistant Secretary in the
Bureau of International Narcotics and Law Enforcement Affairs
at the State Department.
Mr. Jeffrey Haeni is the Acting Deputy Assistant
Administrator in the Bureau for Economic Growth, Education, and
Environment at the U.S. Agency for International Development.
Mr. Patrick Lechleitner is the Assistant Director for
International Operations and Homeland Security Investigations
at U.S. Immigration and Customs Enforcement.
And Ms. Regina Thompson is the Deputy Assistant Director at
the Criminal Investigation Division of the FBI.
We want to thank all of you for being here.
We'll start from right to left with you, Ms. Filipetti.
Thank you.
STATEMENT OF CARRIE FILIPETTI, DEPUTY ASSISTANT SECRETARY,
BUREAU OF WESTERN HEMISPHERE AFFAIRS, U.S. DEPARTMENT OF STATE,
WASHINGTON, DC
Ms. Filipetti. Thank you, Chairman Rubio, Ranking Member
Cardin. We greatly appreciate the opportunity to appear before
you today to show the concerns of the State Department
regarding illicit mining.
While my colleagues are going to describe the impact of
this practice on the region, today I'm going to focus on
Venezuela, where illicit mining perpetuates a horrific cycle
of, as you said, corruption, violence, human rights abuses,
disease, and ecological devastation.
As we know, Venezuela is a land blessed with immeasurable
resources. We often speak about Venezuelan oil, but their
resources extend far beyond that. Venezuela holds vast deposits
of gold, precious minerals, and resources like coltan, which is
used in manufacturing electronics. In fact, Venezuela's mining
arc, or Arco Minero as it is called, comprises 12 percent of
Venezuela's entire land mass, making it larger than Cuba,
Portugal, or Panama.
Security is perhaps one of the most significant concerns
when it comes to illicit mining, which we estimate makes up
approximately 91 percent of all mining coming out of Venezuela.
Prison gangs known as pranes colectivos, and ELN members and
FARC dissidents, are all active in the mining arc. In many
places these individuals maintain power over the mines
themselves, over transit routes, or over the resources required
to successfully mine, including mercury. This, along with their
use of force, gives these gangs broad power over the
communities living near the mines, in many cases making them
dependent on the violent whims of these illegal groups for
food, medicine, and a livelihood.
This leads to another threat, how illicit mining benefits
the Maduro regime. The regime is determined to retain power,
and it needs money to do so. This is a large reason why we have
implemented sanctions, to cut off these sources of financial
income and prevent the oil industry, for example, from being
exploited for patronage. But since the regime lacks both the
will and the capacity to stop people from exploiting mines, it
facilitates its allies' access to mining revenue, and in so
doing reinforces the loyalty of those allies.
And there are many innocents who are victims of this
violent, corrupt network. There are, of course, the indigenous
communities, as you both mentioned, who are disproportionately
affected by illicit mining thanks to their high populations in
the heavily mined states of Zulia, Amazonas, and Bolivar.
There are also those victims who are lured to the mines out
of desperation. Many are subsequently exploited in forced labor
or sex trafficking, including children, compelled through
violence and fear by the groups running the mines.
In addition, trafficking in persons and sexual exploitation
at mining camps has created significant spikes in HIV and AIDS.
A horrifying example is that of Leocer Jose Lugo, a former
member of the Venezuelan military who was drawn to a mine in
Bolivar for work. When the gang he was working for discovered
that he had previously worked for the armed forces, the 19-
year-old was tortured and left for dead. They cut out his
tongue and they made him swallow it, and when that wasn't
enough they amputated his hands and they gouged out his eyes.
Leocer Jose Lugo is not the only example. Bolivar State is
tragically the site of countless mass graves for an unknown
number of victims, leaving National Assembly Deputy Angel
Medina noting just last week that there have been over 40
massacres in the State of Bolivar alone since 2016.
But it is not just the violence that is a threat to the
population. Among the other health risks are mercury poisoning
and mosquito-borne diseases, particularly malaria. As a
reminder, in 1961 Venezuela was the first country in Latin
America to have eradicated malaria in the majority of its
territory. Now, largely due to the collapsed public health
system, the Maduro regime's incompetence, and the illicit
mining industry, the WHO reported that Venezuela had the fourth
highest malaria rate in the entire world between January and
October of this year.
And with respect to mercury, a powerful neurotoxin used in
the extraction of gold, a test performed in mining communities
recently showed that over 90 percent of people working in the
mines in Bolivar had unsafe concentrations of mercury in their
urine, with effects also reaching 87 percent of women and 68
percent of children.
Now, this poisoned water harms both humans and the earth,
as does the immeasurable amount of drilling and deforestation
these practices require. They have wrought vast ecological
damage to the vital Amazonian landscape, including portions of
it that were supposedly protected, turning this beautiful
ecologically significant landscape into the latest victim of
the Maduro regime.
The crisis in Venezuela has led to the flight of over 4.6
million refugees, the collapse of a once prosperous country's
educational, economic, industrial, and health care systems, and
the depravation of fundamental freedoms for tens of millions.
Illicit mining is a key part of this story and one that needs
to be better told.
This is why we deeply appreciate the opportunity to brief
on the subject this morning. It's also why we have focused on
imposing costs for engaging in the mining sector, both for the
Maduro regime and for those foreign countries like Russia,
China, and Turkey whose partnerships on illicit mining have
enabled this horrific human and ecological devastation. It is
why in March of this year the Treasury Department announced
sanctions designations against the Venezuela state-owned gold
industry, and it is why we stand in support of the National
Assembly, the only remaining democratic institution in
Venezuela, which has issued resolutions calling out the abuses
of the mining industry and declaring contracts with the
industry null and void.
Of course, our key focus is in uprooting the cause, the
Maduro regime. A swift political transition is the single best
and most effective way to reduce these and other abuses, and
this remains the focus of the Department of State and our
efforts on Venezuela.
Thank you very much for the opportunity to bring awareness
of this important issue. I look forward to the questions.
[The prepared statement of Ms. Filipetti follows:]
Prepared Statement of Carrie Filipetti
Chairman Rubio, Ranking Member Cardin, distinguished Members of the
Subcommittee; thank you for the opportunity to appear before you today
to share the concerns of the U.S. Department of State regarding illicit
mining. While my colleagues have described the impact of this practice
on the region as a whole, today I will focus my remarks on Venezuela,
where illicit mining perpetuates a horrific cycle of criminality and
both human and ecological abuse. In this cycle, lawless, ungoverned
territories are taken over by armed and violent criminal and terrorist
groups who strip Venezuelans, including many members of indigenous
communities, of their land, their dignity, and often their lives,
subjecting them to unsanitary conditions that have reversed decades of
progress in combatting disease, poisoning their water supply with
unsafe quantities of chemicals involved in the mining process, and
destroying thousands of square kilometers of the Amazon.
Recognizing its incompetence in removing this threat, the Maduro
dictatorship has begun to capitalize off of it, trading guns, cash, and
control for loyalty to the regime.
Illicit mining is a therefore a perfect storm of criminality and
corruption, and is a critical threat to the security, governance,
cultural heritage, human rights, health, and ecology of Venezuela.
what is the mining arc?
Venezuela is a land blessed by immeasurable resources. Sitting on
the world's largest known oil reserves, petroleum fueled Venezuela's
rise. But Venezuela's riches extend far beyond oil.
Venezuela holds vast deposits of gold, diamonds and precious
minerals, and resources like coltan, which is used in manufacturing
batteries, cars, planes, and electronics. It is estimated that there
are over 45 types of minerals, as well as one of the world's largest
gold reserves in Venezuela's Mining Arc. This ``Arco Minero,'' as it is
called, is almost 112,000 square kilometers, making it 12 percent of
Venezuela's entire landmass and larger than Cuba, Portugal, or Panama.
But it is not just the size that matters--it is location. The
territories with the largest reserves of these minerals are Zulia,
Bolivar, and Amazonas, three states that are known not just for their
mineral reserves but because of their high population of indigenous
communities and because they are some of the most biologically diverse
and ecologically significant lands in all of Venezuela. The resources
in these states could greatly benefit the Venezuelan people, and
highlight the beautiful cultural and biological diversity of the
country. Instead, illicit extraction of these resources is generating
profits that help prop up the illegitimate Maduro regime and leaves in
its wake lawless, ungoverned territory managed by non-state armed
groups, horrific human rights abuses, and vast ecological devastation.
security: armed and violent criminal and terrorist groups
I began noting threats posed by Venezuelan illicit mining. The
first is the core of the problem: Security. Illicit mining makes up an
estimated 91 percent of all mining coming out of Venezuela, and it
provides a unique opportunity for illegal armed and violent criminal
groups, including terrorist entities like the ELN and FARC, to cement
their grip on power thanks to the profitability, permissive
environment, and increasing government focus on mining as a substitute
to oil profits. Prison gangs known as pranes, decentralized, pro-
government gangs known as colectivos, and ELN members and FARC
dissidents are all active in the mining arc. In many places, these
individuals maintain power over the mines themselves, over the transit
routes, or over the resources required to successfully mine, including
mercury. This, along with their use of force, often gives these gangs
broad power over the communities living near the mines, in many cases
making entire communities dependent on the violent whims of these
illegal groups for food, medicine, and a livelihood.
governance: maduro regime patronage network
This leads to another major threat: Governance. Illicit mining
directly undermines our policy in Venezuela by enabling a patronage
network that secures loyalty for the Maduro regime. The regime is
determined to retain power, and it needs money to do so. This is a
large reason why we have implemented sanctions--to cut off those
sources of financial income and prevent the oil industry from being
exploited for patronage. Since the regime lacks both the will and the
capacity to stop people from exploiting mines, it facilitates its
allies' access to mining revenue--and, in doing, reinforces the loyalty
of those allies. In this way, the gangs, the military, and the
government officials continue to receive largesse from the Maduro
regime--a largesse that would otherwise have been successfully cut off
via our petroleum and other sanctions.
human rights abuses: trafficking, torture, and intimidation
It is not these threat networks alone that are of concern. So, too,
is the violence that stems from this system of corruption and
patronage. As noted, these gangs have a monopoly on force in these
regions, which are disproportionately populated by indigenous
communities. According to the last census in Venezuela in 2011, only
about 2.8 percent of the total population in Venezuela were from
indigenous communities. In Zulia state, however--which is the capital
of coal mining in Venezuela--indigenous communities like the Wayuu make
up over 61 percent of the total population. Likewise, in Amazonas,
there are over 20 ethnic groups, including the Yanonmami, and in
Bolivar, communities like the Pemon, the Piaroa, and the Penare make up
7.5 percent of the total population.
Bolivar state is a devastating example of the human rights abuses
committed in the wake of illicit mining. Like in many mining regions,
human rights organizations cite a complete absence of government
presence in Bolivar, leaving its residents subject to the order imposed
under the non- state armed groups I've just described.
In the context of Venezuela's complex humanitarian emergency,
people are lured to the mines out of desperation. Some arrive in search
of anti-malarial medication, the distribution of which is controlled in
large part by armed groups surrounding the mines. Others arrive seeking
to pay for medical care or basic subsistence. Many are subsequently
exploited in forced labor or sex trafficking, compelled through
violence and fear by the group running the mine. There has been
reporting that in some regions, the average age of those being sex
trafficked is 13-14 years old.
Some victims have described facing a 2-day period of interrogation
upon arrival and, if accepted to work the mines, are warned of
consequences of not following the rules including gang rape,
mutilation, and a slow, painful death. The Department of Labor's
Findings on the Worst Forms of Child Labor reports that children are
engaged in gold mining production.
Venezuelan NGO Centros Comunitarios de Aprendizaje (Cecodap) has
reported that children travel with their parents to mining areas to
perform activities related to gold mining.
Leocer Jose Lugo was a former member of the Venezuelan military,
drawn to the Yin Yan mine in Bolivar for work. When the gang he was
working for discovered he had once been a member of the armed forces,
the 19-year-old was tortured and left for dead. They cut out his tongue
and made him swallow it, amputated his hands, and gouged his eyes.
Bolivar is also, tragically, the home of countless mass graves for
an unknown number of victims. Testimony from one victim states that
when the non-state armed groups first arrived, individuals who had run
afoul of the armed group were murdered in the jungle, never to be seen
again. But in recent years, the tortures and mutilations are made
public, like those of Leocer Jose Lugo, to serve as a warning to
others. Those who stand witness to this criminal economy are silenced
by the fear that they or their loved ones may end up harassed,
tortured, or murdered. National Assembly Deputy Angel Medina noted just
last week that there have been over 40 massacres in the state of
Bolivar alone since 2016, and U.N. High Commissioner for Human Rights
Michelle Bachelet noted the alarming scope of ecological devastation of
illicit mining and the adverse effect on the lives of indigenous
communities in her July report.
health: reversing decades of progress
This leads to another victim of illicit mining: human health. Two
of the most serious concerns are mercury poisoning and mosquito-borne
diseases--particularly malaria. Because of the rapid expansion of
mining in the region, we have reports of waterways like the Orinoco
river, a main water source for many indigenous communities,
contaminated with mercury, a powerful neurotoxin that is used to
extract gold. Tests performed in mining communities across Bolivar
state found that over 90 percent of people working in the mines showed
unsafe concentration of mercury in their urine, with effects also
reaching 87 percent of women and 68 percent of children.
Mercury is not the only health concern caused by illicit mining.
Men, women, and children involved in gold mining are exposed to
accidents and injuries as a result of this activity.
Trafficking in persons and sexual exploitation at mining camps has
created spikes in HIV/AIDS as well as exponential increase of malaria,
diphtheria, chikunguna, yellow fever, and dengue fever cases due to the
large amounts of standing water at illicit mining sites. This is
especially poignant when you recall the incredible achievements
Venezuela once had in confronting these diseases. Back in 1961,
Venezuela was praised as the first country in Latin America to have
eradicated malaria in the majority of its territory. Now, largely due
to the collapsed public health system and the illicit mining industry,
the WHO reported over 323,392 malaria cases in Venezuela between
January and October of this year, 70 percent of which occurred in the
heavily mined Bolivar and Amazonas states. This is the fourth highest
rate in the entire world.
ecology: deforestation of the amazon
This poisoned water harms both humans and the earth, as does the
immeasurable amount of drilling and deforestation these practices
require. These practices have wrought vast ecological damage to the
vital Amazonian landscape. The territory in the mining arc is home to
over 9,400 flora, 2,100 of which are endemic. And yet, from 2011-2015,
immediately following the nationalization of the mining sector, over
2,821 square kilometers were destroyed due to illicit mining. 50
percent of these territories were in supposedly ``protected'' areas.
And it has only gotten worse, as the Amazon biome becomes yet another
victim of the Maduro regime.
u.s. approach
The crisis in Venezuela has led to the flight of over 4 million
refugees, the collapse of a once prosperous country's educational,
economic, industrial, and healthcare systems, and the deprivation of
fundamental freedoms from tens of millions. Illicit mining is a key
part of this story, and one that needs to be better told. To do so is,
however, challenging: We only know of these heinous acts because of
members of Venezuela's civil society who put themselves in harm's way
to research and document these horrors. They do so at great personal
risk, and we are forever grateful for their service and sacrifices.
For our part, we will not stand idly by. We have responded to these
concerns, primarily through executive authorities that allow us to
sanction individuals, entities, and sectors in Venezuela. In March of
this year, the Treasury Department announced specific sanctions
designations against the Venezuelan state-owned gold sector company,
MINERVEN and its president Adrian Antonio Mata. To date, we have
sanctioned over 200 individuals and entities in Venezuela.
We are also focused on imposing costs on those foreign partners,
including Russia, China, and Turkey, whose partnerships on illicit
mining have enabled this horrific human and ecological devastation. And
we stand in support of the National Assembly, Venezuela's only
remaining democratic institution, which has passed several resolutions
related to the mining region, including one on November 12 prohibiting
gold contracts, one on September 3 tying non-state actors to illegal
mining, and one last month creating a committee to investigate the
abuses and corruption of the mining region. We stand ready to receive
the findings of this National Assembly committee once complete, and
will take appropriate action to help bring this nefarious activity to
an end.
Of course, our key focus is on uprooting the cause: the Maduro
regime. A swift political transition is the single best and most
effective way to reduce these and other abuses. And this remains the
focus of the Department of State in our efforts on Venezuela.
Thank you for the opportunity to bring awareness of this important
issue. I look forward to the Committee's questions.
Senator Rubio. Thank you.
Mr. Glenn.
STATEMENT OF RICHARD H. GLENN, DEPUTY ASSISTANT SECRETARY,
BUREAU OF INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS,
U.S. DEPARTMENT OF STATE, WASHINGTON, DC
Mr. Glenn. Chairman Rubio, Ranking Member Cardin, good
morning and thank you for your interest in this vital issue.
I'm here this morning to speak to you about our efforts at the
State Department's Bureau of International Narcotics and Law
Enforcement Affairs to combat illicit mining in the Western
Hemisphere.
It is a global concern that in our hemisphere it is most
prevalent in Bolivia, Brazil, Colombia, Ecuador, Guyana,
Mexico, Nicaragua, Peru, Suriname, and Venezuela. That's a good
number of countries. Illegal mining fuels organized crime and
narco-trafficking, corruption, trafficking in persons,
violence, and environmental destruction.
Transnational criminal organizations, which I will refer to
as TCOs, threaten the national security and prosperity of the
United States by using gold, mostly mined illegally in remote
areas in South America, to launder illicit profits through the
U.S. financial system. For the purposes of this hearing I will
focus most of my words on Peru since it is the largest producer
of gold in Latin America and the sixth largest in the world.
Mr. Chairman, you and I were in Peru at the same time last
year and got a brief from our embassy staff on the depth of
destruction in the Amazon jungle due to illegal mining.
Deforestation associated with illegal mining destroys rain
forests or has destroyed rain forests equivalent to the size of
7 times the City of Miami in just the region of Madre de Dios.
I brought in some pictures here that we will submit for the
record. I think seeing such images helps us better understand
the enormity of the challenge we face.
As our neighbors in the hemisphere cracked down on the
narcotics industry, TCOs began to move into the under-regulated
gold mining sector as it offers lucrative incentives. Experts
believe that a third of the gold leaving Peru is illegally
mined. In 2019, Peru's Financial Intelligence Unit found that
illegal gold mining emerged as the largest source of money
laundering, at more than double the amount of narcotics.
Once gold is mined, it is difficult to trace its origin.
Criminals use cash or wire transfers to pay for gold, which
makes transactions essentially anonymous. Lax registration
procedures or falsified records allow criminal groups to set up
companies to buy gold used to launder funds and enter the
legitimate supply chain.
Like most criminals, illegal mining thrives where there is
little state presence. Major drug production locales in the
hemisphere overlap with illegal gold mining areas. The routes
used to smuggle drugs and precursor chemicals are also used to
smuggle gold, humans, supplies, and equipment used for illegal
mining.
In addition to financing activities and controlling the
labor, TCOs also buy illegal gold and launder their money
through gold consolidators, defunct mines, semi-refiners, and
shell companies. To combat this threat, the State Department
helps partner nations disrupt criminal networks responsible for
illegal mining and its associated crimes. We reinforce
transparent and traceable supply chains for gold and eliminate
the use of mercury. We recently signed an MOU with Peru just 2
years ago, in 2017, to combat illegal gold mining and its
deleterious effects on the rule of law, of human rights, and
the environment.
Since the MOU was signed, we have funded trainings for
prosecutors to build complex environmental cases and to set up
a forensic laboratory with advanced technology to detect
mercury and map crime scenes. Our assistance is helping the
government of Peru take action. In February of this year they
launched Operation Mercury to evict illegal miners from Madre
de Dios. This operation has led to subsequent interdictions
around the country, as well as a 92 percent reduction in rates
of deforestation caused by illegal mining in the Madre de Dios
area.
We recognize illegal mining is a threat and effective
response requires strengthening law enforcement and regulatory
capacity of partner nations and improving regional
coordination. We recently established a project with the
Organization of American States to strengthen the national and
regional systems that combat illegal mining financial
structures and enhance regional collaboration. Working with
financial intelligence units and customs and immigration
authorities, the project will increase investigations and
convictions of crimes related to illegal mining.
While we have made progress, stronger action is needed to
stop the trafficking of illegal gold through U.S. ports of
entry and to target bad actors at home and abroad. We must
continue to advance our shared interests through a coordinated
interagency approach, with an eye toward developing greater
cross-border collaboration.
Our hemispheric collaboration is essential to disrupting
these criminal networks, reducing the demand for human
trafficking, and preventing illegally mined gold from entering
the U.S. and international markets.
Chairman Rubio, Ranking Member Cardin, thank you again for
the opportunity to appear before you today. I look forward to
your questions.
[The prepared statement of Mr. Glenn follows:]
Prepared Statement of Richard H. Glenn
Chairman Rubio, Ranking Member Cardin, distinguished Members of the
Subcommittee; thank you for the opportunity to appear before you today
to discuss the work of the Bureau of International Narcotics & Law
Enforcement Affairs (INL) at the U.S. Department of State to combat
illicit mining. Mining in violation of the laws of the nation in which
the activity occurs often takes place in remote areas, and is difficult
to police, which leaves opportunities for organized criminal groups to
carry out this activity. Transnational criminal organizations (TCOs),
including drug trafficking organizations (DTOs), and insurgent groups
use gold, mostly mined illegally in South America, to reap billions in
illicit profits that further bolster their strength and long-term
viability. They also use gold trafficking as a mechanism to launder
profits from other illicit activities. Illicit mining threatens the
national security and prosperity of the United States and our partners
throughout Latin America by compromising the lawful gold supply chain
and exploiting the U.S. financial system for illegal gain.
TCOs take advantage of a lack of state presence, corruption, and
weak rule of law. They implement an efficient, low-risk business model
that complements their traditional focus on narcotics production and
trafficking. TCOs use illicitly mined gold to launder criminal proceeds
by selling illegally mined gold to legal supply chains, which then
exports it to refineries in the United States, China, India, the United
Arab Emirates, Switzerland, and Italy. This scheme provides TCOs clean
cash with high profits at low risk. In addition, illegal gold mining
operations enable human trafficking; endangers public health; and
destroys natural resources.
illegal gold largest source of money laundering
In the last 10 to 15 years, some TCOs in the Western Hemisphere
realized gold trafficking can provide them higher and easier returns
than cocaine trafficking. Gold prices increased significantly between
2000 and 2012, reaching their peak at $1,895 an ounce between 2011 and
2012. The heightened focus on counternarcotics operations increased the
risks for these groups to produce and traffic narcotics and the move
into the under-regulated gold mining sector offered lucrative
incentives. One of the main incentives is that it is easy to import
illegal gold into the United States. For example, although passengers
must declare currency or monetary instruments such as gold coins,
valued at $10,000 or greater, non-monetized gold such as gold bars do
not require the same reporting because it is not considered a monetary
instrument. As a result, it is legal for a passenger to fly into the
United States with, for example, 50 pounds of gold bullion, worth $1
million at today's prices, without providing the same customs
declaration information required when traveling with $1 million in
cash. Therefore, the individual passes through customs and does not
automatically trigger secondary screening.
Peru is the top gold producer in Latin America and the sixth
largest in the world. The Global Initiative Against Transnational
Organized Crime, a network of over 430 independent and regional
experts, estimates up to 28 percent of the gold leaving Peru is
illegally mined.
According to a report released by Verite, a non-profit research
organization, illegal gold mining generates an estimated $3 billion
annually in Peru. In 2019, Peru's Financial Intelligence Unit found
that illegal gold mining emerged as the largest source of money
laundering, at more than double the amount related to illicit narcotics
profits.
Although cocaine production in Colombia has risen to record levels,
Colombian DTOs, dissidents of the Fuerzas Armadas Revolucionarias de
Colombia (FARC), and other criminal groups have nevertheless turned
also to the illegal gold trade. They have made substantial revenue
through illegally mined gold in recent years and often use it to also
launder their revenue from drug trafficking. Colombia is the fourth
largest gold producer in Latin American and 21st largest globally; the
government estimates over 80 percent of gold mined in Colombia is mined
illegally. This activity is widespread and coexists with cocaine
trafficking in some areas controlled by FARC dissidents and other armed
groups that operate in locations where there is little effective state
presence, such as remote parts of Antioquia, Choco, Caqueta, Narino,
and the Amazonas departments.
tcos control many aspects of illegal mining
Like most crimes, illegal mining thrives where the state is not
present. Major drug production locales in the hemisphere overlap with
major gold mining areas. The routes used to smuggle drugs and precursor
chemicals are also used to smuggle gold, migrants, and controlled
mining inputs such as mercury, petroleum, and dynamite. In Peru, family
clans control these areas and direct illicit activities, such as drug
production, illegal mining, illegal logging, and human and wildlife
trafficking, which then feed into transnational criminal networks. With
the opening of the Trans-Oceanic highway in 2011, illegal mining
skyrocketed in Peru, particularly in the Amazonian region of Madre de
Dios. The road has enabled illegal miners to bring heavy machinery,
laborers, and inputs to set up gold mines there. Since illegal miners
do not have access to capital through the formal banking sector, they
often turn to TCOs and other criminal groups for financing. This gives
TCOs another opportunity to launder drug money through the sale of
heavy equipment, such as excavators and dredges.
Residents of mining regions in Peru refer to criminal groups
operating locally as ``assassins,'' as they are often equipped with
satellite phones and automatic weapons. In 2017, police in Peru's Madre
de Dios region uncovered a mass grave with 20 burned bodies thought to
be the bodies of laborers from illegal mining camps. In addition to
financing the activities and controlling the labor, TCOs are principal
purchasers of illegal gold and launder their money through gold
consolidators, semi-refiners, and shell companies. TCOs have also
bought long? defunct gold mines to launder additional money by claiming
the mines are back in production, while passing off purchases of dirty
gold as their own.
In Colombia, criminal organizations frequently engage in both
narcotrafficking and illegal mining operations, as illegally mined gold
is an efficient mechanism to launder profits from the drug trade. There
is also a strong connection between illegal mining, forced labor, and
trafficking-in-persons, which provide miners and sex workers for
illegal mining camps. In addition, children are engaged in illegal
mining operations as well as activities related to the supply chains of
these operations.
mined gold is easier to transact than drug cash
Gold's origin is difficult to trace; once gold is melted down, it
is almost impossible to trace. People often use cash to pay for gold,
which makes transactions anonymous. Lax registration procedures allow
criminal groups to set up companies to buy gold used to launder funds.
Some licensed brokers also purchase illegally mined gold to pad their
profits. Although gold exporters are required to provide documentation
citing the gold's origin to ensure its legitimacy, these documents are
easy to falsify or obtain from corrupt officials and allow illegally
mined gold to enter the legitimate supply chain.
illegal mining fuels human trafficking and environmental destruction
Illegal mining also promotes and is associated with other crimes,
including sex and labor trafficking. The lucrative nature of illegal
mining in Peru and Colombia has driven the demand for forced sex and
labor trafficking, particularly in Peru's Madre de Dios, Puno, and
Cusco regions. In the annual Trafficking of Person's Report for Peru,
Embassy Lima reported that traffickers subjected victims to forced
labor in artisanal gold mines and nearby makeshift camps that provide
services to miners; traffickers compel victims through deceptive
recruitment, debt-based coercion, restricted freedom of movement,
withholding wages, and threats and use of physical violence. The
International Labor Organization estimates that since 2010, 50,000
children have been forced to work in the illegal gold mines or
subjected to sex trafficking in mining camps in the Madre de Dios and
Puno regions. According to informal reports, mining workers have
disappeared when attempting to denounce the inhumane working and living
conditions. Workers have also reported that when trying to separate
from their employer, they were forced to traffic drugs in order to
receive their payment.
Illegal gold mining also has severe environmental consequences. In
Colombia, gold mining operations frequently use mercury, a potent
neurotoxin used to extract gold from the sediment, which results in
severe and long-lasting soil, air, and water pollution. In Peru,
illegal mining has destroyed a part of the Amazon rainforest equivalent
to 7 times the size of Miami. The majority of this deforestation has
taken place within the last 10 years and the pace of destruction is
quickening. Miners have moved into some of the most biodiverse areas of
the world, including the Tambopata National Reserve in Madre de Dios.
The attached images, provided by the U.S. Embassy Lima, represent a
glimpse of the devastation illicit mining poses on Peru's biodiversity.
In Peru, Colombia, and other countries with illegal mining, mercury is
poisoning the rivers and will impact public health for generations. In
this process, mercury is also being released to the atmosphere where it
can travel thousands of miles. An estimated 70 percent of mercury
deposited in the United States comes from global sources. Each year,
illegal miners in Peru release an estimated 40 metric tons of mercury
into rivers, soils, and air, which allows it to enter the food chain.
In 2012, researchers from Stanford University found that 60 percent of
the fish species and 78 percent of adults in Madre de Dios had mercury
contamination above EPA limits--in some cases, over 27 times the
reference limit.
u.s. collaboration addresses illegal mining
The United States signed a Memorandum of Understanding (MOU) with
the governments of Peru and Colombia, in 2017 and 2018 respectively, to
expand bilateral cooperation to combat illegal mining and minimize its
negative impacts. The Peru MOU supports over 40 activities that build
the Peruvian government's capacity to fight TCOs, eradicate illegal
mining from protected areas, support the development of transparent and
traceable supply chains for small-scale gold, and eliminate the use of
mercury from artisanal and small-scale gold mining. Support from INL
aims to disrupt criminal networks that smuggle migrants, narcotics,
illegal gold, and controlled chemicals, as well as to prevent illegally
mined gold from entering the United States and the international
market.
Within the framework of the MOU, INL works with other U.S.
government agencies and the Government of Peru to train the police,
prosecutors, judges, auditors, and others responsible for investigating
these crimes and convicting perpetrators. INL provides capacity
building and mentoring to Peru's Financial Intelligence Unit to
identify money laundering risks in the mining sector and to take steps
to raise scrutiny on suspicious transactions linked to illegal mining.
INL also trains customs authorities at ports and airports on how to
recognize fraudulent documents to increase seizures of illegal gold
before it leaves Peru.
The U.S. Embassy in Lima issued a Commercial Advisory encouraging
buyers, sellers, traders, and refiners of gold to conduct additional
due diligence as part of their risk management regimes to account for
the influx of illegally mined Peruvian gold into existing supply
chains. It also alerted buyers that illegally mined gold from Peru is
exported via neighboring countries to obscure its origin and illegality
before it enters the international market.
In February 2019, the Government of Peru launched Operation
Mercury, a whole-of-government operation to evict illegal miners from
Madre de Dios, the illegal gold epicenter in Peru. The 2-year plan
began with a 2-week operation, led by 1,200 Peruvian police, 300
soldiers, and 70 prosecutors, aimed at removing an estimated 6,000
illegal miners from the La Pampa area of Madre de Dios and establishing
a semi-permanent government presence in the region to prevent their
return. INL provided operational support to the Peruvian National
Police efforts and supported the Attorney General's efforts to set up a
forensics laboratory in Madre de Dios with advanced technology to
detect mercury and map crime scenes. The successful operation has led
to subsequent interdictions around the country, as well as a 92 percent
reduction in rates of deforestation caused by illegal mining in the
area. Through the illegal gold mining MOU, INL will increase support
for Operation Mercury as it enters into a new phase where authorities
will remain in the region for 2 years to consolidate gains.
The U.S.-Colombia MOU signed at the 2018 High-Level Dialogue has
increased joint efforts to combat illegal mining, including detecting
and eliminating mercury usage. INL provides training as well as field
and laboratory equipment to Colombian law enforcement entities for
detecting and supporting prosecution of illegal mining activities for
environmental damage, including a $1.5 million environmental chemical
laboratory. INL helps Colombia build institutional capabilities in the
police, armed forces, office of the attorney general, and judicial
institutions to detect, investigate, and prosecute environmental
crimes, as well as money laundering, narcotics trafficking, and other
organized criminal activity. This year alone, INL's direct operational
support and the crucial use of INL-supported helicopters have allowed
the Colombian National Police to seize or destroy more than $4 million
worth of heavy machinery and other mining equipment belonging to TCOs.
Through the U.S.-Colombia MOU, INL coordinates with USAID and the Oro
Legal program, a USAID-funded initiative, which aims to formalize
small-scale and medium-scale mining operations, reduce mercury use, and
rehabilitate degraded lands. This coordinated inter-agency approach
provides a comprehensive set of interventions to address the complex
challenges associated with illegal gold mining in Colombia.
INL recognizes that illegal mining is an issue that extends beyond
individual country borders and that tackling this issue head-on
requires strong regional networks. In August 2019, INL established a 3-
year project with the Organization of American States (OAS) to
strengthen the national and regional systems that combat illegal mining
financial structures and to enhance regional collaboration. Through
training courses focused on financial intelligence units, customs and
immigration authorities, and agencies responsible for the
administration of seized and confiscated assets, we seek to enhance
regional collaboration and to increase investigations and convictions
of crimes related to illegal mining. We also seek to increase the
quantity and value of seized and confiscated assets linked to TCOs.
While we have made progress, stronger regulation is needed to stop
the trafficking of illegal gold through U.S. ports of entry and to
target bad actors at home and abroad. I am glad to be joined by my
colleagues who work on the domestic law enforcement aspect of this
issue.
conclusion
Illegal gold mining presents a direct threat to U.S. national
security interests. TCOs use illegally mined gold to launder billions
of dollars in revenue from other criminal activities through the United
States, harming our legitimate businesses and exploiting our financial
system for illicit gain. Illegal gold mining feeds corruption and
insecurity, presenting serious governance challenges for our partners.
Our collaboration with Peru and Colombia is essential to disrupting
these criminal networks, reducing human trafficking, decreasing
environmental and health impacts of illegal mining, and preventing
illegally mined gold from entering the United States. We must continue
to advance our shared interests through a coordinated interagency
approach with an eye toward developing greater cross-border
collaboration, given the regional nature of illegal gold mining and
associated crimes. We must do more to identify financial and money-
laundering networks, and the flow of controlled mining inputs and heavy
equipment used in gold mining. Illuminating the methods and processes
used to facilitate illegal mining and trafficking of illegally mined
gold will help us intensify our efforts to combat this scourge.
attachment: environmental devastation in peru
Illegal miners have moved into some of the most biodiverse areas of
the world, including the Tambopata National Reserve in Madre de Dios
along southeast Peru. Illegal mining is rapidly destroying parts of the
Amazon rainforest and poisoning rivers with mercury causing severe
environmental consequences. The below images, provided by the U.S.
Embassy Lima, represent a glimpse of the devastation illicit mining
poses on Peru's biodiversity.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Rubio. Thank you.
Mr. Haeni.
STATEMENT OF JEFFREY HAENI, ACTING DEPUTY ASSISTANT
ADMINISTRATOR, BUREAU FOR ECONOMIC GROWTH, EDUCATION AND
ENVIRONMENT, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT,
WASHINGTON, DC
Mr. Haeni. Chairman Rubio, Ranking Member Cardin, thank you
for the opportunity to testify about the important role the
U.S. Agency for International Development, USAID, plays in
addressing illegal and unregulated mining. Illegal and
unregulated mining undermines U.S. interests around the globe,
contributes to armed conflict and instability, provides funding
to criminal networks, threatens our shared environmental goals,
and menaces indigenous people(s).
The linkages between mineral wealth and development are
complex and dynamic. Whether a country harnesses its mineral
wealth for inclusive economic growth, or its mineral wealth
leads to a downward spiral of corruption and violent conflict
depends largely on a supportive policy framework and its
enforcement, combined with citizen responsive governance,
including transparency and accountability.
Within the minerals sector, artisanal and small-scale
mining, ASM, is uniquely vulnerable to exploitation by corrupt
officials, elites, and criminal groups. At least 40 million
people in developing countries, most of them poor, work in the
ASM sector, which is mostly informal in nature. Women and
children are especially vulnerable to labor and sexual
exploitation on illegal mining sites, especially in conflict or
post-conflict environments.
Illegal ASM has helped finance prolonged and deadly
conflicts throughout sub-Saharan Africa. In the Sahel, armed
groups are increasingly seizing control of artisanal and small-
scale gold mining sites in Mali, Burkina Faso, and Niger, which
could further destabilize the region.
Artisanal and small-scale mining often occurs in and around
protected areas of high biodiversity, which hampers efforts to
protect critical ecosystems. In Colombia and Peru, artisanal
and small-scale gold mining has deforested over 140,000
hectares of tropical forest.
Artisanal and small-scale gold mining is the largest source
of mercury pollution on earth, as at least 10 million people
use mercury to mine for gold in more than 70 countries, with
severe effects on human health.
Unfortunately, we have no easy or quick solutions. Evidence
suggests, however, that formalization of the sector is one
effective step to break the link between minerals and armed
conflict, mitigate environmental impacts, and minimize human
rights abuses.
USAID has learned through experience that addressing
illegal and unregulated mining requires a coordinated whole-of-
government approach and long-term investments. We cannot solve
this problem alone with development assistance. USAID invests
in efforts to formalize and improve the ASM sector in
partnership with national and local governments, civil society,
and the private sector.
Over the last 5 years, USAID has awarded programs with an
anticipated total value of $125 million to address illegal and
unregulated artisanal and small-scale mining in countries such
as Afghanistan, the Central African Republic, Colombia, Cote
d'Ivoire, Democratic Republic of the Congo, Peru, and Rwanda.
On a recent trip to Colombia, USAID Administrator Mark Green
commented that he was ``shocked to see remnants of the illegal
mining and the devastating consequences for the environment.''
But he was also heartened to witness firsthand the impact that
USAID's programs have had to help support environmentally and
socially responsible legal supply chains that ``bring revenues
into legal channels in a way that helps to support families and
provides new revenues for the government.''
In Latin America, USAID's programs in Peru and Colombia
directly support bilateral MOUs between the United States and
the aforementioned governments to counter illegal mining and
related crimes. USAID recently launched a new 5-year $23.9
million program in Peru to strengthen environmental justice
institutions, reduce environmental crimes, and support civil
society and the media to serve as effective watchdogs.
In Colombia, USAID funded programs to promote legal and
responsible mineral supply chains in Antioquia and Choco. These
programs have helped formalize 42 mining operations, eliminate
nearly 40 tons of mercury from mining operations, assisted in
generating $110 million of legal gold sales, and rehabilitated
17,000 hectares of land affected by mining.
In Africa, USAID works closely with the government of the
Central African Republic to improve compliance with the
Kimberley Process and reduce the flow of conflict diamonds, and
helps to establish legal, responsible mineral supply chains for
tin, tantalum, tungsten, and gold in the Democratic Republic of
the Congo.
In 2010, the United Nations reported that almost every mine
site in eastern DRC was under the control of armed groups.
Since that time, USAID has supported the validation of more
than 600 mine sites as conflict free. In 2018, validated
conflict-free supply chains in the DRC legally exported
approximately 15,800 tons of minerals worth over $285 million.
A comprehensive solution for illegal mining cannot succeed
without also strengthening the governance of industrial mining.
That is why USAID has invested more than $19 million in 17
countries to advance the Extractive Industries Transparency
Initiative, a voluntary global partnership between governments,
extractive industry companies, and civil society to promote the
transparency and accountable management of oil, gas, and
mineral resources.
USAID's interest is and always will be to work with
governments, civil society, and the private sector in countries
on their journey to self-reliance. Part of this journey is the
effective management of natural resources, including high-value
minerals.
Thank you for your time, and I look forward to your
questions.
[The prepared statement of Mr. Haeni follows:]
Prepared Statement of Jeffrey Haeni
Chairman Rubio, Ranking Member Cardin, Distinguished Members of
this Sub-Committee: Thank you for the opportunity to testify about the
important role the U.S. Agency for International Development (USAID)
plays in addressing illegal and unregulated mining. It is an honor to
be here with you today.
USAID is committed to working with governments, civil society,
communities, and the private sector to reduce the impact of conflict;
counteract the drivers of violence, instability, and transnational
crime; address corruption; advance prosperity; protect human rights;
improve human health; and prevent the loss of biodiversity. For all of
these reasons, USAID is deeply concerned about illegal and unregulated
mining. There is little doubt that illegal and unregulated mining,
particularly artisanal and small-scale mining (ASM), undermines U.S.
interests around the globe, contributes to armed conflict and
instability, provides funding to criminal networks, threatens our
shared environment, and menaces indigenous people.
The linkages between mineral wealth and development are complex and
dynamic. Despite the potential for a country's mineral wealth to
translate into prosperity and social development, we see far more
examples in which discovery and exploitation of mineral wealth
undermines development gains. Whether a country harnesses its mineral
wealth for inclusive economic growth, or its mineral wealth leads to a
downward spiral of corruption and violent conflict depends largely on a
supportive policy framework and its enforcement, combined with citizen
responsive governance, including transparency and accountability.
In many countries in which USAID works, governments, illegitimate
regimes, and powerful non-state actors, including companies, elites,
and criminal groups, use intimidation, violence, and corruption to
acquire wealth and control over the minerals sector. In these cases,
economic benefits concentrate within a small percentage of the
population, while many more people bear the negative environmental,
social, and economic impacts.
Within the minerals sector, ASM is uniquely vulnerable to
exploitation by corrupt officials, elites and criminal groups. At least
40 million people in developing countries--most of them poor--work in
the ASM sector, most of which is informal in nature. Women and children
are especially vulnerable to labor and sexual exploitation on illegal
mining sites, particularly in conflict or post conflict environments.
Powerful actors who face little or no accountability for predatory
behavior easily undermine local regulatory structures.
Mining in violation of the laws of the nation in which the activity
occurs often takes place in remote areas that are difficult to police.
In Latin America, illegal and unregulated ASGM generates billions of
dollars in illicit revenue for transnational criminal organizations,
some of which have close ties to high-ranking officials in government
and state security forces. In 2016, the total value of illicit gold
production in South America was estimated as at least $7 billion, and
by all accounts is increasing. In Venezuela, the former Maduro regime
has increasingly turned towards illegal and unregulated gold mining to
line its pockets and maintain its power, in cooperation with
transnational groups.
In Africa, artisanal diamond, gold, coltan, and tungsten mining has
helped finance prolonged and deadly conflicts in countries such as
Angola, Central African Republic (CAR), the Democratic Republic of the
Congo (DRC), Liberia, and Sierra Leone. In CAR and DRC, minerals have
become synonymous with ``conflict,'' which has resulted in temporary
restrictions on their export. In the Sahel, armed groups are
increasingly seizing control of ASGM sites in Mali, Burkina Faso, and
Niger which could further destabilize the region. As in Latin America,
high-ranking officials in government and state security forces often
profit personally from these operations.
Throughout much of Africa, illegal and unregulated ASM supply
chains have links to criminal networks and contribute to domestic and
regional insecurity.
ASM often occurs in and around protected areas of high
biodiversity, which hampers efforts to protect critical ecosystems.
Indigenous people and other vulnerable groups inhabit some of these
areas. Artisanal and small-scale gold mining (ASGM) is the largest
source of mercury pollution on Earth as at least 10 million people use
mercury to mine for gold in more than 70 countries--with severe effects
on human health. Much of the mercury released goes into the atmosphere
and travels thousands of miles. It is estimated that 70% of the mercury
deposited in the United States comes from global sources. Alluvial gold
mining--the extraction of gold from creeks, rivers and streams--has
deforested over 62,500 hectares in the Amazon's uniquely biodiverse
Madre de Dios region since 1999.
Unfortunately, we have no easy or quick solutions. Illegal and
unregulated ASM mining is a complex problem that requires long-term
investments and structural reforms. USAID aims to support our partners
that show the resolve to address the pervasive problems that surround
this sector. Over the last 5 years, USAID has awarded programs with an
anticipated total value of $125 million to address illegal and
unregulated ASM in countries such as Afghanistan, CAR, Colombia, Cote
d'Ivoire, DRC, Peru, and Rwanda. Our programs include rigorous, field-
level monitoring, evaluation, and oversight which has generated the
data needed to demonstrate impact and to ensure our programs constantly
learn and adapt. On a recent trip to Colombia, USAID Administrator Mark
Green commented that he was ``shocked to see the remnants of the
illegal mining and the devastating consequences for the environment,''
but he was also heartened to witness first-hand the impact of USAID's
programs that have helped support environmentally and socially
responsible licit supply-chains that ``bring money revenues into legal
channels in a way that helps to support families and provides new
revenues for the government.''
Evidence suggests that formalization and legalization of the sector
is one effective step to break the link between the trade of artisanal
minerals and armed conflicts. USAID has learned through experience that
addressing illegal and unregulated mining requires a coordinated,
whole-of-government approach and long-term investments. We cannot solve
this problem through development assistance alone. At USAID
headquarters and in our Missions in the countries in which we work, our
decision to engage in the artisanal mining sector occurs on the ground
as part of a comprehensive and cross-sectoral Country Development and
Cooperation Strategy. We make our investments in efforts to formalize
and improve the ASM sector in partnership with national and local
governments, civil society, and the private sector, almost always
coupled with closely coordinated interventions from other U.S.
Government Departments and Agencies.
In Latin America, USAID's programs in Peru and Colombia directly
support bilateral Memoranda of Understanding (MOU) between the United
States and the aforementioned governments to counter illegal mining and
related crimes. In Peru, USAID has built up the country's scientific
and research capacity by establishing the first laboratory in Madre de
Dios with the capacity to analyze environmental mercury contamination
and supporting the publication of over 25 papers on remediation and
management techniques. USAID recently launched a new 5-year,
Twenty-three and nine tenths million dollar program in Peru to
strengthen environmental criminal justice institutions; reduce
environmental crimes in key landscapes in and around protected areas
and indigenous land; and support civil society and the media to serve
as effective watchdogs. In Colombia, USAID- funded programs promote
legal and responsible mineral supply-chains in Antioquia and Choco. Our
programs have helped formalize 42 mining operations, eliminated nearly
40 tons of mercury from mining production, and assisted in generating
$110 million dollars of legal gold sales, which mobilized $8 million of
domestic resources in the form of royalties and taxes. In addition,
USAID rehabilitated 17,000 hectares of land affected by mining.
In Africa, USAID works closely with other U.S. Government
Departments and Agencies in CAR and the DRC. In CAR, USAID helps reduce
the flow of conflict diamonds by improving compliance with the
international due-diligence process known as the Kimberley Process
Certification Scheme. In 2013, CAR was temporarily suspended from the
Kimberley Process because of its lack of compliance and concerns about
conflict diamonds, which led to an embargo on diamonds from CAR. USAID
worked closely with the government of CAR to improve compliance, which
led to a partial lift on the embargo in 2015. USAID continues to
support the Government of CAR to improve compliance and strengthen
social cohesion in mining communities. In the DRC, USAID supports the
establishment of legal, responsible mineral supply-chains for tin,
tantalum, tungsten and gold. In 2010, the United Nations reported that
almost every mine site in Eastern DRC was under the control of armed
groups. Since that time, USAID has supported the validation of more
than 600 ASM sites as conflict-free. By 2017, an estimated three out of
four tin, tantalum, and tungsten sites were free of the control of
armed groups. In addition to the security improvements, the conflict-
free supply-chains have also generated a legal source of revenue. In
2018, validated conflict-free mine sites in the DRC legally exported
approximately 15,800 tons of tin and tantalum worth over $285 million.
This year, USAID supported the very first export of conflict-free gold
to the United States from Eastern DRC through private-sector-led gold
supply-chain involving only U.S. companies. Furthermore, USAID, along
with the State Department and Department of Labor, established the
Public-Private Alliance for Responsible Minerals Trade (PPA), a multi-
stakeholder initiative that promotes responsible sourcing of gold, tin,
tantalum, and tungsten in the DRC and the Great Lakes Region.
In Afghanistan, where extractives are the second-largest source of
revenue for the Taliban after narcotics, USAID has developed
interagency agreements with the U.S. Department of Commerce and the
U.S. Geological Survey (USGS) within the Department of Interior with an
anticipated total value of $38.2 million. This USAID funding supports
the provision of targeted legal, regulatory, and policy advice as well
as the analysis of geological data and management assistance to the
Afghanistan Ministry of Mines and Petroleum and the Afghanistan
Geological Survey.
But let me be clear, just because artisanal mining is legal and
regulated, does not necessarily mean that it will propel a country
towards self-reliance, nor can a comprehensive solution succeed without
strengthening the governance of industrial mining. This is why USAID
also funds the Extractive Industry Transparency Initiative (EITI), a
voluntary, global partnership between governments, extractive-industry
companies, and civil society to promote the transparent and accountable
management of oil, gas, and mineral resources. Advancing the EITI
Standard serves key U.S. national-security, economic, and foreign
policy objectives, including fighting corruption, empowering
communities affected by mining operations, leveling the playing field
for U.S. companies overseas, and promoting good governance in the
extractive sector worldwide. Since 2013, USAID has obligated more than
$19 million in funding through over 17 USAID Missions--including in
both Colombia and Peru--for programs to support the EITI-related
disclosure of data on government revenue, explorations and concessions
in the extractives sector; to strengthen multi-stakeholder governance;
and to promote beneficial-ownership processes to enhance transparency
and minimize supply-chain risks to businesses, including money-
laundering and terrorist-financing.
USAID's successes in the sector have been hard-won. Mining in
violation of the laws of the nation in which the activity occurs is a
complex development problem that must be addressed through carefully
planned and sustained investments, a permissive operational
environment, and close collaboration with other U.S. government
departments and agencies. USAID will continue to participate in U.S.
Government interagency efforts to combat illegal and unregulated mining
of a country's natural resources; advance the formalization and
regulation of the ASM sector; strengthen mineral ASM supply-chains to
render them legal, transparent, and environmentally and socially
responsible; combat related crimes such as sex and labor trafficking in
mining regions; clarify land and resource rights; prevent encroachment
into protected areas; promote the environmental rehabilitation of
degraded lands and the elimination of mercury; protect the rights of
indigenous peoples and other vulnerable populations; and support
increased transparency and accountability in the minerals sector.
Our interest is, and always will be, to work with governments,
civil society and the private sector in countries on their Journey to
Self-Reliance. Part of this Journey is the effective management of
natural resources, including high-value minerals. USAID will continue
to join forces with partners that are committed to improving their
regulation and management of the mining sector for the economic,
social, and environmental benefit of their people.
Thank you for your time. I look forward to answering your
questions.
Senator Rubio. Thank you.
Mr. Lechleitner.
STATEMENT OF PATRICK J. LECHLEITNER, ASSISTANT DIRECTOR FOR
INTERNATIONAL OPERATIONS AND HOMELAND SECURITY INVESTIGATIONS,
U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT, WASHINGTON, DC
Mr. Lechleitner. Good morning, Chairman Rubio and Ranking
Member Cardin. Thank you for the opportunity to appear before
you today to discuss the illicit mining of gold and the threats
this activity poses to U.S. national security, international
law, and human rights.
As the largest investigative agency within the U.S.
Department of Homeland Security, U.S. Immigration and Customs
Enforcement Homeland Security Investigations investigates and
enforces more than 400 federal criminal statutes. HSI utilizes
its broad legal authorities to investigate immigration and
customs violations, including those related to import/export
control, human rights abuses, narcotics, weapons and contraband
smuggling, financial crime, cybercrime, human trafficking,
smuggling, child exploitation, IP theft, transnational gangs,
immigration document and benefit fraud, and worksite
enforcement. We are grateful for the continued congressional
support that allows ICE HSI to maintain critical operations at
home and abroad and increase our efforts to target and combat
dangerous transnational gangs and other criminal organizations.
ICE HSI has a global presence, with over 500 personnel,
including special agents deployed to 78 offices in 52 countries
who conduct criminal investigations against TCOs, terrorists,
and other criminal organizations that threaten our national
security. HSI leverages its international footprint and
partnerships to disrupt and dismantle TCOs that seek to exploit
America's legitimate trade, travel, and financial systems, and
enforces U.S. Customs and Immigration laws at and beyond our
nation's borders to prevent threats from entering the United
States.
Today, I would like to highlight how HSI has investigated
illicit actors whose activities touch our borders.
Investigations spearheaded by HSI have ranged from blood
diamonds mined in Africa to unregulated harvesting of timber in
the Amazon to wildlife trafficking in Southeast Asia. HSI, in
collaboration with Federal partners such as U.S. Customs and
Border Protection, the U.S. Department of the Treasury, the
Department of State, as well as partnering with INTERPOL to
combat natural resources exploitation through the sharing of
criminal intelligence and application of U.S. Customs and money
laundering laws.
As you know, the U.S. has a long history of protecting our
environment, wildlife, and natural resources through the
promulgation and enforcement of statutes exemplified by the
Lacey Act, the Clean Diamond Trade Act, the Trade Facilitation
and Trade Enforcement Act, and many others. The activities of
TCOs and other illicit actors are often diversified, regardless
of whether calculated or opportunistic. At its core, HSI
recognizes that the impetus of most criminal schemes is
financial enhancement and, as such, financial investigations
are the cornerstone of HSI investigations.
Financial irregularities are often the tip-off leading to
an HSI criminal investigation. As an example, an HSI-led
investigation resulted in the conviction of the director of
operations, the executive sales director for Latin America, and
others from the largest American-owned precious metals
purchasing and refining company for conspiracy to produce over
$3 billion of criminally derived gold from Latin America,
originating primarily from Peru and the Caribbean. These
proceeds were gained from unlawful criminal activities,
including mining, foreign bribery, smuggling, narcotics
trafficking, and the entry of goods into the United States by
false means and statements. They subsequently transmitted over
$3 billion of wire payments from the United States to Latin
America and the Caribbean to promote the delivery of additional
criminally derived gold.
The investigation further resulted in the indictment of
four Peruvian nationals in November of 2017 who were charged in
the Southern District of Florida for their alleged
participation in this money laundering scheme. One of the
suspects was arrested in Peru by the Peruvian police on charges
of illegal gold mining and laundering more than $630 million
worth of gold. The American-owned company was sentenced to
forfeit $15 million to the United States, develop and maintain
an effective compliance and ethics program, and also received a
5-year term of probation that prohibits it from purchasing
precious metals from outside the United States.
HSI continues to work with the Department of State and our
international and U.S. law enforcement partners to address the
challenges and threats posed by these illicit activities to the
United States.
Thank you for the opportunity to appear before you today. I
would be pleased to answer any questions you may have.
[The prepared statement of Mr. Lechleitner follows:]
Prepared Statement of Patrick J. Lechleitner
introduction
Chairman Rubio, Ranking Member Cardin, and distinguished members of
the Subcommittee:
On behalf of the Department of Homeland Security (DHS), thank you
for the opportunity to testify before you today to discuss how U.S.
Immigration and Customs Enforcement (ICE), Homeland Security
Investigations (HSI), the largest investigative DHS Component, works
with its international law enforcement partners to investigate
transnational criminal organizations (TCOs) and the criminal activities
of these TCOs, including human trafficking and money laundering, among
other things. HSI protects U.S. borders by conducting multi-faceted law
enforcement operations, and by partnering with foreign and domestic
counterparts to combat criminal organizations and prevent terrorist
activities. As a Senior Executive of HSI, I serve as Assistant Director
of HSI International Operations.
HSI International Operations has a network of over 400 personnel,
including over 180 special agents deployed to 78 offices and eight
Department of Defense Liaisons across 52 countries, who conduct
investigations against TCOs, terrorists, and other criminal
organizations threatening our national security. HSI leverages its
international footprint and partnerships to disrupt and dismantle TCOs
seeking to exploit America's legitimate trade, travel, and financial
systems; and enforces U.S. customs and immigration laws at and as
appropriate, beyond our Nation's borders to prevent threats from
entering the United States.
combating transnational criminal organizations
HSI utilizes its broad legal authorities to investigate immigration
and customs violations, including those related to export control,
human rights abuses, narcotics, weapons and contraband smuggling,
financial crime, cybercrime, human trafficking, migrant smuggling,
child exploitation, wildlife trafficking, intellectual property theft,
transnational gangs, immigration document and benefit fraud, and
worksite enforcement. We are grateful for the continued congressional
support that allows HSI to maintain critical operations at home and
abroad and increase our efforts to target and combat dangerous
transnational gangs and other criminal organizations.
During Fiscal Year (FY) 2019, HSI investigations led to over 36,000
criminal arrests, including criminal arrests of over 3,800
transnational gang members. HSI also seized over 1.4 million pounds of
narcotics, made over 2,500 seizures for violations of U.S. intellectual
property and commercial fraud laws, and seized over $620 million in
currency and monetary instruments. Additionally, HSI identified and
assisted over 1,400 victims of human trafficking and child
exploitation.
During the last two decades, transnational crime has expanded
dramatically in size, scope, and impact, posing a significant threat to
national security. HSI takes this threat very seriously, and targets
TCOs at every critical location in the cycle: internationally, in
cooperation with foreign counterparts, where transnational criminal and
terrorist organizations operate; at our Nation's physical border and
ports of entry, in coordination with U.S. Customs and Border Protection
(CBP), where illicit smuggling cells attempt to exploit America's
legitimate trade, travel, and transportation systems; and in cities
throughout the United States, where criminal organizations earn
substantial profits off of their illicit activities.
As directed by the President's Executive Order 13773, Enforcing
Federal Law with Respect to Transnational Criminal Organizations and
Preventing International Trafficking, HSI will continue to place a high
priority and devote sufficient resources to dismantling TCOs and
subsidiary organizations. HSI will continue to focus on cooperative
work with other federal agencies, as well as with foreign counterparts,
by sharing criminal intelligence and law enforcement information when
appropriate and permitted by law.
illegal gold mining
Higher gold prices invigorate artisanal and small-scale gold mining
(ASGM) throughout the world. Usually unregulated and outside the formal
economic sector, ASGM and the gold it produces are a significant
problem throughout Latin America, particularly in Venezuela, Suriname,
Colombia, Ecuador, Bolivia and Peru. Consequences of ASGM include
deforestation, environmental contamination, and loss of biodiversity.
Mercury, a highly potent neurotoxin, is often used to extract gold,
making ASGM the largest source of global mercury pollution and an
important issue addressed in the Minamata Convention on Mercury. It is
widely reported that mine workers face exploitation and forced labor,
that child labor is not uncommon in the mines, that mining communities
drive the demand for sex trafficking, and that health risks, due to
exposure to mercury and other toxic chemicals, abound.
Gold mining in violation of the laws of the nation in which the
activity occurs often takes place in remote areas, and is difficult to
police, which leaves opportunities for organized criminal groups to
carry out this activity. For example, HSI personnel stationed in
Colombia and Peru work hand-in-hand with their law enforcement
counterparts to investigate and dismantle TCOs involved in the illegal
mining of gold.
The United States has a long history of protecting our environment
and wildlife through the promulgation and enforcement of statutes
exemplified by the Lacey Act, the Clean Diamond Trade Act, and the
Trade Facilitation and Trade Enforcement Act, among many others. Since
its inception, HSI has ardently investigated illicit actors, both
individuals and businesses, whose activities lead them to our borders.
Investigations spearheaded by HSI have ranged from ``blood'' diamonds
mined in Africa, to unregulated harvesting of timber in the Amazon, to
wildlife trafficking in Southeast Asia. HSI works in collaboration with
federal partners such as CBP, U.S. Fish and Wildlife Service, U.S.
Department of Agriculture's Office of Inspector General and Animal and
Plant Health Inspection Service, and the U.S. Department of the
Treasury Financial Crimes Enforcement Network and Office of Foreign
Assets Control, as well as internationally with the International
Criminal Police Organization (INTERPOL), to combat natural resources
exploitation through the sharing of criminal intelligence and
application, as appropriate, of U.S. customs and money laundering laws.
The activities of TCOs and other illicit actors are often
diversified, regardless of whether calculated or opportunistic,
touching on more than one type of crime. HSI recognizes the impetus of
most criminal schemes is financial enhancement, and as such, financial
investigations are the cornerstone of HSI investigations. Financial
irregularities are often cited as the tip leading to an HSI criminal
investigation.
peruvian gold investigation
HSI leads the multi-agency Operation Arch Stanton. This Organized
Crime Drug Enforcement Task Force (OCDETF) investigation is a joint
effort among U.S. Federal (HSI, DEA, FBI, CBP, DOJ-Office of
International Affairs, and IRS-Criminal Investigations), state and
local law enforcement agencies. Since January 2018, Operation Arch
Stanton has resulted in the conviction of executives from one of the
largest American-owned precious metals purchasing and refining
companies, of conspiracy to purchase over three billion dollars of
criminally derived gold from Latin America (originating primarily from
Peru) and the Caribbean. These proceeds were gained from unlawful
criminal activities (including mining, foreign bribery, foreign
smuggling, foreign narcotics trafficking, and the entry of goods into
the United States by false means and statements). They subsequently
transmitted over $3 billion of wire payments from the United States to
Latin America and the Caribbean to promote the delivery of additional
criminally derived gold.
Operation Arch Stanton has also resulted in further charges against
one executive and the indictment of an additional four Peruvian
nationals in November 2017, who were charged in the Southern District
of Florida for their alleged participation in this gold money
laundering scheme. One of the suspects was arrested in Peru by the
Peruvian Police for charges of illegal gold mining under Peruvian law
and laundering more than $630 million worth of gold. Pursuant to the
terms of the Plea & Forfeiture Agreement filed with the court, the
American-owned precious metals purchasing and refining company was
sentenced to forfeit $15 million to the United States, develop and
maintain an effective compliance and ethics program, and be subject to
a 5 year term of probation, during which time it will be prohibited
from purchasing precious metals from outside the United States and
required to comply with all further investigations.
Additionally, in October 2018, 10 members of a transnational
criminal organization were arrested by Colombian authorities for
violation of Colombian law concerning illegal gold mining, customs
fraud, and money laundering. This organization used shell corporations
to introduce illegally mined minerals into legitimate mineral trade
sectors of the United States. The illegally mined gold was then paid
for through a trade-based money laundering scheme.
illicit finance and proceeds of crime unit
HSI's Illicit Trade, Travel and Finance Division, through its
Illicit Finance and Proceeds of Crime Unit (IFPCU), develops
investigative techniques and typologies to identify and eliminate
vulnerabilities in U.S. financial systems and criminally pursue
perpetrators of financial crimes. The IFPCU enhances cooperation and
forges partnerships with domestic and foreign law enforcement, money
service businesses (MSBs), regulatory agencies, and non-government
institutions. The IFPCU then leverages these partnerships to enhance
HSI's financial investigations and various anti-money laundering (AML)
programs. The IFPCU works with other government entities to provide AML
assessments, training, best practices, and lessons learned in the fight
against global money laundering.
The IFPCU continues to expand its outreach work with the private
industry. In May 2018, the IFPCU participated in a conference with
national and international precious metal and gem dealers to develop
industry contacts, discuss trends, and provide education on the
applicability of the U.S. Bank Secrecy Act and AML compliance
guidelines. Of particular note, in March 2018, a U.S. gold refinery
pleaded guilty to failure to maintain an adequate AML program.
In FY 2019, HSI initiated over 3,500 new financial investigations
operating under the scope of the IFPCU and made over 2,600 criminal
arrests, over 1,600 indictments and over 1,100 convictions, as well as
the seizure of over $620 million in illicit currency and criminal
proceeds.
As the only investigative law enforcement agency with direct access
to trade data, HSI is uniquely positioned to provide analytical,
strategic, and tactical support for complex long-term and high-profile
investigations, including third-party money laundering and trade-based
money laundering investigations, across multiple programmatic areas.
trade transparency unit
HSI's Trade Transparency Unit (TTU) was created in 2004 and
establishes TTUs in partner countries to share trade data to detect
trade-based money laundering and sanctions violations as well as
commercial smuggling and other crimes that generate illicit proceeds.
TTUs detect suspicious transaction and financial discrepancies and
coordinate investigative and enforcement activities with domestic and
international HSI offices and partners. HSI has TTU agreements with
seventeen countries, including the Latin American countries of
Argentina, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru, and
Uruguay. Formal information sharing agreements are used to exchange
valuable trade data, providing visibility to both sides of trade
transactions. As such, TTUs offer another means to link international
customs and law enforcement agencies together in combating
transnational crime.
national targeting center--investigations
HSI's National Targeting Center--Investigations (NTC-I) was
established in December 2013, in collaboration with CBP, to enhance our
shared border security mission. As the investigative arm of DHS, HSI's
increased manpower and concerted efforts at the NTC support the entire
border security continuum, from CBP interdictions and HSI
investigations, to the joint exploitation of intelligence. NTC-I serves
as HSI's central targeting and coordination center and plays a critical
role in promoting border security, public safety, and national security
through the identification and investigation of TCOs, terrorists, and
other criminal actors attempting to undermine DHS's border security
efforts.
The NTC-I methodology involves identifying and cultivating the
financial and trade aspects of each individual investigation,
identifying, seizing, and forfeiting criminal assets, and disrupting
and dismantling transnational criminal networks. The HSI NTC-I
methodology also involves the coordination of efforts between multiple
HSI, federal, state and international agencies to maximize resources
and results to identify, disrupt, and dismantle criminal enterprises,
while bolstering the U.S. Government's efforts to combat money
laundering and the financing of terrorism.
law enforcement information sharing efforts
In addition to leveraging domestic assets, HSI International
Operations Attache personnel deployed to 78 offices in 52 countries are
uniquely positioned to use established relationships with host country
law enforcement, including the engagement of foreign partner
Transnational Criminal Investigative Units (TCIUs). TCIUs are comprised
of foreign law enforcement officials with DHS training who have the
authority to investigate and enforce violations of law in their
respective countries. Also, included in TCIUs are customs officers,
immigration officers, and prosecutors who undergo a strict vetting
process to ensure that shared information and operational activities
are not compromised. Since our law enforcement officers working
overseas do not possess general law enforcement or investigative
authority in most host countries, partnering with these TCIUs enables
HSI to promote direct action in its investigative leads while
respecting the sovereignty of the host country and cultivating
international partnerships.
HSI International Operations partners with TCIUs in 13 countries.
TCIUs identify targets, collect evidence, share intelligence, and
facilitate the prosecution of TCOs both in-country and through the U.S.
judicial system. These efforts, often thousands of miles from the U.S.-
Mexico border in countries like Colombia and Panama, essentially act as
an extended outer layer of security for our Southwest Border.
conclusion
Thank you again for the opportunity to appear before you today and
for your continued support of DHS and our mission. HSI is committed to
continuing its successful practice of sharing information with domestic
and foreign partners and leveraging its resources around the world to
stem cross-border criminal organizations and threats. I appreciate your
interest in these important issues and the efforts I have discussed
today.
I look forward to any questions you may have.
Senator Rubio. Thank you.
Ms. Thompson.
STATEMENT OF REGINA E. THOMPSON, DEPUTY ASSISTANT DIRECTOR,
CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF
INVESTIGATION, WASHINGTON, DC
Ms. Thompson. Good morning, Chairman Rubio, Ranking Member
Cardin, and members of the subcommittee. I am pleased to appear
before you to discuss the FBI's efforts to disrupt
transnational organized crime, TCOs, and specifically their
involvement in illegal mining.
The FBI has a long history of successfully combatting
organized crime. And as illicit activity of these actors evolve
and diversify, so have our strategies to combat them. The last
decade in particular has seen a boom in illegal mining
operations primarily due to financial instability and an
increase in global demand for precious metals. It is well known
that drug trafficking is a money-making cornerstone of TCOs in
the Western Hemisphere. However, criminal endeavors such as
illegal mining are also substantial generators of revenue.
The precious metals trade is a global industry with
established value. Penetration of the industry by criminal
organizations allows them to establish global networks for the
sale of illegally mined metals and establish money laundering
platforms. Illegal mining and the subsequent laundering of gold
allows criminal organizations to easily commingle illicitly
obtained commodities with the legal market by using witting or
unwitting businesses or smuggling techniques to introduce it
into the domestic and global economy.
TCOs also leverage the gold industry as a money laundering
platform which allows them to exchange large sums of illicitly
gained cash for gold that can be easily transported, stored,
and used in lieu of cash. These organizations purchase gold,
much of which is illegally mined, then sell it into the
legitimate market, where then clean money is returned.
We have seen well-known groups, including Sinaloa and FARC,
and also smaller clan-based groups in the current
administration in Venezuela, engaged in these types of criminal
activities.
To effectively combat this threat, in October of 2015 the
FBI established the Illegal Mining Initiative. This initiative
is an intelligence-led effort to disrupt TCOs' involvement in
the illicit trade and prosecute those involved. Through the
initiative, the FBI engages with other Federal agencies and
international law enforcement partners in complex, multi-
jurisdictional investigations that span the globe.
A prime example of the initiative's success in the FBI's
efforts to detect and disrupt this activity is Operation Diez
Condores, which was initiated in January 2016 as a joint FBI
and Chilean police investigation. This investigation disrupted
a network responsible for importing $80 million in illicit
gold. Intelligence obtained during the investigation identified
a link with an ongoing OCDETF case, Operation Arch Stanton,
which ultimately led to the prosecution of a multi-billion-
dollar money laundering scheme.
A spinoff investigation targeting a U.S. company, NTR
Metals, was launched in conjunction with DEA Lima and HSI
Miami. This investigation uncovered a conspiracy responsible
for the importation of over $3.6 billion of gold with ties to
illicit activities.
The work of multiple U.S. federal and foreign law
enforcement agencies ultimately resulted in convictions,
restitution, a landmark guilty plea by the NTR Metals parent
company, and the disruption of a major international gold
smuggling and money laundering operation.
The FBI continues to identify and target networks worldwide
that are exploiting illegal mining, and we provide information
to law enforcement and private-sector partners related to this
growing threat.
The FBI has collaborated extensively with the State
Department to develop and implement national and international
training, most recently providing training in Panama for law
enforcement and prosecutors in October of this year.
TCOs will continue to pose a significant threat to national
and international security as they continue to evolve and
diversify their activities. Disrupting these activities will
require enhanced domestic and international collaboration and
education in both the government and private-sector arenas.
This is key, as it increases reporting, which in turn enhances
our intelligence base and leads to more investigations and
prosecutions.
Thank you for the opportunity to appear today, and I look
forward to your questions.
[The prepared statement of Ms. Thompson follows:]
Prepared Statement of Regina E. Thompson
Good afternoon Chairman Rubio, Ranking Member Cardin, and Members
of the Subcommittee. I am pleased to appear before you today to discuss
the threat of illicit mining and the FBI's efforts to address it.
the threat: tcos and illicit mining
The last decade has seen a boom in illicit mining operations in the
Western Hemisphere due to various factors affecting global markets such
as financial instability and increased demand for precious metals. The
fracturing of major transnational criminal organizations (``TCOs'') in
the hemisphere into smaller organizations due to the death or
apprehension of key leadership, compounded with infighting for control,
has forced TCOs to diversify their criminal activities in order to
supplement their revenue. Illicit mining operations provide Western
Hemisphere-based TCOs with a profitable source of income beyond
traditional revenue streams, such as narcotics trafficking, and a
reliable mechanism to launder illicit proceeds from those traditional
activities. TCOs use traditional criminal infrastructure--to include
established drug trafficking routes, control of corrupt officials, and
proven smuggling techniques--to traffic illegally mined metals and
minerals in the same manner as narcotics. In contrast to narcotics,
however, illicit mining provides an avenue for TCOs to exploit a legal
commodity. Illicit activity is easily commingled with legal trade
obfuscating TCO involvement.
The precious metals trade is a global industry with longstanding
value. Penetration of the industry by TCOs allows these criminal
organizations to maintain global support networks and a global platform
for money laundering, hindering law enforcement prosecution by co-
opting a legitimate, high volume commodities industry. Currently there
is no test to accurately determine where the gold was mined, and thus
whether the metals or minerals have been mined illegally.
TCO involvement in illicit mining occurs through the taxation or
extortion of both legal and illicit miners operating in the region
under their control, as well as the direct control and operation of
illicit mines. TCOs in Mexico, Colombia, Venezuela, Peru, Guyana and
other South and Central American countries exploit valuable metals,
minerals, and precious stones such as gold, silver, copper, coltan
(colombite-tantalite), iron, coal, emeralds, and uranium. Neighboring
countries and Caribbean islands serve as transshipments points, while
North American countries are final destination markets.
The U.S. market plays a key role in the global exchange of precious
metals. TCOs use often-witting U.S. businesses to exploit U.S.
regulations and export illegally extracted gold to the United States to
launder billions of dollars of illicit proceeds from criminal
operations in Latin America. Because gold bullion is classified as a
commodity rather than a monetary instrument, the imported gold is not
subject to Treasury Department reporting requirements; nor is it
subject to customs duties, which limits law enforcement visibility into
this money laundering method and increases profitability for TCOs.
Large amounts of illegally mined gold and the few hurdles it
currently faces to reach legal markets provides TCOs, especially those
involved in drug-trafficking, with a reliable vector to exchange large
sums of illicitly gained cash into a compact, manageable commodity that
can be easily transported, stored, or used in lieu of cash for criminal
transactions. Additionally, the gold itself can be laundered into the
global markets via several methods: acquiring fake documents, through
bribery or threats, opening front companies, selling the gold to
dishonest brokers, smuggling the gold through countries with lax export
laws, or simply by paying individuals with legitimate authorization to
sell gold.
Governments in the Western Hemisphere face internal obstacles due
to a lack of capacity to properly regulate the mining industry, issues
with corruption, as well as inadequate laws that make combating illicit
mining challenging. Mining operations often exist in remote areas with
minimal government presence allowing illicit mining, other criminal
activity and human rights abuses--including those involving forced
labor, sex trafficking, child labor, and violence against native
communities--to thrive.
TCOs' continuous involvement in illicit mining operations also
negatively affects the environment and public health. TCOs facilitate
the trafficking of mercury, currently used in illicit gold mining
operations. Mercury is transported long distances through the
atmosphere, and approximately 70 percent of the mercury deposited in
the United States originates from global sources. Although
international agreements, like the Minamata Convention, are designed to
curtail the legal global commerce and availability of mercury, these
restrictions combined with the current demand could further drive
mercury commerce to illicit markets controlled by TCOs. Illicit mining
operations also have driven alarming rates of deforestation and loss of
biodiversity in South America.
fbi initiative to combat illicit mining
In October 2015, the FBI established the Illegal Mining Initiative
to disrupt TCO involvement in this illicit trade and to prosecute
complicit companies. The initiative simultaneously addresses the FBI's
strategic and tactical necessities, enhancing our understanding of the
threat, and steering joint intelligence production and multi-agency
operations. This work culminated in an international investigation
comprised of multiple Federal and foreign law enforcement agencies, and
resulted in the first prosecution of a multi-billion-dollar money
laundering scheme involving illegally mined South American gold. The
investigation uncovered a conspiracy responsible for the importation of
over $3.5 billion dollars of gold derived from numerous illicit
activities, including narcotics trafficking, illegal gold mining,
foreign bribery, foreign smuggling, and U.S. customs violations, on
behalf of multiple TCOs.
Operation Diez Condores, initiated in January 2016 as a joint FBI
and Investigations Police of Chile (``PDI'') investigation, disrupted a
Chilean TCO involved in smuggling illicit gold. The Chilean-based
operation procured gold from various illicit sources and collected the
metals at their headquarters in Santiago, Chile, where they conspired
with disreputable businesses to generate fraudulent paperwork about the
gold's true origin and composition. TCO couriers hand-carried the gold
on commercial aircraft from Chile to the United States where they
presented the fraudulent paperwork to U.S. customs officials in Miami,
thereby circumventing regulations. The couriers would then deliver the
gold to a U.S. refinery, NTR Metals Miami (``NTR''), which paid for the
gold via wire transfer back to Chile.
In August 2016, the members of the TCO were arrested in Chile after
the investigation documented $80 million in gold shipments that moved
through multiple shell companies established in Chile and Miami with
the assistance of NTR. The TCO was charged with racketeering,
smuggling, customs fraud, and money laundering in Chile. Intelligence
obtained during debriefs of the Chilean TCO members by U.S. law
enforcement helped to identify inconsistencies in NTR's practices and
that the Miami executives were aware that the gold that they were
purchasing involved TCOs in multiple Latin American countries linked to
gold smuggling, illicit mining, and narcotics trafficking activities.
This led to a spinoff investigation in conjunction with the Lima office
of Drug Enforcement Administration and the Miami office of U.S.
Immigration and Customs Enforcement Homeland Security Investigations
(``HSI'') that identified a link to an ongoing FBI/HSI Organized Crime
Drug Enforcement Task Force investigation. Law enforcement efforts
culminated in the successful prosecution of three NTR executives in
March 2017 for their dealings with the Chilean TCO as well as others in
Latin American.
The investigation ultimately resulted in the conviction of seven
subjects, restitution of approximately $16 million in the United States
and $25 million in Chile, and the disruption of a major international
precious metals smuggling and money laundering operation. This
investigation received national and international attention for
highlighting the role of illicit gold as a profitable and preferred
method for TCOs and other criminal organizations around the globe to
launder illicit revenue and for being one of the largest money
laundering cases prosecuted in the Southern District of Florida. In
addition, in November 2017, four members of a Peruvian TCO linked to
the investigation were indicted.
While the efforts of the United States Government have concentrated
on targeting TCOs' drug trafficking operations, it is critical to
examine other illegal income streams to achieve operational disruption.
conclusion
Transnational organized crime continues to pose a significant
threat to national and international security. The FBI remains
dedicated to combating this threat. In the Western Hemisphere, efforts
against illicit mining have emerged as a significant priority for
governments in the region, and the FBI is committed to working with
them to combat this threat.
Thank you again for the opportunity to appear today. I now look
forward to any questions you might have.
Senator Rubio. Thank you.
We'll start with the ranking member.
Senator Cardin. I want to thank all of you for your
efforts. You are involved in trying to, through enforcement,
deal with these illicit activities. And here's the challenge,
and there are a lot of similarities between the illicit
activities with gold, with wildlife trafficking, and we've seen
the same or similar type of circumstances where we could get to
child labor products that violate international human rights
with the same type of enforcement issues; or, for that matter,
we have corrupt officials in the extractive industries in
dealing with those activities.
So when you have the direct line between a company and
illegal activities, then, yes, you can go after the
enforcement. It's not easy, but you can draw those direct
lines. The problem is that the reason these activities take
place is that they're profitable, and they find ways to get
into the supply chain, into legitimate companies who either
don't know or don't care to know where the supply is coming
from.
So we need to help you--and I mean that sincerely--and
that's why to me transparency in the supply chain is critically
important here. And it seems to me that we could do a better
job in the legal requirements of legitimate companies with
their requirements to dig in more into the supply chain before
they purchase their products, and that is a political hurdle we
have here because, obviously, companies don't like to have to
go through that burden.
But with the size of this problem--if the numbers we have
are correct--we are allowing a lot of illicit gold to come into
America that we're not able to stop under today's enforcement
rules.
So I guess my question to you is, I mentioned two examples
of transparency initiatives, one the EITI, which is a global
initiative; it's been around for a long time. And then I
mentioned 1504, which has taken hold by other countries
enforcing their disclosure laws on the stock exchanges.
Wouldn't that help you if we had greater transparency, put more
responsibility where the money is coming from, and that is the
consumers of this country or the people who buy, believing
they're buying legitimate product, but in reality they're
buying illicit gold that's been melted down into a different
look, and therefore it's difficult to find? Can't we develop a
better way for transparency in the supply chain?
[No response.]
Senator Cardin. Everybody is quiet? That's a question for
an answer.
Yes?
Ms. Thompson. Yes, sir. I certainly agree. A lot of times
when we're engaging in training, whether it be with foreign
partners or in collaboration with domestic agencies or with the
private sector, we speak a lot about anti-money laundering
measures, and the measures can be taken, obviously, on a
national level, but they can also be taken at a business level
in terms of implementing these anti-money laundering measures
so that we can really see the beneficial ownership information,
meaning who is ultimately benefitting from the money of the
sale of the illegal gold or where the payments are going.
Senator Cardin. So, you have a company here who's buying,
let's say, gold from a company in our hemisphere, a legitimate
company that's operating three companies below with illegal
activities. How do you operate here in America to require that
supply chain information to be known so that the company here
in the United States cannot participate because they have not
gotten the satisfaction that the gold being purchased here was
not part of illicit activity? How do we do that?
Good, I found one volunteer. Yes?
Mr. Haeni. Senator, it can be quite difficult for gold, but
I think we could use some other examples, particularly in
tantalum, and tungsten and the success that we have had in the
DRC. Establishing traceability is absolutely critical as we
look to decouple the criminal activity from these local mining
operations and allow the local population to profit from them.
The progress to go in 2010 from almost total control of the
mine sites in eastern DRC under criminal and armed group
control to today down to 20 percent is quite remarkable, and I
think that's an example of when traceability is in place where
we can see progress.
As I mentioned, that is more difficult on the gold side
because gold is more easily smuggled and more difficult to
establish traceable supply chains, but we very recently have
done the same thing for the first time in the DRC, establishing
a fully traceable, conflict-free supply chain for the export of
gold to the U.S. through an all-U.S. private sector supply
chain.
Senator Cardin. And, of course, 1502 of Dodd-Frank deals
with that requirement.
Let me tell you the alternative. The alternative is that
Congress passes a ban on these products coming into America,
just an outright ban, because we can't with satisfaction
determine that it is safe from contamination from illegal
sources. That could violate some of our trade agreements. That
could cause diplomatic and bilateral problems. And it presents
an economic challenge for America.
So if we can't get this right, we will look for other ways
to deal with this. And, quite frankly, I don't believe we have
the cooperation of the commercial entities in this country. I
don't think they share enough concern about where their
revenues are going. They look more as to their own
profitability rather than what they are contributing to, and
that's why it requires us to give them guidance. If everyone
has to comply with the same rules, no company is put at a
disadvantage, and we need stronger national laws on this.
That's why 1502 was adopted. That's why 1504 was passed. That's
why we've worked on these issues that provide a common
requirement so that everyone is under the same standards.
I can tell you 1502 wasn't easy to pass. There was a lot of
opposition to 1502. So we need your help, because I can only
imagine how difficult it is for the FBI or Homeland Security to
try to put together one of these cases. It's not an easy thing
to do because you can't connect all the dots under current
laws, and there is virtually no way you can establish criminal
responsibility at the end user level unless you can connect
some dots on culpability. That's the challenge today.
So we've identified a problem. I'm not sure we've
identified an answer that will be comprehensive enough. We
certainly want to do everything we can at the source, working
with the countries involved, good governance. You're right, get
rid of Maduro, the best thing we could do for Venezuela, and so
many other things come along with that, including illicit
mining. We agree with that, and we have to work in that regard.
But I do think recognize it is the money from the consumers in
this country that is fueling these operations, and we have to
have a better way of identifying the source in order to stop
the practice.
Thank you, Mr. Chairman.
Senator Rubio. Thank you.
Let me begin with Ms. Thompson and Mr. Lechleitner. We've
seen numerous cases where private planes are being used to
transport illegal gold. How can we boost scrutiny of such
flights at our nation's airports and encourage stronger customs
enforcement in countries through which the illegal gold passes?
Mr. Lechleitner. Thank you, Mr. Chairman. That's a very
difficult issue because of the way that gold is handled and
that it's virtually impossible once it's melted and combined
together to trace it. It's very difficult to tell if it's
illicit or licit. The best solution, one of the best solutions,
I believe, would be working with our foreign partners to
determine where this gold is being sourced and potentially
where these flights are coming from. Working with our partners
in transnational criminal investigative units both domestically
and abroad to determine where these flights are coming from and
their source countries would be a way that we could potentially
attack this issue.
It's not an easy issue. It's very easily hid, and it's very
easily obscured. So only with the participation of our foreign
partners, I think, can we really attack the issue to any
measureable degree.
Senator Rubio. Let me ask you both, maybe you guys can help
us. Just logistically, if you could walk us through how, for
example, illicitly mined gold in Peru, in Venezuela, wherever,
winds up in our marketplace here, what are the steps. Obviously
they illegally mine it, and then what happens? If you could
just walk us through how it gets here, typically.
Ms. Thompson. Well, there are two main ways that it's going
to enter our markets. One is through fraudulent documentation
that is given at the border, and the other way is the
smuggling. So to take a step back, as you said, the gold is
obviously illegally mined, and then it will pass through a
number of hands. Sometimes it's more direct. Sometimes it
really is a number of hands to hide the original source of the
gold. And then sometimes that involves shell companies. And
then, as I said, it's the two primary ways that it enters the
U.S.
Senator Rubio. But physically, how does it get--does
somebody have it on their person on a commercial flight? Do
they send it via FedEx? I mean, how does it come in?
Ms. Thompson. Oh. Sorry, sir. Yes, both. So, for example,
if it's crossing and declared when it's coming into the
country, it can have fraudulent documentation with it. That's
one way the illegal gold can come in. And then second is the
smuggling route, which we have talked about a little bit
earlier, where it's melted down into belt buckles, jewelry,
purses, things like that, and that's a way to smuggle it in.
Senator Rubio. So I arrive at Miami International Airport
with gold bars in my suitcase. What are the declaration
requirements when you land?
Mr. Lechleitner. If it's greater than $10,000, you need to
declare it, but there would be no way to determine if those
gold bars are illicit or licit.
Senator Rubio. Right. But if it's more than $10,000,
they're supposed to declare it. Obviously, it's the equivalent
of cash in that case, right?
How many of the entry points do we think come in through
just a regular commercial flight where people are going to
carry gold in amounts of less than $10,000 but with sufficient
back-and-forth travel to get it into the country in numbers
that make sense for them?
Mr. Lechleitner. I don't have a specific number. I can
research that and get back to you on the specific numbers, if
we could find that. We do know that the gold is coming in
through various sources, both legitimate and illegitimate. What
happens is that in the source countries it's being melted down
and combined, and then it basically legitimizes it, launders
the gold, and very often it's coming in and it's essentially a
legitimate commodity at that point, and it's basically a----
Senator Rubio. So one route is the way they clean it up,
they launder it basically, and that is they take the gold and
either pass it through various entities until the paper trail
makes it look like it came from--no one knows where it came
from; the other is it's melted down and mixed with other
sources, again untraceable anyway, and then it comes in through
the normal commercial transaction for importation.
The other is--and it was one of the cases that they were
highlighting to us in the past--that somebody actually arrives
at the airport in Miami, gets through Customs, and then drives
down to some company who converts the gold into a cash
transfer. So what has happened with that route in terms of
bringing it in? Do companies now--if I show up with a bunch of
gold at one of these exchanges and they wire cash to me in
exchange for the gold, does that transaction, that wire, now
have to be reported?
Ms. Thompson. It depends upon what you mean by being
reported, because one thing with the reporting, and it's an
issue, is gold is not considered a monetary instrument. It's
considered a commodity. So the paper trail is very minimal with
the gold. So there is no financial reporting to track. When it
comes to the payments, that's what we have. Like in the case
that you referenced, there were money wire transfers, and
that's what we were able to track.
Senator Rubio. Right, you were able to track the wire. But
does it specify that this is turning a commodity into cash for
the seller, and then that transaction is reported? Is that how
that works?
Mr. Lechleitner. No, I don't believe so. I don't believe
so. It's just a money transfer.
Senator Rubio. Without knowing that the source of it was
$10,000 worth of gold sold in exchange for $10,000 cash wire.
Mr. Lechleitner. Correct.
Senator Rubio. So you have to know who to look for.
Mr. Lechleitner. Absolutely.
Senator Rubio. Because if you're just scouring
transactions, that alone is not going to tip you off.
Mr. Lechleitner. No, that's correct.
Senator Rubio. And if the transactions are under $10,000,
there's no reporting; correct? On the wiring side.
Mr. Lechleitner. Well, with gold, as was stated, because
it's a commodity, it's handled a little differently. But with
transactions, if you do enough of them under the $10,000
threshold, that's called----
Senator Rubio. Under the banking system, right. If you go
to a bank, I think the threshold is $10,000 as well. Any
transaction over $10,000, there has to be a record made.
Mr. Lechleitner. Correct.
Senator Rubio. So if you go to one of these exchange houses
that buy gold from people, and you show up with $9,999 worth of
gold, and they give you cash for it, that's not reported
anywhere; correct?
Mr. Lechleitner. I'll have to research that. I don't
believe so.
Senator Rubio. Right. Okay.
Mr. Glenn, let me ask you, what can we do to bolster the
investigatory and enforcement capacity of the governments in
the region to go after firms that are laundering? We just
talked about how some of this stuff is taken, illegally mined
and mixed in with other stuff, the other gold and so forth, and
at that point they have laundered it, basically, for lack of a
better term.
What's the best thing we can do? Obviously, in Venezuela,
the government is actively participating in it. But in places
like Peru and Colombia and El Salvador, others that want to be
cooperative, what do they need? How can we help them to
increase their capacity?
And that's for anybody who has an idea, by the way, whether
it's Mr. Haeni or Ms. Filipetti. But I want to start with you,
Mr. Glenn.
Mr. Glenn. Sure. Thank you for the question. It's an
excellent question.
We've actually had, I would say, considerable success with
Peru since they decided to attack this problem head-on.
Political will from the president, President Vizcarra, and his
decision to take this problem on, has been essential.
In terms of our assistance and what we've been able to do
to help, and what we can do to help in other countries, I think
is very good if we're able to model it upon what we've been
able to do in Peru. So we focus on building the capacity of
investigative agencies to be able to do the complex types of
investigations. We do that through partnering with the FBI,
with DHS, with other U.S. agencies that have the expertise. We
can bring those experts down to Peru, to Colombia, to El
Salvador, to whatever country, and share those best practices
and expertise.
Another essential part is making sure that they have the
laws that exist that give the governments the tools or the
hammer or the stick that they need to do enforcement. So in
many countries asset forfeiture laws do not exist, or they're
weak, or they're unenforceable. So we work to help them reform
those laws or to pass those laws in the first place, and then
train investigators, prosecutors, and judges so that they then
have the confidence and ability to enact those laws.
So going at it from a regulatory and a criminal regulatory
perspective has been essential. It has proven successful in
Peru. There has been a large uptick in the number of cases that
they've been able to successfully prosecute. That's one of the
many ways that we can go about it, but we know that that one is
successful.
Senator Rubio. Could you update us on the status of the
2017 Memorandum of Understanding with the Peruvians?
Mr. Glenn. Sure. The MOU with the Peruvians was essential,
in large part to get the U.S. Government side talking to each
other. It then helped the Peruvian side as well to get their
side. Just like us, there are multiple agencies within the
government of Peru that engage on this issue. That MOU that was
signed under the time that Ambassador Nichols was there has
been continued under Ambassador Urs. We used that MOU to model
a similar MOU in Colombia, and those have been the documents
that we've used to strategically focus our assistance, our law
enforcement efforts, and to help our partners do their part.
But those MOUs are focused not just on law enforcement.
They're focused on looking at alternatives to formalizing the
mining sector, getting the mercury out, and it's a
comprehensive approach.
Senator Rubio. I'm sorry to go back to Mr. Lechleitner and
Ms. Thompson for a second. I forgot to ask, what evidence do we
have? Are we seeing the use of shell companies in the United
States to help launder money associated with this?
Mr. Lechleitner. Yes, we are, quite a bit. We've seen quite
a bit of shell companies. Specifically, I can address some that
are in Florida, south Florida.
Senator Rubio. Any in Maryland? No?
[Laughter.]
Senator Rubio. All right.
Mr. Lechleitner. Very often they go back to a residence,
and we've seen some commonalities with some B1/B2 holders as
well. But shell companies are being utilized to launder the
money.
Ms. Thompson. And to add to that, sometimes it's not as
simple as just a shell company. They often engage in what's
called layering, where there will be multiple shell companies,
therefore making it even harder to track the documentation.
Senator Rubio. Which is now a shameless plug for my bill
with Senator Wyden to unmask some of these companies that are
being used for these illicit purposes.
Mr. Haeni, let me ask how the USAID programs that are
helping miners and targeting the artisanal miners, can you give
us an update on those programs?
Mr. Haeni. Sure. As you noted, they're a critical component
to the MOUs that were signed both in 2017 with Peru and in 2018
with Colombia. Peru's recent $23.9 million program is in direct
support of that MOU, as is the ongoing CINCIA project, which,
as Mr. Glenn mentioned, helped to establish the first-ever
mercury testing facility in Peru. It has also worked to promote
innovative reforestation techniques. So we're really taking a
holistic approach all the way from the formalization of the ASM
sector, looking at the link to environmental degradation,
including looking at alternative livelihood. So both in Peru
and Colombia, we've had success through USAID's programming.
Senator Rubio. Senator Cardin.
Senator Cardin. I want to just follow-up on the
conversation with our State Department people. I think there's
a lesson to be learned in a positive way on how we have been
able to go after trafficking in wildlife, particularly elephant
tusks and rhino horns. We've had an all-out effort to deal with
that issue, and we've gotten great cooperation from the
countries involved; not all, but most have worked with us in
order to really deal with these illegal takings. And Congress
gave additional resources and tools, and it was a priority of
the State Department, a priority in each of our missions in the
countries involved, and it made a difference.
I think we could do the same in regards to this illicit
mining, and I appreciate the fact that you've given us good
examples of the relationship in Peru and what's been going on
in Peru. But I think there needs to be stronger attention given
within the State Department instructions to our different
missions, and in the use of USAID's activities in these
countries, to make it clear that this is something that you
need to have a checklist on in order to be able to maintain a
positive relationship with the United States.
I can tell you that it really was the interest in the State
Department, the interest in Congress that made a difference on
wildlife. I don't think we've had the same visibility on
illicit mining, and it is perhaps a much larger dollar problem
for us than the rhino horns and elephant tusks, although that's
a huge business, don't get me wrong.
So what is the game plan here beyond just a one-country
effort?
Mr. Glenn. Political will is essential. We can put in
hundreds of millions of dollars to this effort and it will go
nowhere unless political will exists. So the question really is
how do we generate political will?
Senator Cardin. That is exactly right. I agree with you,
you need political will. But it's amazing how political will
changes when the United States pays attention to a problem.
Mr. Glenn. Yes. What I don't want to encourage, though, is
that money and assistance isn't necessarily going to generate
that will. What we've been able to do in Peru--the Peruvians
and their Operation Mercury, it's a $300 million investment in
the government of Peru. The investment on the U.S. side is
remarkably small. It enables a lot of what they're able to do,
but it is their investment that is making the difference there.
We will see similar results as we are seeing in Peru in places
like Colombia and some of the other Latin American countries
when that political will gets generated.
How do we create that political will? Under Ambassador
Nichols at the time in Peru, and continuing under Ambassador
Urs, the constant attention from our embassy staff, these types
of hearings where an expression is being made by the U.S.
Government, my focus on it. I will be down in Peru and Colombia
next week. In Colombia, we'll actually be specifically focused
on criminal activity, much of it mining, that is being
generated out of Venezuela and how can we as a region in the
Western Hemisphere combat that illegal mining coming out of
Venezuela.
So it's those kinds of engagements that help build that
political will and gets countries to invest. I think a lot of
it is convincing them of the profitability of a legal system,
and a lot of that has to do with USAID's programming. So that's
the key. Obviously, the resources from our end that we are able
to invest in their capability and increase their capacity is
key. But I think, again, the most important part is to get them
to want to address this issue.
Senator Cardin. And we have an opportunity. The President
has nominated a new ambassador to Peru, and I believe she's
from Florida, if I'm correct. I may be wrong about that, but
she's not from Maryland. That I did notice. But we will make
sure that that's an issue that we bring up as important, and
I'm sure it will be on the administration's mind.
I agree with you, you've got to create the interest, and
it's more than money. But a relationship with the United States
is multifaceted, and if this issue isn't a top tier issue, then
it's of less political will locally. I understand it can be
generated locally, but normally international pressure can make
a difference in political will locally.
Thank you, Mr. Chairman.
Senator Rubio. And I have a couple of comments and maybe a
question, and I want to focus specifically on Venezuela with
you, Ms. Filipetti, and then the broader group if you have
comments on it as well.
The interesting thing about illegal mining in Venezuela,
the first thing is the ecological disaster. Irrespective of the
political outcome there, the ecological disaster is
extraordinary and some of it irreversible, and much of that,
frankly, has been underreported because the political disaster
and the economic disaster has been so extraordinary.
There are two things happening. One, frankly, is the regime
has dipped heavily into their gold reserves just to sustain
itself. The central bank puts out these numbers, but if you do
the math they're lying, and they're probably under $10 billion
in reserves as is, and they will probably be lower here by the
end of the year because one of the ways Maduro holds on to
power is he does these Christmas bonuses, pork for Christmas
and so forth. He won't even be able to meet the demand that
exists, but he takes funds and sort of throws them into the
street just to keep people calm over the holiday. So they'll
have to use reserves to pay for that.
We've seen U.S.-origin gold bullion from the 1940s winding
up in the global market. Stuff that was used during the Second
World War to pay for oil, that's now winding up out there in
the global marketplace. That's been openly reported in a number
of sites.
But the second piece, the one that's leading to the
degradation ecologically, is the illegal mining. Ms. Filipetti,
it's my understanding that--and correct me if I'm wrong. What
is the role of the ELN and the dissident FARC movements that
are within Venezuela playing in the mining regions? Some report
that they have almost complete control and operate with
impunity. What's the assessment of the State Department as to
the role they're playing in the illegal mining occurring in
Venezuela?
Ms. Filipetti. Sure. Thank you very much, Senator. Well,
it's clear that the ELN and the FARC are very present in the
mining arc. It really depends on what specific areas we're
focusing on. It's essentially ungoverned, lawless territory. So
it's common that terrorist entities like ELN and FARC will make
themselves present there.
In some cases we are seeing them control the mines
themselves. In other cases we're seeing them control transit
routes. We're seeing them take advantage of refugees who are
trying to flee and sort of forcing them to work in the mines
and to stay. In other cases we're seeing them have control over
some armed weapons which are enabling them to have control over
medicinal supplies and things of that nature. So it really does
depend.
But the truth is their presence in the region is one of the
most dominant concerns of the State Department. We have seen
also how--I spoke a little bit about the Maduro regime and its
incompetence in gaining control over this problem. What it
realized is once it was not able to effectively combat illicit
mining, it decided to capitalize off of it in order to get more
resources that it realized were being deprived of it, largely
because of U.S. and international sanctions on the petroleum
industry.
So we have now seen how there's a relationship between
government officials. There's a relationship between the army
and the national guard with some of these entities, whether
it's the ELN and the FARC or whether it's the pranes colectivos
who are also present in order to really trade weapons, control
over some of the territories, or cash, for support from these
territories.
Senator Rubio. I think that's the key point, because we're
not talking about criminal operations in a country that doesn't
want them there. We have criminal operations like that in other
countries like Peru or Colombia, but the governments by and
large want them out. There may be some localized corruption,
but the government wants them out. In this particular case
they've basically been deputized and/or the industry has been
outsourced to them by the regime in exchange for those groups'
support and cooperation and a small fee or whatever that's
generating income not just for the regime but for the
individuals in the regime. This is one of the ways that Maduro
keeps these people around and loyal, not to him but to that
source of revenue of illicit gain. So this is with their
cooperation.
Ms. Filipetti. That's right, Senator. In some cases they
have tried to cut down on instances of illicit mining simply
because they don't have the relationships with those gangs. So
in that case they do try to stop it so that they can generate
those relationships. But, absolutely.
You know, we've spoken a lot about how we need to generate
political will. There are things we can still do even with a
country that's under a regime that has no interest in working
with us on combatting it. Venezuela is a really unique case
because Maduro is part of the problem, and also because we
sanctioned the entire gold sector for precisely the reasons
that you've described, because it has enabled this patronage
network that has kept him in power.
So that actually gives us a number of unique tools that we
can use in order to combat illicit mining inside Venezuela.
We've used some of them. Diplomatic engagement, as Senator
Cardin mentioned, has been critical with some of our allies.
We've seen how the Bank of England has confiscated $550 million
worth of Venezuela-origin gold. We've also seen a decrease in
the amount of gold flowing to Turkey thanks to our engagement
with Turkey.
There are other things that we've been working on as well.
Sanctions and imposing a cost for dealing with this sector has
been effective as well. We continue to look at other companies
that continue to operate with the Venezuelan mining sector.
And, of course, looking at a transition scenario, this is where
we can be most effective. This is when we can start to deploy
some of the resources and tools that my colleagues spoke about
that we're using in Peru and Colombia.
It's also an opportunity for us to consider how we might be
able to encourage more legal forms of mining so that we can get
rid of the illicit category within Venezuela. But, of course,
that would require a lot of security assistance as well, and it
would be something that we can only consider once we have a
democratic government in place in Venezuela.
Senator Rubio. My last question is what you've described
and what I've talked about often is that you have a
governmental agency, for lack of a better term, in the Maduro
regime that basically cooperates with drug dealers for a fee.
They have done drug seizures, but the drug seizures are on the
people who haven't paid them. If you pay them, they might
actually even fly the drugs for you or transport it for you.
The same is true in the illicit mining. They may go after a
group, but it's the group that isn't paying them. In essence,
if you pay them, they let you operate.
How is that any different from how organized crime operates
when it takes over a neighborhood and cracks down on loan
sharking or gambling among those crews who are not paying the
capo the kickback that he's asking for? What you're basically
describing is an organized crime effort dressed up, that
retains some elements of a nation-state government. But in
essence, this is an organized crime ring that today doesn't
govern but controls Venezuela.
Ms. Filipetti. Senator, that's how we would describe it. We
don't refer to the Maduro regime as a government. It is a
corrupt criminal network. It's corrupt and criminal both, as
you described. It's involved in the drug trade. It's also
corrupt and criminal in its involvement in the mining industry,
and not just gold. Again, we're talking about a lot of illicit
sources of coltan, of diamonds, of coal even. So I absolutely
agree with your characterization of it as a criminal network.
Senator Rubio. Senator Cruz.
Senator Cruz. Thank you, Mr. Chairman.
Good morning. Welcome to each of the witnesses. Thank you
for your testimony.
I've long worried that we're not paying nearly enough
attention to the use of gold as a monetary instrument of
illicit finance, so today's hearing is valuable in that regard.
I appreciate Chairman Rubio convening this hearing.
Earlier this year I introduced a bill that would add trade
in illicit precious metals as a class of transaction to be
considered when making a Section 311 primary money laundering
concern designation. This bill would allow the Treasury
Department leverage when determining whether a country or bank
should be designated a jurisdiction of primary laundering
concern, a label which has an obviously chilling effect. I
continue to urge the administration to consider this and
similar measures which would help address both the mining and
the trade of illicit materials.
On that issue I'd like to ask each of you to talk a little
bit about how illicit metals are being used by the Maduro
regime and other anti-American regimes in South America
specifically. The porous border between Venezuela and Colombia
facilitates the smuggling of illegal gold with ties to guerilla
groups like the ELN and the FARC. How widespread is this
challenge, and how can we support Colombia in monitoring and
halting smuggling across its borders?
Ms. Filipetti. Senator, thank you. I can speak very briefly
to the Venezuela angle of it. In terms of how prevalent it is,
unfortunately, because we don't have a relationship with the
Maduro regime, it can be difficult for us to gain exact
numbers. We do know that approximately 91 percent of all the
mining in Venezuela is illicit, which is partially why our gold
sanctions are so significant. It enables us to target the
entire industry because either it is illicitly mined or it is
in some way trying to be used by the Maduro regime in order to
support itself by stealing from the natural resources of the
Venezuelan people.
We know that the ELN and the FARC are present. We also know
that there are a number of centralized gangs, colectivos, as
you are aware, that are operating there, and it's really a
vicious cycle because the presence of these ungoverned spaces
means that these terrorist and criminal groups come in. They
are the ones who have control over the weapons. They're often
in indigenous communities. It's notable that the three highest
mining instances are in Bolivar, Amazonas, and Zulia, which
are, of course, also the most heavily and densely populated
indigenous communities in all of Venezuela.
So their land is being stolen from them. They are being
trafficked both into the sex trade as well as forced into
labor. So it's a key problem, and it affects Colombia as well
because, of course, as you noted, these are porous borders. The
transit routes are often controlled by the ELN and the FARC and
other gangs. So the health impacts and the poisoning of the
water and so on does not stop at Venezuela's borders. Colombia
had recently indicated that most of its--I think it was 95
percent of all of the new malaria cases in foreign-born
individuals who were in Colombia came from Venezuela.
So we're seeing everything start to trickle out of
Venezuela, and I think it's critical that we focus both on
regional approaches, which my colleagues can discuss, in the
surrounding countries where we have partnerships, but also some
of the ideas that we posited on how do we address the problem
inside Venezuela, even with a government that's not willing to
cooperate with us.
Senator Cruz. Let me follow up. How does the Maduro regime
benefit from illegal mining carried out by groups like ELN and
the FARC? And will disrupting the region's illegal mining
networks undermine the stability of the Maduro regime? If so,
how can we rally the region behind this goal?
Ms. Filipetti. The answer to if disrupting it will
destabilize Maduro, I think the answer is a categorical yes.
It's partially why we have implemented the gold sanctions. He's
going to keep looking at other sources of potential cash the
more our sanctions take effect, particularly on the petroleum
sector. So we have seen him turn even more towards gold. We've
seen him make announcements in both 2018 and this year
indicating that this Arco Minero is a central piece of his
strategic developments. And, of course, there are billions and
billions of dollars' worth of revenue that can be generated
from the gold reserves inside Venezuela.
In terms of what we can do, again, we have very strong
allies on the borders of Venezuela who have been working very
closely with my colleagues and I and elsewhere in order to
combat illicit mining. We have seen reports, though--of course,
it's hard to determine the origin of some of the gold. So what
comes out is Colombian gold, and they have actually been
Venezuelan in origin.
A few things that we can look at in the near term. So, as
I've pointed out, we have had some cooperation from our allies
as we've come forward and indicated to them the sanctions risk
of engaging with the Maduro regime. So we have seen a
significant decrease. I think Turkey is an example of this.
Between January and September of 2018, we saw Turkey purchase
over $900 million worth of Venezuelan gold. That's more than
the total trade between the two countries in the previous 5
years combined. We engage with them very directly. Our embassy
engaged with them very directly, and we are not seeing that
kind of engagement with the Venezuelan gold industry to that
extent. So that is something that we continue to engage with
our partners on.
Another thing for us to potentially look at is mercury.
Mercury is one of the key causes of the ecological devastation,
which also affects the health of the indigenous communities
that are present. If we can potentially consider ways to
prevent or disrupt the amount of mercury that's going into
Venezuela and being used by these small mining individuals,
that I think could potentially prevent the production of that
gold from ever making it out from Venezuela in the first place.
So that's an area for us to look into as well.
Senator Cruz. Let's shift for a minute from gold to
uranium. In Latin America there are two converging developments
on uranium. First, legal mining has been on the rise of uranium
across Latin America, and illicit mining will undoubtedly
increase alongside it. Second, as we have known for a decade
now, Iran and Hezbollah are both engaged in efforts to mine
strategic minerals for missile and nuclear programs across the
region. A report recently published by Los Alamos National
Laboratory about Hezbollah specifically called attention to the
``global pandemic'' of missing nuclear material and equipment.
A couple of questions. What is your assessment of the risk
Hezbollah or affiliated extremist organizations are trying to,
and can, acquire illicit precious metals for their ballistic
missiles and nuclear programs, especially illicitly mined and
traded uranium?
Ms. Filipetti. I can speak briefly to the Venezuela angle
of this. We certainly know that there is an Iranian presence.
The extent to which the Iranians are directly involved in
mining, inside Venezuela at least, is still a little unclear to
us. So we know that there are Iranians; we just don't know the
extent to which they're operational in the mining industry.
There are some deposits of thorium and uranium inside
Venezuela, so it's something that we watch incredibly closely,
and the minute we have further details we're happy to provide
those to you.
Senator Cruz. Very good. Thank you.
Senator Rubio. Anything else? Thank you.
Thank you all for your time. We appreciate it very much. I
think this has been a useful hearing for us. As you can see,
there's interest in this topic, and it's important. It's not an
easy one to address, but it's one we're trying to find ways to
move forward that we can do both from a legislative perspective
and also from a public awareness perspective about this need.
So again, I want to thank you all for being here.
The record will remain open for 48 hours.
And with that, this hearing is adjourned.
[Whereupon, at 11:29 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Responses of Carrie Filipetti to Questions
Submitted by Senator Benjamin L. Cardin
mining supporting criminals in venezuela
Over the past 3 years, a boom in illegal mining in Venezuela has
helped Nicolas Maduro's government retain power. In March 2019, the
U.S. Treasury Department imposed sanctions on Venezuela's state-run
gold mining company (Minerven) and its president for engaging in
illicit transactions that have supported Maduro. Treasury accuses
Minerven of buying gold from hundreds of thousands of ASM miners,
exploiting a large military-controlled zone seized from indigenous
groups.
Question. What role do you see illegal armed groups from Colombia
playing in the control of the illicit gold mining industry in
Venezuela?
Answer. In Bolivar State, a massive territory in the southeast of
Venezuela, human rights organizations cite a complete absence of
government presence, leaving its residents subject to the order imposed
by armed, non-state groups. The increased presence of such groups has
created heightened violence and insecurity in local communities. Some
mines are run by Colombian armed groups--the Ejercito de Liberacion
Nacional (ELN) and the Fuerzas Armadas Revolucionarias de Colombia
(FARC) dissidents. Others are run by Venezuelan ``sindicatos'' and
``pranes'' or gangs. These non-state armed groups work in concert with
members of the illegitimate Maduro regime and distribute profits as
patronage.
Question. To what extent, if at all, do you see ties between
criminal actors in the mining sector and the Maduro government?
Answer. While the precise extent of the current ties between
criminal actors in the mining sector and the Maduro government are only
partially understood, they are clearly strong. According to reports
from well-respected think tanks and other independent experts, criminal
actors operate in mining regions as intermediaries between local
miners, the Venezuelan armed forces and government officials. In some
cases, the Maduro regime has traded control over mines for political
loyalty, establishing a criminal patronage network that empowers
Maduro. At the very least, with the explicit acquiescence and support
of the armed forces and the Maduro government, the criminal actors have
a monopoly on the use of force in the mining regions, essentially
placing miners, and many members of indigenous communities, under their
control. In exchange for this so-called protection, miners are
generally forced to pay a portion of the mined gold to criminal actors
and sell mined gold to the criminal actors at prices set by the
criminal actors. Much of the gold then flows from local criminal
actors, through local military officials, to higher ranking military
officers, and senior government officials, before being smuggled out of
the country. At each step, participants in the scheme siphon off gold
or share profits of the gold sales.
Question. How have U.S. sanctions imposed in March 2019 affected
the Maduro government's ability to fund itself through illicit gold
mining proceeds?
Answer. As a result of the designation, all property and interests
in property of CVG Compania General de Mineria de Venezuela CA
(Minerven) and its President, Adrian Antonio Perdomo Mata, and of any
entities that are owned, directly or indirectly, 50 percent or more by
Minerven and Perdomo, that are in the United States or in the
possession or control of U.S. persons are blocked. U.S. persons are
generally prohibited from dealings with Minerven and Perdomo, and
persons and entities transacting with Minerven and Perdomo risk
exposing themselves to U.S. sanctions and losing access to the U.S.
financial system. While difficult to quantify the effect, this
designation has impinged Minerven and Perdomo's ability to continue
normal operations.
Question. To what extent is forced labor, including child labor,
present in the illegal mining sector in Venezuela?
Answer. The former Maduro regime makes no effort to prevent
children from working in the gold mining industry, or to protect them
once they are working. It is difficult to determine the exact extent to
which forced labor is present in the illegal mining sector in
Venezuela. While many miners are local indigenous people, some miners
have also voluntarily migrated to the gold mining regions desperately
in search of work that is otherwise so difficult to find under Maduro's
rule. Virtually all miners must work under the direction of and under
terms and conditions set by criminal groups. Many can only gain medical
care through these entities, and often, women and girls as young as 14
are sexually trafficked. According to a report by the non-governmental
organization Cecodap.Indigenous, up to 45 percent of those engaging in
illegal gold mining are children or adolescents.
impact on human rights in venezuela
Over the past 3 years, the boom in illegal mining in Venezuela has
also contributed to environmental degradation in indigenous areas,
clashes between rival criminal gangs, violence against miners, and
outbreaks of malaria and diphtheria (diseases that had been rare in
those areas). According to numerous reports, the illegal mining
industry also commits various human rights violations, reportedly
including the forcible recruitment of child labor from the indigenous
Yanomami tribe:
Question. What impact has a recent increase in illegal gold mining
had on the health and human rights of indigenous groups residing in
Venezuela's gold-producing regions?
Answer. The former Maduro regime has been developing and expanding
illegal mining zones, particularly in the growing ``Arco Minero,'' an
area that extends between the states of Bolivar and Amazonas. It has
been doing so without consulting those native to the region, putting
indigenous communities at risk. Impacts of this illegal mining include
environmental degradation, water contamination, child labor, forced
labor, and the unprecedented influx of disease, drugs, and
prostitution.
We understand there has also been an increase in the presence of
armed groups, including Colombian guerrillas and former rebels in these
areas, creating heightened violence and insecurity in local
communities. Indigenous leaders have reported that various incidents,
including the November killing of eight individuals from the indigenous
community of Ikaburu, have led to the displacement of more than 1,300
members of the community.
Question. To what extent has the presence of sex trafficking in and
around mines driven the recent sharp rise in HIV/AIDS cases and deaths
in that region?
Answer. In the 2019 TIP Report, the Department documented the
increase in sex trafficking in Venezuela's informal mining sector.
Illegal mining operations exist in some of the region's most remote
areas, which have a complete lack of rule of law. Such is the case of
Bolivar state, which has become a hotspot for criminal activity,
including the sex trafficking of girls, the forced recruitment of youth
to join armed criminal groups, and the forced labor of young people to
work in the mines under dangerous conditions.
These vulnerabilities and compounding factors, paired with the lack
of access to decent Healthcare, create fertile ground for the spread of
sexually transmitted diseases, such as HIV/AIDS. PEPFAR is working to
provide HIV testing and treatment services to Venezuelan migrants
sheltering in Colombia and to conduct an HIV disease surveillance
activity in Colombia to produce better estimates of HIV prevalence in
the Venezuelan migrant community and their distribution throughout the
country, as a lack of good data on the HIV disease burden is one of the
core challenges in Colombia.
__________
Responses of Carrie Filipetti and Richard H. Glenn to Questions
Submitted by Senator Benjamin L. Cardin
disclosure
One method to combat illicit mining is to increase disclosure in
extractive industries, which may seek to cover the unethical or
exploitative practices they use for acquiring minerals. To enhance
transparency and good governance in state-run extractive industries,
multiple countries, including the United States and European Union
members, have laws requiring the public disclosure of EI firms'
payments to governments.
In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also
known as the Cardin-Lugar provision. Section 1504 established a global
standard to require companies to disclose payments made to the U.S. or
foreign governments related to the development of oil, gas, or
minerals. Since then, 30 countries have followed the U.S.' lead,
including Canada, Norway, the U.K., and 27 other members of the
European Union.
But in 2017, through the Congressional Review Act procedure,
Congress voted to revoke the updated rule passed by the SEC that
required public disclosure. That same year, the U.S. withdrew from the
Extractive Industries Transparency Initiative (EITI):
Question. How can the U.S. lead by example when we withdraw from
initiatives like the EITI and when Congress votes to invalidate rules
that require transparency in critical sectors of the economy
responsible for illicit activities?
Answer. Although the United States announced in 2017 it would no
longer implement EITI domestically, it continued to support EITI.
Department of State Bureau of Energy Resources (ENR) represents the
Supporting Country constituency on the EITI Board of Directors and sits
on multiple governance committees. USAID provides $3 million per year
to support the EITI Secretariat and the implementation of EITI in other
countries.
ENR also supports transparency in the extractive resources sector
through the Energy Resources Governance Initiative (ERGI). Through
ERGI, ENR seeks to bring together countries that believe in the
principles of sound governance to work together to share leading
industry practices and encourage a level playing field for investment.
The initiative will also encourage the creation and promotion of
resilient, responsible, and integrated supply chains to avoid supply
disruptions of key energy resource minerals.
Question. What role does transparency play in ensuring that mining
is more fair and accountable? What are the U.S. government and U.S.
companies doing to support transparency in the mining sector, including
via the EITI?
Answer. Transparency enables the citizens of a country to
understand how much money their country's natural resources are worth,
who is paying for access to those resources, how much they are paying,
and who is receiving those payments. Systematic disclosure of revenues
from the extractive sector is at the heart of EITI's work. EITI uses a
multi-stakeholder group (MSG) model that includes companies,
governments, and civil society representatives. This diverse MSG works
together to establish procedures for disclosing extractive resources
revenue. EITI aims to enable all stakeholders to have equal access to
the same information, which deters corrupt practices and helps identify
improper use of revenues.
The State Department's Bureau of Energy Resources (ENR) represents
the Supporting Country constituency on the EITI Board of Directors and
helps govern the organization through its work on the Finance,
Governance and Oversight, and Outreach and Candidature Committees.
USAID provides $3 million per year in funding for the implementation of
EITI in other countries.
In 2019, the State Department, through ENR, launched the Energy
Resources Governance Initiative (ERGI) to foster dialogue among
producers of critical energy minerals on how to promote sound mining
sector governance, create more resilient supply chains, and provide
sufficient resources for the rapidly growing critical energy mineral
market. Through ERGI, we are working together to share leading industry
practices and encourage a level playing field for investment. The
initiative will also encourage the creation and promotion of resilient,
responsible, and integrated supply chains to avoid supply disruptions
of key energy resource minerals.
Question. Which efforts are the most effective to reduce corruption
and other illicit activity in the mining sector?
Answer. Bringing small-scale gold miners into the formal economy
and increasing transparency within the illegal gold mining sector and
in the international and domestic trade of mercury, a key chemical for
illegal mining, are essential to reducing corrupt practices within the
mining sector.
In Latin America, the United States signed Memorandums of
Understanding (MOUs) with the governments of Peru and Colombia, in 2017
and 2018 respectively, to expand bilateral cooperation to combat
illegal mining and minimize its negative criminal, health, and
environmental impacts. The MOUs allow the U.S. government to advance
our shared interests through a coordinated interagency approach with an
eye toward developing greater cross-border collaboration, given the
regional nature of illegal gold mining and associated crimes.
Question. Do you agree that initiatives like the EITI are effective
means of collecting such data? Do you think the U.S. should rejoin the
EITI? If not, why?
Answer. EITI is an effective means of collecting extractive sector
data because it is based on input from all key stakeholders:
governments, civil society organizations, and the private sector
entities. Countries implementing the EITI Standard range from
established democracies with strong governance traditions to those with
minimal governance capacity. Well-governed countries need years to
fully implement the EITI Standard. In countries with political
turbulence, few sources of revenue, and limited histories of
independent judicial systems, a free press, or open civil society
space, even an imperfect implementation of EITI's recommendations can
take many years. In cases where countries perform poorly at providing
required or requested data, EITI enables citizens to realize what data
is lacking and serves as a platform for public debate and future
reforms.
The United States does not need to re-start implementing the EITI
Standard. In 2017, the United States changed its status from its dual
role as a Supporting Country and Implementing Country to Supporting
Country. The U.S. government has continuously supported EITI with
financial assistance through USAID and participated in its governance
through its membership on the EITI Board of Directors since being a
founding member of the Initiative in 2003. The tax reporting issues
that led the U.S. government to stop implementing the EITI Standard
have not changed. To resume implementing the EITI Standard in the
United States would likely re-create the same debate and do nothing to
improve extractives sector data reporting. The U.S. government can
effectively improve extractives sector transparency by supporting EITI
implementation in developing countries in which basic good governance,
anti-corruption, and data reporting practices are nascent.
The United States, with its free press and reporting standards for
publicly traded companies, and other legislation prohibiting corrupt
practices at home or abroad, serves as a reliable model for countries
implementing the EITI Standard.
Question. Please discuss the role of ``responsible sourcing''
(i.e., due diligence-based tracking of mined commodity supply chains)
to prevent mining revenues from being used to abet illicit armed
groups, criminal groups, corruption, or problems such as forced labor.
Answer. Responsible minerals sourcing means that private sector
companies have in place procedures that respect human rights, avoid
contributing to conflict through their mineral purchasing decisions and
practices, and allow them to know each node of their supply chains,
which reduces the risk of behavior like money laundering. Broad and
consistent application of due diligence systems, particularly the OECD
Due Diligence Guidance for Responsible Supply Chains of Minerals from
Conflict-Affected and High-Risk Areas, increases the supply of
responsibly sourced minerals over time.
Question. What lessons learned from this approach in Central Africa
may be applicable to Latin America, especially with regard to
countering drug cartels, and other armed or criminal groups'
involvement in mining?
Answer. Supply chains for natural resources tend to follow similar
paths and patterns. Bad actors tend to use similar smuggling paths for
multiple items or commodities and follow the route of least resistance,
often through under-governed spaces. The work in Central Africa has
illuminated the difficulties and opportunities of responsible sourcing
efforts and illustrated that with consistent effort and public advocacy
it is possible to attract responsible actors to the supply chains of
these materials.
Question. How might the EU's application of responsible sourcing to
all ``conflict-affected and high-risk areas'' affect Latin America?
Answer. The EU regulation pertaining to conflict minerals relates
to ``conflict-affected and high-risk areas (CAHRA)'' around the world,
in contrast to Dodd-Frank 1502's focus on the Democratic Republic of
Congo and its neighbors. We believe that the EU is working closely with
private sector and advocacy groups to be as clear as possible about
what constitutes a CAHRA and may not ultimately list specific
countries. EU disclosure requirements for companies will further expand
the need for private sector companies to implement supply chain due
diligence. For companies operating in Latin America and the Caribbean,
the EU regulations may raise private sector and consumer awareness
about mining in these regions.
Some indigenous people--such as the Yanomami in Venezuela, among
other vulnerable populations--have been forced into slavery at some
illegal mines. Indigenous populations also face threats from illegal
miners operating near or within their lands. Indigenous groups often
object to mining because it violates their ancestral land rights,
pollution and destruction of their land damages their livelihoods, and
they are often excluded from decision making regarding the disposition
of mining proceeds.
Question. What is the U.S. doing to promote the protection of
rights for indigenous communities exposed to the mining sector?
Answer. Through bilateral and multilateral diplomacy, programming,
and reporting, the U.S. government works to promote and protect the
rights of those who belong to marginalized communities, including
members of ethnic minority groups and indigenous peoples. This includes
prohibitions on slavery and forced or compulsory labor.
We work to promote an open environment for civil society to
advocate governments to protect human rights and promote transparency,
accountability, the rule of law, and anti-corruption efforts. This work
is vital in protecting the human rights of members of vulnerable and
marginalized populations. We also coordinate closely with the U.S.
government interagency in support of policies and programs that seek to
address labor and other human rights issues associated with the mining
sector.
Executive Order 13850 authorizes the imposition of sanctions on
persons determined to operate in the gold sector of the Venezuelan
economy or in any other sector of the Venezuelan economy as may be
determined by the Secretary of the Treasury, in consultation with the
Secretary of State. The Department of Treasury has designated the
Venezuelan state-run mining and gold processing company Minerven under
this authority.
The State Department's annual Country Reports on Human Rights
Practices include a section on human rights concerns affecting
indigenous peoples; these reports provide important information and
draw attention to the impact of mining on indigenous peoples, where
applicable. Further, the State Department chairs a U.S. government
interagency working group (IAWG) to monitor violence against
environmental defenders, many of whom are indigenous people. The IAWG
seeks to strengthen access to environmental information and
environmental impact reviews of extractive sector, energy, and
infrastructure tenders and projects. It also seeks to promote
transparency and access to justice, particularly in cases of violence.
Question. What are the primary export destinations for illicit gold
coming from Africa? From Asia? From Latin America?
Answer. In Latin America, illicitly mined gold is primarily
exported to refineries in the United States, China, India, the United
Arab Emirates (UAE), Switzerland, and Italy. From Africa, a known and
significant primary export destination and transit point for illicit
gold is the UAE. China is reportedly a primary destination for
illegally mined gold from the Philippines.
Question. What roles do regulatory and tax regimes play in
incentivizing black market trade in the mining sector?
Answer. Trade routes quickly adjust when taxes are lowered or
raised. Given the role low-level corruption can play in burdening
exports from the source to the point of export, an unregulated business
environment also can frustrate legitimate business and incentivize
illegal or illicit trade.
Question. How do we address demand for illicitly mined products
like gold and diamonds at the national level?
Answer. Supply chains for valuable, prolific, and easily smuggled
commodities like gold and diamonds represent serious challenges for the
public and private sectors. Governments can continue to encourage
private sector actors to apply supply chain due diligence efforts to
add transparency to their sourcing efforts. Consumer awareness of, and
demand for, responsibly sourced minerals drives a great deal of the
private sector behavior as modern consumers want to know more about the
means through which their purchases have been brought to market.
Companies realize that to stay competitive they need to address these
concerns. Advocacy groups have helped put pressure on private actors
and governments to prioritize responsible sourcing as a means of
minimizing conflict finance, stabilizing supply chains, and ensuring
the highest sourcing standards. Education, consumer awareness, due
diligence, transparency, and corporate decision making all will
continue to play important roles in combatting demand for these
illicitly mined products.
__________
Responses of Richard H. Glenn to Questions
Submitted by Senator Benjamin L. Cardin
Question. How effective have industry-led due diligence efforts
been in preventing armed groups from profiting from ASM in eastern DRC?
Answer. ASM gold mining in eastern DRC is a serious concern for
private sector supply chain actors and for the governments of the
United States, the DRC, and international partners. The concept of
responsible minerals sourcing means that private sector companies have
in place procedures that respect human rights and avoid contributing to
conflict through their mineral purchasing decisions and practices.
Broad and consistent application of supply chain due diligence systems
by private sector actors, particularly the OECD Due Diligence Guidance
for Responsible Supply Chains of Minerals from Conflict-Affected and
High-Risk Areas, increases the supply of responsibly sourced minerals
over time. Most artisanal gold mines in eastern DRC, unfortunately,
have not been validated as conflict-free, despite our efforts.
mining supporting armed groups in africa
Recent research in the Sahel by the International Crisis Group
(ICG) indicates that an ASM gold mining boom in Mali, Burkina Faso, and
Niger--yielding production between 40 and 95 tons per year worth
between $1.9 and $4.5 billion--has provided ``diverse armed groups...
in some cases including jihadists, with a new source of funding and
potentially even recruits:''
Question. To what extent might gold be funding terrorist groups in
West Africa's Sahel region? How large is the black market for gold
across Africa more broadly?
Answer. Artisanal and small-scale gold mining is a major source of
livelihood and revenue in West and Central Africa. Based on available
data, the majority of all gold exports from these regions is illicit.
The UAE is the primary export destination for illicit African gold,
through which billions of dollars in gold are smuggled annually. Mining
operations often lead to illicit behavior, including illegal
trafficking of gold; human trafficking; labor and human rights abuses
at mining sites; financial crimes; and supposed support to non-state
armed and violent extremist groups. Across Africa, the illicit gold
economy persists as a result of institutional challenges, including
lack of law enforcement capacity, corruption, and insufficient
political will. A lack of alternative sources of income for low-level
actors further exacerbates these issues.
Researchers and practitioners in the region have identified an
increasing link between the ``black market gold'' and terrorist/violent
extremist organizations. The high value and ease with which gold can be
smuggled and sold into formal supply chains makes it an attractive form
of income for armed groups, including terrorist organizations. Further
data would be necessary to understand the extent to which gold mining
funds terrorist and violent extremist activity in West Africa's Sahel
region.
Question. What have been the main approaches, successes, and
challenges of national-level efforts to counter ASM-related crime and
tax evasion in Africa?
Answer. Across Africa, governments have implemented various
measures to combat Artisanal and Small-Scale Mining (ASM)-related
crime, including tax evasion, as a part of their commitment to the
African Mining Vision--adopted in 2009 at the African Union Summit.
Governments have introduced alternative livelihood programs to move
miners away from ASM to other sectors, particularly agriculture.
However, results have been low with many miners viewing agriculture as
a less attractive alternative. National-level efforts, while helpful,
could be better supported with local government buy-in, which has been
absent in some of the efforts. Promising approaches to ASM factors the
issues noted above and formalization of ASM miners. Formalization and
regulation are key success indicators. In Ghana, ASM policies provide
incentives and formalization to support miners in getting a fair price
for the minerals they sell, purchasing equipment, and technical
training. The national government works with the local governments to
regulate ASM policies in an effort to avoid child labor, tax evasion,
and ban operators that violate ASM policies--those involved in criminal
activity. In addition to Ghana's policies on ASM, the African Mining
Vision in 2016 launched the African Minerals Development Centre, which
will support African government's efforts to formalize and regulate
their ASM sector.
__________
Responses of Jeffrey Haeni to Questions
Submitted by Senator Benjamin L. Cardin
One method to combat illicit mining is to increase disclosure in
extractive industries, which may seek to cover the unethical or
exploitative practices they use for acquiring minerals. To enhance
transparency and good governance in state-run extractive industries,
multiple countries, including the United States and European Union
members, have laws requiring the public disclosure of EI firms'
payments to governments.
In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also
known as the Cardin-Lugar provision. Section 1504 established a global
standard to require companies to disclose payments made to the U.S. or
foreign governments related to the development of oil, gas, or
minerals. Since then, 30 countries have followed the U.S.' lead,
including Canada, Norway, the U.K., and 27 other members of the
European Union.
But in 2017, through the Congressional Review Act procedure,
Congress voted to revoke the updated rule passed by the SEC that
required public disclosure. That same year, the U.S. withdrew from the
Extractive Industries Transparency Initiative (EITI).
Question. How can the U.S. lead by example when we withdraw from
initiatives like the EITI and when Congress votes to invalidate rules
that require transparency in critical sectors of the economy
responsible for illicit activities?
Answers. At the outset, it is important to clarify that the United
States has not withdrawn from EITI, but has reverted from a dual
Supporting/Implementing Country status within the initiative to our
long-time prior status as a Supporting Country. In fact, the United
States maintains--and has since the initiative's launch in 2003--
continual and strong high-level support for EITI. This includes
providing critical leadership within the multilateral and multi-
stakeholder EITI initiative, as well as robust support for EITI
implementation around the world.
The State Department has held the EITI Supporting Country Board
seat for the United States since 2003, alongside U.S. company board
EITI members such as ExxonMobil and Freeport McMoran, and provided
critical American leadership on the governance, financial management,
and strategic direction of the global initiative. This was particularly
important during the first years of the initiative, where the United
States served as both a founding member and a lead Supporting Country
of EITI, helping to found, form, and stand-up the initiative,
influencing the adoption of the EITI Standard on transparency and
disclosure, and supporting new member outreach and engagement. As a
Supporting Country Board member and Alternate, the United States has
continued to play a key role in the governance and technical focus of
EITI, including adoption of rules around beneficial ownership in the
2016 EITI Standard.
In addition, since FY 2006, the U.S. Agency for International
Development (USAID) has robustly supported EITI implementation, peer
exchange and research around the world, including providing $13.5
million in support for a World Bank-managed EITI Single Donor Trust
Fund, and approximately $19 million in bilateral funding for activities
that promote and support transparency and accountability of extractives
expenditures and revenues around the world. In Nigeria, Senegal,
Colombia, Peru, Indonesia, and at least 14 other countries, for
example, USAID is supporting EITI-related disclosure of government
revenue, exploration and concession data in the extractives sector,
strengthening multi-stakeholder governance, and promoting beneficial
ownership processes to enhance transparency and minimize supply chain
risks to businesses, including money laundering and terrorist
financing.
The United States is committed to this ongoing support because we
know that engagement in EITI and support for the EITI Standard serves
key U.S. national and foreign policy objectives, including fighting
corruption, empowering citizens, leveling the playing field for U.S.
companies overseas, and promoting good governance in the extractive
sector worldwide.
For the first 10 years of the initiative--from 2003 to 2013--the
United States served exclusively as an EITI Supporting Country. The
United States began the process of joining EITI in 2012 as a Candidate
Implementing Country as part of the first U.S. Open Government
Partnership (OGP) National Action Plan. The EITI Board officially
accepted the United States as a candidate for Implementing Country
status in March 2014, and the United States Extractive Industries
Transparency Initiative (USEITI) was established. The Secretary of the
Interior led USEITI, with the Department of Interior's (DOI) Office of
Natural Resources Revenue (ONRR) serving as the institutional home for
the USEITI Secretariat.
Over the course of 4 years as a Candidate Implementing Country,
USEITI made impressive progress in implementation of the EITI Standard
in the United States. Of note was the DOI-developed state-of-the-art,
open source interactive data portal, which allows the American public
to study the use of natural resources on federal lands and contains
detailed information on taxes collected from the oil, gas, coal, wind
and geothermal industries and how these revenues are put to use (see
https://revenuedata.doi.gov/). Yet despite notable progress, and even
within the U.S.' highly transparent and efficient system that meets or
exceeds many of the EITI's benchmarks, implementation of some of EITI's
rules proved overly challenging and were ultimately deemed unfeasible
for implementation within the United States, primarily due to our
federal structure and tax disclosure system and framework. While USEITI
was able to report, for example, on extractive revenues from federal
lands, it was unable to report (or compel states to report) on revenues
from state lands (where the majority of extractive activity occurs).
Privacy and process challenges with both the IRS and the tax legal
framework also impeded the disclosing of company tax information.
As a result, the United States decided to discontinue domestic
implementation of the EITI Standard and its candidacy for Implementing
Country status. Since then, the United States has continued to
implement many best practices learned from the EITI process, including
disclosing industry's financial transactions to the U.S. Government and
the national and state level distribution of those funds, including the
revenues generated by royalties, rents, and bonuses. DOI has continued
to provide enhanced and user-friendly access to reliable information
that can be used to hold the government and industry to account. DOI
has also engaged in public awareness and understanding of how
extractive revenues are collected and disbursed, in order to promote
accountability and facilitate the full and fair return to the American
people for these resources.
The fact that, after a good faith effort, the United States
acknowledged the infeasibility of implementing the Standard fully has
not diminished the U.S.' standing or leadership within EITI. Attempting
to implement the EITI Standard in the United States had always been a
highly ambitious experiment in mainstreaming EITI principles within an
existing framework. This effort has not been undertaken by other
Supporting Countries, all of which also already have legal frameworks
for transparency and accountability in the sector. It is noteworthy
that of the current 15 EITI Supporting Countries, 11 others, including
Australia, Belgium, Canada, Denmark, Finland, France, Italy, Japan,
Sweden and Switzerland are also not implementing EITI domestically. As
a result, the United States' ambitious attempt to undertake
implementation, though ultimately unsuccessful, has not affected our
standing on the EITI Board or our ability to exercise leadership within
the initiative.
The decision to discontinue domestic implementation has also not
diminished our ability to lead by example, either within EITI or in the
broader sector of transparency and accountability. Instead, the U.S.
decision underscores our leadership in this space. Rather than erode
the EITI Standard by requesting deviations to accommodate the U.S.'
unique federal and legal structure, the United States elected instead
to revert to Supporting Country status and to continue to support
adoption and implementation of EITI. This decision demonstrates and
sends a clear message about U.S. commitment to the integrity of the
EITI Standard.
Lastly, the United States continues to exercise important
leadership in implementation of robust country-level EITI programming
through USAID. This country-level support--which exceeds that of any
other bilateral donor--is making a real-life difference in countries
around the world in everything from improving revenue recovery,
ensuring better allocation of resources, enhancing foreign investment,
improving the business environment, empowering citizens and
communities, tackling corruption, and supporting self-reliance.
Question. What role does transparency play in ensuring that mining
is more fair and accountable? What are the U.S. government and U.S.
companies doing to support transparency in the mining sector, including
via the EITI?
Answer. Transparency is a critical tool in the global fight against
corruption and mismanagement of natural resources, which impedes
economic growth and self-reliant country development, reduces
opportunities for trade and investment, and fosters instability and
conflict. Transparency empowers citizens, civil society and the private
sector to hold governments to account for the equitable and responsible
use of taxpayer and other public resources, as well as the provision of
citizen-responsive public services. This is particularly important in
the extractive sector; one which holds so much promise for countries'
development--especially resource-rich but otherwise poor countries--and
presents so much risk of misuse and exploitation (the so-called
``resource curse'').
Global transparency norms and standards such as EITI were developed
in recognition of the importance of transparency to ensuring democracy
and equitable economic growth. At the core of EITI is the principle
that the extractive resources of a country belong to its people, and
that the people have the right to information about how these resources
are governed; how extractive rights, permits and licenses are issued;
how these resources and revenues (paid and received) are allocated and
monetized; and how these resources benefit the citizens and the
economy. Transparency is central to EITI, both for creating new
institutional norms around openness, accountability and responsiveness,
and for empowering citizens.
Measures to increase transparency also strengthen democracy by
supporting extractive industry reforms that make governments more
accountable, and addressing some of the pervasive corruption challenges
within the extractives sector that continue to undermine development,
feed human rights abuses, support international criminal networks, and
degrade the environment. By requiring citizens and community
involvement in understanding and monitoring extractive activity and
revenues, EITI reforms help prevent corruption, build citizen trust,
and ensure the benefits of natural resources go towards meeting the
needs of citizens and communities.
Transparency also improves the financial and investment environment
in the countries where we work and levels the playing field for U.S.
and other businesses. By requiring revenue, concession, procurement and
extraction data, EITI reforms help governments understand and quantify
their revenue base from extractives. In Nigeria, for example, the
government has been able to identify and recover some $2.5 billion in
back-owed revenue from extractive companies. For investors, EITI
reforms ensure that concessions and extractive sector management is
done transparently and effectively, easing the cost of doing business
and minimizing insider deals and risk.
Perhaps most importantly, increased transparency contributes to a
country's long-term development by increasing public-private sector
cooperation on key development challenges, supporting an active and
involved civil society, and enhancing the ability of governments to
effectively utilize and bring to bear their own resources. In many of
the countries where USAID works, effective and accountable management
of natural resources has the potential to transform and drive economic
growth, serving as own-source revenue and a driver of development. On
the other hand, the failure to address systemic corruption, leakage and
mismanagement of the extractives sector keeps countries under the
``resource curse''; wealthy in resources and poor in the ability to
effectively use them for their own development. In many countries the
benefits of vast natural and mineral resources are subject to misuse
and corruption, depriving the poor and marginalized of access to
critical and life-saving services, while enriching bad actors and
criminal networks.
For all of these reasons, the U.S. Government supports both EITI
and other platforms to improve transparency--and ultimately drive
accountability--in the mining sector. Since FY 2016, USAID has provided
approximately $19 million in bilateral support to complement country-
led efforts to increase extractive industry transparency and expand the
impact and reach of EITI. Activities in countries such as Indonesia,
Nigeria, Mexico, Ukraine, the Philippines and Colombia have included
support for multi-stakeholder group development; support to national
EITI secretariats in conducting public outreach and citizen engagement;
assistance to civil society organizations and the media in advocating
for extractive industry transparency; support in passing transparency
legal and regulatory reform in the extractives area; technical
assistance in preparing countries to accede to EITI and pass
validation; and interventions aimed at reducing conflict over
extractives.
Question. Which efforts are the most effective to reduce corruption
and other illicit activity in the mining sector?
Answer. As an Agency, we understand the difficulty of addressing
systemic corruption, whether in the mining/extractive sector, or in the
areas of health, education or infrastructure development. We also
understand the importance of doing so; there is no doubt that
corruption weakens democracy, sabotages development gains, hinders
economic growth, and perpetuates a cycle of dependence. Corruption also
fundamentally undermines the ability of countries to implement their
own national development priorities across all sectors, whether health,
education, governance, or infrastructure.
USAID knows that the most effective measures to address corruption
are ones driven by an understanding that corruption is both its own
system of governance--one with drivers, incentives, value chains, and
objectives--and a web of public and private behaviors that inform
expectations about power, responsibility, and democracy. Understanding
the problem in this way allows for more effective and comprehensive
approaches to preventing and responding to corruption, including taking
into account the norms and incentives that drive it.
USAID's approach to addressing systemic corruption, including in
the natural resource and mining sector, is to build systemic
accountability. This means taking a holistic view of the governance
landscape in-country, and of the implications for building
accountability and integrity throughout the governance system. It also
involves recognizing that the system includes all branches and levels
of government; oversight and audit institutions; law enforcement;
public sector agencies; the private sector and civil society. All of
these are critical players in building systemic accountability. This is
particularly true in the mining sector, where issues of systemic
corruption and opportunities for systemic accountability can be found
throughout the governance value chain, from a Ministry of Mines to the
State Audit office to municipal authorities using royalty funds to
artisanal/illegal mining companies.
As with all anti-corruption programming, effective activities in
the mining sector should aim to promote this systemic accountability by
building country capacity and commitment to combat corruption. On the
capacity side, activities should aim to build the systemic ability and
resilience of public institutions to fight and prevent corruption.
Using platforms such as EITI or the Open Government Partnership (OGP),
programs of this kind might help build this systemic accountability by
creating public disclosure and expenditure tracking systems at the
national or municipal level; enhancing the governance of royalty or
other mining revenue funds; building or strengthening the technical
capacity of audit, enforcement and oversight bodies to ``follow the
money''; supporting reforms of mining registration and concession
processes; and supporting the specific technical capacity and
understanding of the judicial sector, and law enforcement to detect,
investigate and prosecute corruption in the mining sector.
On the commitment side, effective activities should aim to support
implementation of international transparency norms and standards--such
as EITI and OGP--as tools to encourage countries to deepen reform. At
their core, these norms are about building citizen-responsive
governance, and transforming the way the public sector around the world
serves and is accountable to their citizens. These platforms provide
opportunities for inclusive design of transparency and accountability
commitments in the natural resource governance sector, as well as a
means to holding governments publicly to account. Effective activities
provide support for new transparency and accountability measures aimed
at empowering citizens and enhancing their ability to demand greater
transparency and accountability of their governments, monitor
compliance with commitments and obligations and actively be part of a
new accountability culture. Examples include support for citizen
observatories, participatory budgeting in the use of mining revenues,
and direct support to civil society reformers and investigative
journalists to help them drive increased commitment to reform.
Finally, effective anti-corruption activities in the mining sector
should include a focus on promoting a culture of good governance and
accountability, both in and between the public and private sectors and
civil society. On the government side, examples include integrity and
ethics training for public officials, transparency assessments and
scorecards, and support for internal self-assessments and new working
methods to promote a culture of institutional integrity and facilitate
behavior change. On the private-sector side, examples include support
for integrity dialogues and pacts, cooperation and disclosure.
Question. Do you agree that initiatives like the EITI are effective
means of collecting such data? Do you think the U.S. should rejoin the
EITI? If not, why?
Answer. EITI has been a highly effective platform for deepening
transparency and combating corruption in the extractive sector around
the world. Data collection is only one aspect of the initiative; in
fact, EITI has evolved from its beginnings as a narrow set of rules
focused on revenue collection into an international standard covering
the wider governance of extractive resources. It now encompasses
beneficial ownership disclosure, contract transparency, the integration
of the EITI into government systems, and transparency in commodity
trading. Likewise, the focus of EITI Reports has moved from compiling
data to building systems for open data and making recommendations for
reforms to improve the extractive sector governance more generally.
This evolution beyond data collection has amplified the usefulness
of EITI as a platform for driving change. In addition, connections
between EITI and OGP--in particular the fact that many countries use
their OGP National Action Plans to create commitments around mining and
natural resource management that go beyond EITI--demonstrate the way in
which good governance can benefit from and build on established
platforms for dialogue and change. EITI and OGP together not only
provide reformers with a roadmap for change, and an opportunity for
multi-stakeholder input from the private sector and civil society, but
they also increase cooperation and trust. This is particularly
important in the extractive sector, where government, the private
sector and civil society have traditionally been at odds with each
other.
As noted above, the United States has not withdrawn from EITI, and
remains an active and engaged member of EITI as both a Supporting
Country and as a Board (and Alternate) Member. The United States also
continues to provide robust support for EITI implementation around the
world through USAID. USAID defers all questions regarding the future of
domestic implementation of EITI in the United States to the State
Department.
Question. U.S. and EU laws require disclosures by firms on their
sourcing of ``conflict minerals'' (tin, tungsten, tantalum, and gold or
their ores, known as ``3TGs''). If a firm sources 3TGs from the DRC--
or, in the case of the EU, from any conflict-affected or high risk
areas globally--the firm must carry out and report on due diligence
monitoring of its supply chains. The aim is to ensure that firms'
purchases do not abet illicit armed activity, corruption, or problems
such as forced labor and child labor.
Please discuss the role of ``responsible sourcing'' (i.e., due
diligence-based tracking of mined commodity supply chains) to prevent
mining revenues from being used to abet illicit armed groups, criminal
groups, corruption, or problems such as forced labor.
Answer. Responsible sourcing for minerals means that private sector
companies have in place procedures that respect human rights and avoid
contributing to conflict through their mineral purchasing decisions and
practices. Broad and consistent application of due diligence systems,
particularly the Organisation for Economic Co-operation and Development
(OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals
from Conflict-Affected and High-Risk Areas, has the potential to
increase the supply of responsibly sourced minerals over time. Consumer
awareness of and demand for responsibly sourced minerals drives much
private sector behavior in this regard as modern consumers want to know
more about the means through which their purchases were brought to
market. Some companies believe that in order to stay competitive, they
need to address these concerns. In turn, advocacy groups have helped
put pressure on private actors and governments to prioritize
responsible sourcing as a means of minimizing conflict finance,
stabilize supply chains, and ensure the highest sourcing standards. The
Public-Private Alliance for Responsible Minerals Trade (PPA) was
created to bring together each of these groups--private sector,
governments, and advocacy or civil society groups--to support the
creation of conflict-free supply chains for so-called conflict minerals
(tin, tantalum, tungsten, and gold) coming out of the Democratic
Republic of the Congo and Africa's Great Lakes Region. This public-
private partnership is valuable for its ability to bring together
interested actors who are focused on achieving solutions to complicated
supply chain dynamics. USAID works closely with the U.S. interagency on
these issues, especially the Department of State's Bureau of Economic
and Business Affairs, which serves as the interagency lead on conflict
minerals policy.
Question. What lessons learned from this approach in Central Africa
may be applicable to Latin America, especially with regard to
countering drug cartels, and other armed or criminal groups'
involvement in mining?
Answer. A critical lesson from Central Africa which is applicable
to Latin America is that efforts to promote responsible minerals trade
need to be part of and in support of a partner country government's
broader economic growth strategy. USAID engagement on mine site
validation built the capacity of and supported the government-led
process, resulting in the validation of more than 600 mine sites in
eastern Democratic Republic of Congo (DRC) as conflict-free. In 2018,
validated conflict-free mine sites in the DRC legally exported
approximately 15,800 tons of tin and tantalum worth over $285 million.
Conflict-free supply chains contribute to security improvements and
generate an important source of legal revenue.
Question. How might the EU's application of responsible sourcing to
all ``conflict-affected and high-risk areas'' affect Latin America?
Answer. EU disclosure requirements for companies operating in Latin
America and the Caribbean may raise private sector and consumer
awareness about artisanal and small-scale gold mining (ASGM) and could
complement USAID's efforts to create responsible ASGM supply chains in
the region. The Department of State's Bureau of Economic and Business
Affairs is the interagency lead on conflict minerals policy.
Some indigenous people--such as the Yanomami in Venezuela, among
other vulnerable populations--have been forced into slavery at some
illegal mines. Indigenous populations also face threats from illegal
miners operating near or within their lands. Indigenous groups often
object to mining because it violates their ancestral land rights,
pollution and destruction of their land damages their livelihoods, and
they are often excluded from decision making regarding the disposition
of mining proceeds.
Question. What is the U.S. doing to promote the protection of
rights for indigenous communities exposed to the mining sector?
Answer. USAID works to ensure that the rights of marginalized
communities, including ethnic minorities and indigenous peoples, are
protected. This includes their right to be free from slavery and
trafficking, and to have statutory and customary rights to land and
resources. USAID has a draft Policy on Promoting the Rights of
Indigenous Peoples that is currently in the final stages of clearance.
The Policy proposes adopting a process to assess the impact that an
activity will have on Indegenouse People, and identifies ways to
strengthen engagement with Indigenous Peoples in order to support their
development priorities and safeguard them against unintended harm.
USAID also coordinates closely with the interagency on programs in the
artisanal and small-scale mining sector. This includes coordination
with the U.S. Department of Labor and the Department of State, both of
which have programs addressing labor and human rights issues associated
with the mining sector that complement USAID programming.
In Peru, the U.S. government is supporting the Government of Peru
in its effort to address the impacts of illegal gold mining in the
Amazon, such as deforestation, encroachment into protected areas and
indigenous territories and mercury contamination impacts on the health
of local populations. USAID provides technical support for
reforestation and ecosystem remediation and has established the first
mercury analysis laboratory in Madre de Dios in the Peruvian Amazon to
collect, analyze and disseminate data on mercury contamination of
rivers, wildlife and human communities. In addition, it is working in
collaboration with the Madre de Dios Regional Educational Office to
promote environmental education in schools to raise awareness of the
health impacts of mercury in the local population.
In Colombia, USAID provides support to the Government of Colombia
to build effective governance of artisanal small-scale gold mines, or
if legal small-scale mining is not economically or environmentally
feasible, to provide licit alternative livelihoods. This work includes
a focus on working with Afro-Colombians, an ethnic minority, especially
vulnerable to exploitation.
In September 2019, USAID launched the ``Amazon Indigenous Rights
and Resources'' a regional activity to improve participation of
indigenous people in the sustainable economic development of the
Amazon. The activity is working (1) to incorporate indigenous rights
and interests into private and public sector development planning, and
(2) to equitably and sustainably scale up indigenous enterprises to
regional and global markets. The activity will work with new and non-
traditional partners, including indigenous peoples, their
organizations, their enterprises, the private sector, civil society,
government entities, and other key stakeholders of large-scale
infrastructure and extractives projects in the Amazon region.
Smuggling of some mined commodities, notably gold, is common across
sub-Saharan Africa, due to overly burdensome customs and business laws,
as well as tax evasion. Smuggling from the DRC through neighboring
countries and on to the Middle East is particularly notable for its
scale.
Question. What are the primary export destinations for illicit gold
coming from Africa? From Asia? From Latin America?
Answer. According to press reports, customs data indicate that the
United Arab Emirates, China, and Switzerland are the largest importers
of African gold. The recorded export data from African states is
notably lower, which can be an indicator of smuggling. Illicit gold is
often smuggled into neighboring countries before being exported to
international destinations.
USAID does not have dedicated programming to specifically address
illicit gold supply chains and therefore is not in a position to
comment on the primary export destinations for gold originating from
Asia.
The United States remains an important destination for illicit gold
coming from Latin America. Last year, more gold arrived in Miami than
any other U.S. customs district and Miami ranked third in outbound
shipments of gold. The most common routes take gold from mines in
Colombia, Mexico, Bolivia, and Peru and the gold trading center of
Curacao, to Miami and then on to Switzerland, the United Arab Emirates
and the Dominican Republic.
While it is difficult to estimate what percentage of that gold is
illegal, the amounts are significant. For example, the Government of
Colombia estimated that close to half of the total gold exported by
Colombia in 2012 and 2013 could have been smuggled into the country
from neighboring countries and that 15-30 percent of total production
could be smuggled out of Colombia every year. Moreover, around 80
percent of domestic gold production is estimated to be illegal, the
vast majority appears to be exported legally.
Countries in Latin America, including Colombia, serve as a pass
through for illicit gold from Venezuela to Miami in order to give the
appearance that the gold is originating from these countries instead of
Venezuela. Profits from illicit mining help prop up the Maduro regime
and criminal and armed groups.
Question. What roles do regulatory and tax regimes play in
incentivizing black market trade in the mining sector?
Answer. Regulatory and tax regimes can impact--both positively and
negatively--the illicit minerals trade. For example, national mining
codes may not allow for artisanal or small-scale mining (ASM)
operations. Or, a country's laws on mining may grant all subsurface
rights to the state, without addressing how existing rights to land may
be harmonized with the state's right to allocate mineral concessions.
These types of regulatory regimes can push the ASM sector further into
the shadows and encourage illicit supply chains. To help create a
positive regulatory environment USAID's projects have conducted policy
analyses and provided ASM-related recommendations for the mining codes
in the Democratic Republic of the Congo (DRC), Cote d'Ivoire, Central
African Republic, Afghanistan, and Colombia. In the DRC, for example,
USAID contributed to the revision of the DRC's Mining Code which led to
provisions in the Mining Code favorable to artisanal mining and the
establishment of artisanal mining areas. USAID has also provided
support to regional mechanisms such as the Regional Certification
Mechanism of the International Conference of the Great Lakes, and input
into international due diligence frameworks such as the Kimberley
Process Certification Scheme (KPCS) for diamonds. Efforts to increase
transparency in the ASM sector, including voluntary or mandatory
disclosure requirements, may encourage positive reform.
High tax rates and disparities in regional tax regimes for minerals
can encourage smuggling. There is a clear economic incentive to smuggle
minerals from a producer country into a neighboring country with no
taxes or lower tax rates for minerals. This is currently happening in
Afghanistan where the lack of basic regulatory guidelines in the
extractives sector, overall uncertainty in the implementation of a new
Minerals Law, high mineral royalty rates and related fees combined with
endemic corruption do not incentivize illegal mining operations to
become part of the formal economy that would facilitate government
revenue generation from legal exports.
Question. How do we address demand for illicitly mined products
like gold and diamond at the national level?
Answer. To reduce demand for illicit minerals at the national
level, it is important to understand ASM actors in the illicit supply
chain as economic actors who undertake this activity for profit. Demand
reduction can be achieved by increasing the risk of enforcement,
decreasing impunity, and increasing the benefits of entering the licit
supply chain, such that the cost-benefit analysis of illicit mineral
production changes in favor of licit, traceable supply chains. In some
cases, creating legal and responsible supply chains for minerals--
including due diligence and traceability systems--may create a
desirable alternative source of minerals for the private sector and
reduce overall demand for illicit minerals. Measures to increase
transparency and accountability in the minerals sector, including
voluntary or mandatory disclosure requirements, may encourage positive
reforms.
The Washington Declaration Diagnostic Framework, created in
partnership between USAID, participants in the Kimberley Process, and
others, specifically outlines policy goals for reducing the trade in
illicit diamonds. To create a supportive policy environment, the
Washington Declaration identified the following policy goals: lower
fees and increase accessibility of mining licenses, enhance data
collection and analysis, strengthen property rights, improve financial
transparency and good governance, empower artisanal miners to engage
with buyers and investors, expand access to mining inputs, support
complementary livelihoods in diamond mining communities, improve
working capital and organization in the artisanal diamond mining
sector, and harmonize legal frameworks covering different land uses and
natural resources (e.g. mining, forestry, water, land).
About 40 million people today worldwide are involved in so-called
artisanal- and small-scale mining. Many of these small-scale miners
work informally, meaning that their work is not registered or regulated
by the government, leaving them unbeholden to mandated practices for
safe labor conditions, employee protections, and environmental
standards. For example, mining deaths from cave-ins and other hazards
are common in hand-dug ASM mines across Africa.
Question. What is meant by ``formalization'' of artisanal and
small-scale mining (ASM)? What are the main challenges and main
positive developments of this approach?
Answer. ASM formalization is the process of collaborative rule-
setting and rule enforcement across supply-chain actors, governments,
and communities with the aim of enabling ASM to contribute to local and
national peace and prosperity, both now and for future generations.
Formalization may include a range of interventions, namely:
clarification of land and mineral rights, supportive laws and
regulations, implementation of the legal and regulatory framework, mine
site validation, traceability, due diligence, certification systems,
establishment of mining cooperatives, and development of legal and
responsible supply chains.
The goal of formalization is to ensure responsible artisanal
mineral production and trade that contributes to a country's
development. A formalized and well-regulated ASM sector can be a
powerful engine for economic growth for men and women and an important
source of domestic resource mobilization. It can mitigate the
environmental risks associated with ASM, reduce human rights abuses,
and cut off an important source of financing for corrupt individuals
and officials, armed groups, criminal networks, and terrorist
organizations.
Formalization is challenging because it is a slow, often years long
process that necessitates working alongside national and local
government officials, and directly addressing organized criminal
operations and corruption. Due-diligence and traceability systems are
often put in place as part of the formalization process. These systems
are costly and supply-chain actors, including companies and consumers,
must be willing to pay for the cost of due-diligence and traceability
in order for the systems to be economically viable. USAID works closely
with the private sector when putting in place due diligence and
traceability systems.
Question. What role does formalization play--and what can it
further contribute--in curtailing illicit mining, alleviating poverty,
and supporting sustainable development of the mining industry?
Answer. Formalization helps ensure ASM actors are part of the
formal economy and subject to appropriate laws and regulations,
including protection and safeguards for ASM actors and local
communities. It can mitigate environmental and social risks associated
with the sector, including the risk of conflict with surrounding mining
operations and other land uses. Formalization helps ensure proper
regulation and oversight of mining operations to reduce environmental
damage. It can also help mining communities benefit from mining
revenue, such that a percentage of the revenue stays within local
communities. Under a well-regulated formal system, ASM actors are less
vulnerable to predation by corrupt individuals, government officials,
or criminal groups. Thus, formalization can result in progress in
combating criminality and corruption, which in turn reduces smuggling.
Question. How might formalization methods and outcomes differ
between Africa and Latin America?
Answer. Formalization methods and outcomes for artisanal and small-
scale mining are context-specific. Each country requires a unique
approach that takes into account issues such as the type of mineral
being smuggled, national and local government regulations and
capacities, political will, land and mineral rights, level of
organization and mechanization in the ASM sector, interference in the
supply chain by corrupt officials or armed groups, smuggling routes,
and civil society and private sector actors.
Formalization of the ASM sector is a long-term process. USAID
prioritizes interventions--and the part of the formalization process
that we are supporting--based on the primary development challenge to
be addressed. In some countries, such as the Central African Republic
or the Democratic Republic of the Congo, priority has been placed on
breaking the link between ASM and conflict and improving compliance
with specific conflict-minerals legislation or trade regimes. In
Colombia, USAID has been working with the Government of Colombia to
formalize small-scale mining operations, rehabilitate land degraded by
mining, and--if legal small-scale mining is not economically or
environmentally feasible--provide licit alternative livelihoods.
A major issue associated with mining is its negative environmental
impacts that lead to public health concerns. Large-scale air and water
mercury emissions directly expose many artisanal and small-scale miners
and surrounding communities to high concentrations of mercury. This
exposure is known to cause serious nervous system and internal organ
disorders and birth defects. Cyanide, used to dissolve gold ores in
slurries, also poses health and environmental risks, notably when it
enters water streams.
Question. How, and to what extent, are mercury and cyanide used in
illicit mining? What health and environmental risks do their uses pose?
Answer. Artisanal and small-scale mining (ASM) generates various
types of pollution that can impact humans and wildlife and stress
ecosystems. To ensure that USAID programs address and mitigate the
environmental impacts of ASM in the design and implementation of
programs in the artisanal mining sector, USAID developed Sector
Environmental Guidelines on Artisanal and Small-Scale Mining. In 2019,
in response to increasing concerns over the impact of ASM on
biodiversity in Latin America, USAID produced a report entitled, Small-
Scale and Artisanal Mining Impacts on Biodiversity in Latin America, to
elucidate the links between ASM and biodiversity and inform USAID
programming.
The most prevalent and widespread pollution includes sedimentation
from alluvial mining, mercury contamination, and acid mine drainage and
heavy metal leachates (including cyanide-related leaching). The use of
mercury is very common in artisanal and small-scale mining of gold
(ASGM) whereas the use of cyanide is not as wide-spread. The extent of
mercury and cyanide use varies greatly by country. For example, USAID's
experience on the ground suggests that mercury use is much more
prevalent in the illicit gold supply chains in Peru and Colombia than
in the Democratic Republic of the Congo.
Use of mercury in ASGM is a common practice globally because it is
an inexpensive, simple, and rapid process to extract gold from ore.
ASGM is the largest source of mercury emissions in the world. Recent
studies estimate that up to 1,400 tons of mercury are released into the
global environment annually from ASGM, representing approximately 37
percent of total global emissions. Approximately one-third is released
into the atmosphere and two-thirds released into waterways and tailings
piles.
Mercury is a potent neurotoxin that can cause physiological,
neurological, behavioral, and reproductive harm to humans and wildlife.
It is a persistent and powerful neurotoxin that bioaccumulates in the
food chain. The most problematic form of mercury contamination is from
organic mercury, which forms methylmercury. Consumption of mercury-
contaminated fish, especially by top predators, is a leading source of
methylmercury exposure for both humans and wildlife. Miners and
communities near mine sites, including indigenous communities, are
especially impacted by mercury contamination.
Cyanide effectively extracts gold and is used in most industrial
gold processing world-wide. Cyanide is used to process gold-bearing ore
and tailings and can be used to extract additional gold from ore that
has already been treated with mercury. Cyanide itself is toxic, but it
also releases mercury and other heavy metals from the ore and requires
significant expertise and technological equipment to do properly.
Although cyanide is not as commonly used by individual miners as
mercury, some regional small-scale cyanide processing centers work with
ASM miners in countries such as Peru and Ecuador. These centers will
often reprocess ore and tailings that have already been processed with
mercury once to extract the remaining 70-80 percent of the gold that
the mercury did not extract.
Question. Please discuss the role of the Minamata Convention in
reducing mercury emissions in small-scale mining, and any related
implementation initiatives in Latin America.
Answer. The U.S. Department of State leads the U.S. Government's
efforts pertaining to the Minamata Convention. The Minamata Convention
is a global treaty to protect human health and the environment from the
adverse effects of mercury. It concerns artisanal and small-scale gold
mining (ASGM) as artisanal gold miners are currently the world's
foremost users of mercury and release significant quantities of it into
the environment. Developed in 2010 and adopted in 2013, the Convention
regulates the use of mercury in AGSM, and controls its release in air,
land, and water. Article 7 of the Convention calls upon countries to
develop ASGM National Action Plans (NAP) which articulate strategies to
promote mercury-free gold extraction methods and address related
environmental and health concerns.
USAID programs help advance the Minamata Convention by supporting
the formalization of ASGM supply chains, addressing illegal mining in
high priority protected areas, establishing and implementing due-
diligence frameworks, and supporting research. For example, USAID
supports efforts to reduce or eliminate mercury in gold supply chains
in Colombia and Peru. In Peru, USAID has built up the country's
scientific and research capacity by establishing the first laboratory
in Madre de Dios with the capacity to analyze environmental mercury
contamination and supporting the publication of over 25 papers on
remediation and management techniques. In Colombia, USAID programs
promote legal and responsible mineral supply chains in Antioquia and
Choco. Our programs have helped formalize 42 mining operations and
eliminated nearly 40 tons of mercury from mining production.
Question. Apart from mercury and cyanide, what are the main threats
to water resources and ecosystems arising from illicit mining in Latin
America? How are governments seeking to prevent such pollution?
Answer. There are a number of impacts of mining on water and
ecosystems in Latin America in addition to those from mercury and
cyanide. The primary impacts of ASM in the ecosystems include
deforestation and soil displacement, fragmentation of habitats, habitat
loss, changes in hydrology, and pollution, including from sedimentation
and mercury. Pollution from ASM can include spills of oil and gas from
equipment, solid waste, sediment and acid mine drainage released into
bodies of water, air pollution, and widespread mercury contamination.
Alluvial mining is widespread in South America and involves
extracting minerals from alluvial deposits, usually in floodplains,
terraces, or alluvial fans at the base of mountains ranges or hills. It
has a wide impact on the landscape and results in most of the topsoil
and organic matter washed away, causing downstream pollution and
rendering the mined landscape infertile and devoid of soil or organic
material which can take decades to revegetate.
Several countries in Latin America have put measures in place to
address the environmental and social impacts of ASM including El
Salvador, Peru, and Colombia. In 2017, El Salvador became the first
country in the world to ban all metal mining to protect water quality.
The ban was primarily in response to severe water scarcity generated by
high rates of deforestation and environmental degradation; the ban
affected hundreds of families that have practiced ASGM for generations,
as well as industrial-scale mining.
USAID has been working in close collaboration with the Governments
of Colombia and Peru who have been reliable partners committed to
addressing illegal artisanal gold mining. In February 2017, the U.S.
Government and the Government of Peru signed a memorandum of
understanding (MOU) to increase cooperation on small-scale gold mining
on critical areas such as reducing or eliminating the use of mercury
and reducing encroachment of illegal mining on natural protected areas,
indigenous peoples and archaeological zones. A year later, in March
2018, the U.S. Government also signed a bilateral MOU with the
Government of Colombia on cooperation related to the prevention and
control of illegal gold mining, which included efforts for
regularization and formalization of small-scale mining; detection and
elimination of mercury use in mining; and recuperation, restoration,
and/or remediation of areas affected by illegal mining.
In February 2019, Peru launched Operation Mercury, a massive effort
to permanently remove illegal gold miners from ``La Pampa,'' Peru's
epicenter of illegal gold mining in Madre de Dios. The initial
militarized stages of the operation will be followed by a 2-year
intensified effort to disable the criminal organizations driving
illegal mining, transition miners to formal and licit livelihoods, and
remediate decimated lands and waterways. USAID is providing the
Government of Peru technical information and technology to facilitate
the ecosystem recovery in La Pampa after removal of the illegal gold
mining. For example, USAID provided information to help identify where
the reforestation process needs to occur, appropriate tree species to
plant, and methods to revitalize degraded soil using organic materials
to produce biochar, a sediment that removes heavy metals, such as
mercury, from the soil and increases water retention capacity and thus
regeneration.
Deforestation linked to illicit gold mining is particularly
extensive in the Amazon region, and has contributed to widespread
desertification within tropical rainforests. Illegal gold mining in the
Peruvian Amazon region, for example, from 2011-2016 was responsible for
the loss of about 60,000 hectares of biodiverse rainforest.
Question. Is reducing deforestation from mining a priority for the
Trump administration?
Answer. Combating deforestation is a high priority for USAID's
global environment programs, including biodiversity conservation
programming which takes a threats-based approach. Deforestation caused
by illegal mining or other threats is addressed, as appropriate, in
consultation with and in support of host country government efforts.
Illegal gold mining may also occur in areas that have been illegally
logged--and both of these illegal activities are included in the
administration's priority initiative to combat conservation crimes.
Since 2017, Congress has appropriated $372 million in U.S. foreign
assistance for sustainable landscapes work to preserve and restore
forests and other lands. This funding supports enhanced forest
monitoring, along with capacity building for forest management and
conservation, which enables our partners to track and combat illegal
deforestation, including from illicit gold mining.
In the Amazon Basin, USAID works to reduce deforestation and forest
degradation; support an environmentally friendly economy; protect key
landscapes and species; and secure the rights, resources, and health of
forest dependent communities. Efforts include supporting regional
deforestation monitoring using remote sensing to enable local
communities and governments to respond as needed. In recent years,
USAID has provided research support and technical assistance to the
Government of Peru's forest management agencies to advance
understanding of how illegal gold mining contributes to deforestation,
and to inform emerging national reforestation guidelines. USAID also
recently launched a new activity that focuses on combating
environmental crimes in the Peruvian Amazon, including support to the
Government of Peru to implement its artisanal and small-scale gold
mining (ASGM) formalization process by incorporating social and
environmental safeguards that will in turn help to reduce deforestation
from illegal mining.
In Africa, USAID's Central Africa Regional Program for the
Environment (CARPE) implementing partners engage with artisanal miners
working illegally within protected areas as part of efforts to conserve
the Congo Basin tropical rainforest and its threatened biodiversity.
USAID is also supporting a monitoring platform with information on the
location of illegal mining sites across Ghana and associated land
degradation. It will provide the necessary spatial data to target areas
for remediation and landscape restoration activities.
Question. Because the U.S. has withdrawn from the Paris Climate
Accords, what leverage do we have when asking other nations to protect
the environment even when doing so may mean less economic gain?
Answer. USAID coordinates closely with the interagency on climate
change; the Department of State leads the United States Government's
climate change negotiations. The United States has begun the process to
withdraw from the Paris Agreement. Per the terms of the Agreement, the
United States submitted formal notification of its withdrawal to the
United Nations. The withdrawal will take effect on November 4, 2020, 1
year from delivery of the notification on November 4, 2019.
Irrespective of our participation in the Paris Agreement, the United
States continues to be a world leader in reducing emissions. U.S. net
greenhouse gas emissions dropped 13 percent from 2005 to 2017, even as
our economy grew more than 19 percent.
This achievement, which can serve as a model to other countries,
flows from innovation, technology breakthroughs, and energy efficiency
gains. The United States will continue to research, innovate, and grow
our economy while reducing emissions and extending a helping hand to
our friends and partners around the globe. We will continue to work
with our global partners to enhance resilience to the impacts of
climate change and prepare for and respond to natural disasters.
As stated in USAID's recently launched Environmental and Natural
Resource Management Framework, sound management of environmental and
natural resources is integral to a country's development, resilience,
and self-reliance. USAID is committed to supporting governments, civil
society, and the private sector in our partner countries on their
Journey to Self-Reliance, including through strategic investments in
environmental and natural-resource management and the robust
integration of environmental protection into our programs. In this
work, USAID is guided by countries' own development priorities,
consistent with the growing international consensus around principles
for effective development assistance.
An estimated 10 million people in at least 40 of 54 countries in
sub-Saharan African make a direct living from the mining sector. A
further 60 million people across the continent make an indirect living
from the mining sector, which provides an important source of poverty
alleviation, jobs, livelihoods, and wealth creation. A reliance on
mining across the sub-Saharan region means that this issue requires
regional solutions.
Question. Please discuss the approach and relative success of
African Union efforts, as envisioned in the ``Africa Mining Vision''
and through the activities of the African Minerals Development Centre,
in helping to foster positive ASM-related development outcomes.
Answer. The African Minerals Development Center (AMDC), a
specialized agency of the African Union (AU), aims to help African
countries properly utilize their mining resources as a catalyst for
sustainable development. The AMDC helps countries adjust to changing
technologies and linkages between mining and other sectors of the
economy, reform their fiscal and tax regimes, and improve governance.
The center developed a mining guide for countries for domesticating the
Africa Mining Vision and aligning it with other countries.
USAID does not currently support the implementation of AU mining
efforts. USAID is not familiar enough with the AU's efforts to provide
comments on their relative effectiveness; however, our responsible
minerals trade work is consistent with ``Africa Mining Vision'' of
``transparent, equitable and optimal exploitation of mineral resources
to underpin broad-based sustainable growth and socio-economic
development'' and the corresponding holistic approach to promoting a
viable responsible minerals industry.
USAID has supported regional efforts to address artisanal and small
scale mining (ASM) in Africa through the International Conference of
the Great Lakes Region (IGCLR), including efforts to strengthen the
strategic and financial management capacity of the ICGLR's Regional
Initiative against the Illegal Exploitation of Natural Resources
(RINR). Additionally, USAID increased the ICGLR's ability to monitor
and audit regional supply chains by supporting the establishment of an
Independent Mineral Chain Auditor within the ICGLR and financing
several independent third party audits of mineral supply chains in the
Great Lakes region.
__________
Responses of Patrick J. Lechleitner to Questions
Submtted by Senator Benjamin L. Cardin
disclosure
One method to combat illicit mining is to increase disclosure in
extractive industries, which may seek to cover the unethical or
exploitative practices they use for acquiring minerals. To enhance
transparency and good governance in state-run extractive industries,
multiple countries, including the United States and European Union
members, have laws requiring the public disclosure of EI firms'
payments to governments.
In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also
known as the Cardin-Lugar provision. Section 1504 established a global
standard to require companies to disclose payments made to the U.S. or
foreign governments related to the development of oil, gas, or
minerals. Since then, 30 countries have followed the U.S.' lead,
including Canada, Norway, the U.K., and 27 other members of the
European Union.
But in 2017, through the Congressional Review Act procedure,
Congress voted to revoke the updated rule passed by the SEC that
required public disclosure. That same year, the U.S. withdrew from the
Extractive Industries Transparency Initiative (EITI).
Question. How can the U.S. lead by example when we withdraw from
initiatives like the EITI and when Congress votes to invalidate rules
that require transparency in critical sectors of the economy
responsible for illicit activities?
Answer. There are several laws enforced by U.S. Immigration and
Customs Enforcement (ICE) Homeland Security Investigations (HSI) that
address exploitive practices associated with illicit mining. For
example, the United States has very clear prohibitions restricting the
importation of goods produced using forced labor. See 19 U.S.C. 1307.
Additionally, ICE HSI conducts investigations of violations of the
Clean Diamond Trade Act, Pub. L. No. 108-19, 117 Stat. 631 (2003), and
investigates criminal organizations who illegally import illicitly
mined minerals into the United States, including through commercial
fraud and third-party and trade-based money laundering. ICE is
committed to addressing the exploitation of people and natural
resources by criminal organizations, such as illicit mining, through
its enforcement of existing laws.
Question. What role does transparency play in ensuring that mining
is more fair and accountable? What are the U.S. government and U.S.
companies doing to support transparency in the mining sector, including
via the EITI?
Answer. (LES) Transparency plays an important role in ensuring the
legal importation of mined minerals. To encourage this transparency and
information sharing in the importation process with foreign government
counterparts, ICE HSI established a headquarters-based unit dedicated
to trade transparency (the Trade Transparency Unit [TTU]) in 2004.
Since the unit's formation, ICE HSI has established TTUs in partner
countries to share trade data to detect trade-based money laundering
and sanctions violations as well as commercial smuggling and other
crimes that generate illicit proceeds. TTUs detect suspicious
transactions and financial discrepancies and coordinate investigative
and enforcement activities with domestic and international ICE HSI
offices and law enforcement partners. ICE HSI currently has TTU
agreements with 17 countries, including the Latin American countries of
Argentina, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru, and
Uruguay. Formal information sharing agreements are used to exchange
valuable trade data, providing visibility to both sides of trade
transactions. TTUs link international customs and law enforcement
agencies together in combating transnational crime, including the trade
in illegally mined materials. ICE HSI special agents also engage in
outreach and training with industries and trade groups to provide
information on the role of law enforcement in investigating crimes
connected to illicit mining and the importance of knowing their supply
chain.
Question. Which efforts are the most effective to reduce corruption
and other illicit activity in the mining sector?
Answer. International cooperation is essential to address
transnational criminal organizations that engage in illicit mining. ICE
works closely with our international counterparts to investigate
corruption, money laundering, and other illicit activity related to the
mining sector to disrupt and dismantle criminal organizations who
engage in illicit mining as well as identifying third parties who
facilitate the laundering of such illicit funds. U.S. Government
agencies continue to work together to increase enforcement, including
use of the Tariff Act of 1930 and sanctions authorities based upon
human rights violations, corruption, and national security.
Question. Do you agree that initiatives like the EITI are effective
means of collecting such data? Do you think the U.S. should rejoin the
EITI? If not, why?
Answer. Information sharing initiatives like the Extractive
Industries Transparency Initiative (EITI) create and facilitate
discussion and cooperation among parties that otherwise may not do so.
The sharing of this information as well as the collaboration for
potential solutions can create significant outcomes, result in the
creation of partnerships, and demonstrate the commitment of the United
States to issues such as illicit mining.
due diligence
U.S. and EU laws require disclosures by firms on their sourcing of
``conflict minerals'' (tin, tungsten, tantalum, and gold or their ores,
known as 3TGs). If a firm sources 3TGs from the DRC--or, in the case of
the EU, from any conflict-affected or high risk areas globally--the
firm must carry out and report on due diligence monitoring of its
supply chains. The aim is to ensure that firms' purchases do not abet
illicit armed activity, corruption, or problems such as forced labor
and child labor.
Question. Please discuss the role of ``responsible sourcing''
(i.e., due diligence-based tracking of mined commodity supply chains)
to prevent mining revenues from being used to abet illicit armed
groups, criminal groups, corruption, or problems such as forced labor.
Answer. Responsible sourcing for conflict minerals (tin, tungsten,
tantalum, and gold or their ores) places a requirement on firms to gain
greater awareness of their supply chain, while also providing consumers
with access to information they need to make informed choices for their
purchases. However, in industries that draw from fungible supplies,
like gold mining, maintaining a transparent supply chain may be
difficult. Gold is often smelted each time it changes hands and during
that process illicit gold may be mixed with licit gold. During the
mining and transportation process, bad actors have opportunities to
forge or falsify documents representing illicitly mined gold as
originating from legitimate mines. While laboratories often can provide
a chemical breakdown of the gold bars, they cannot identify the
specific country or region of origin for such gold. While ``responsible
sourcing'' plays an important role, it must also be combined with a
strong law enforcement component to address criminal groups,
corruption, and forced labor issues encountered in the illicit mining
industry.
Question. What lessons learned from this approach in Central Africa
may be applicable to Latin America, especially with regard to
countering drug cartels, and other armed or criminal groups'
involvement in mining?
How might the EU's application of responsible sourcing to all
``conflict-affected and high-risk areas'' affect Latin America?
Answer. Illicit minerals are trafficked throughout the world.
Because of smuggling routes for these illicit minerals, it is not
always easy for a legitimate business in the United States to know if
the mineral is derived from a conflict-affected or high-risk area. When
conflict areas are limited in scope, the culpability of these firms is
even more difficult to prove. Laws requiring disclosures of minerals
sourced from all conflict zones allow law enforcement to more
effectively investigate all crimes associated with this illicit trade.
ICE HSI coordinates with its partner agencies in the European Union
(EU), and throughout the world, to pursue investigations involving
illicit gold sourced from conflict zones.
indigenous rights
Some indigenous people--such as the Yanomami in Venezuela, among
other vulnerable populations--have been forced into slavery at some
illegal mines. Indigenous populations also face threats from illegal
miners operating near or within their lands. Indigenous groups often
object to mining because it violates their ancestral land rights,
pollution and destruction of their land damages their livelihoods, and
they are often excluded from decision making regarding the disposition
of mining proceeds.
Question. What is the U.S. doing to promote the protection of
rights for indigenous communities exposed to the mining sector?
Answer. ICE's mandate does not specifically reach into the
protection of rights for foreign indigenous populations; as such, ICE's
criminal investigations pursue matters impacting such populations when
there is a U.S. investigatory nexus, such as commercial fraud, or
forced labor in imported goods investigations.
consumer demand
Smuggling of some mined commodities, notably gold, is common across
sub-Saharan Africa, due to overly burdensome customs and business laws,
as well as tax evasion. Smuggling from the DRC through neighboring
countries and on to the Middle East is particularly notable for its
scale.
Question. What are the primary export destinations for illicit gold
coming from Africa? From Asia? From Latin America?
Answer. (LES) Uganda is a significant destination for unrefined
gold from Africa as it is home to gold refineries that are responsible
for significant portions of the illicit gold trade. Some of these
refineries operate outside of local law; however, they receive at least
some degree of protection from law enforcement. These Ugandan gold
refineries likely source their raw gold from conflict mines in the
Democratic Republic of the Congo and South Sudan. Ugandan refineries
are known to have imported at least seven tons of illicit Venezuelan
gold for processing and refinement.
(LES) The United Arab Emirates (UAE) is also a primary destination
for gold from Africa. According to the United Nations Comtrade
database, the UAE reports a higher intake of gold arriving from Africa
than African countries report exporting to the UAE. Additionally, the
UAE reports imports from 46 African countries, while only 21 African
countries report exporting to the UAE. The UAE trades heavily in gold,
primarily through Dubai, and exports to numerous countries throughout
the world, including the United States.
(LES) Reports by The Global Initiative Against Transnational
Organized Crime indicate the primary market for illicit gold from Asia
is from the Philippines to China via large gold markets in Hong Kong
and Singapore. The same organization reports that the primary market
for illicit gold from Mongolia is China as well, with smaller amounts
of illicit Mongolian gold shipped to South Korea.
(LES) The primary export destinations for illicit gold from Latin
America are the United States via Miami, Florida; and the Middle East,
via the UAE.
Question. What roles do regulatory and tax regimes play in
incentivizing black market trade in the mining sector?
Answer. The U.S. Government can help address demand for illegally
mined products at the national level by raising awareness of the impact
of illicit mining. As a law enforcement agency, ICE continues to work
closely with our law enforcement counterparts to investigate
transnational criminal organizations (TCOs) that import illicit gold
into the United States and launder the profits. These efforts make it
more difficult for TCOs to profit from illicit mining.
Question. How do we address demand for illicitly mined products
like gold and diamond at the national level?
Answer. Companies that can claim membership in product
certification schemes have the ability to share that information with
consumers as a way to incentivize informed consumer purchases. A public
relations/advertising campaign to promote the purchase of ethically-
sourced gold and diamonds, accompanied by a government information
campaign on the potential consequences of purchasing non-ethically-
sourced gold and diamonds (such as human exploitation and forced labor,
harm to the environment, financing of terrorist organizations, and the
spread of activities by TCOs in the illicit movement of goods and
people connected with illegal mining) could increase demand for
ethically-sourced goods.
responsible supply chains
International mineral supply chains are increasingly complex and
interconnected, which means companies could be vulnerable to legal,
financial, and reputational harm if they are unknowingly or indirectly
contributing to predatory armed groups, organized crime, terrorist
networks and other corrupt and rights-abusing actors through their
supply chains.
Question. How can U.S. companies that rely on certain minerals
minimize their risk of buying minerals that have benefitted bad actors?
Answer. U.S. companies may determine that the risk of sourcing from
a conflict area outweighs the financial benefits of doing so in the
absence of clear data mapping a supply chain back to the raw materials,
if they lack information on the identity of all participants in that
supply chain, or if they are not able to freely access worksites, labor
forces, or the business data needed to map a supply chain. U.S.
companies should avail themselves of all sources of information when
making sourcing decisions, such as U.S. Department of Labor reporting
on international child labor and forced labor, the U.S. Department of
Treasury's Office of Foreign Assets Control sanctions list, including
the list of violations of the Global Magnitsky Human Rights
Accountability Act, as well as reporting by academics, non-governmental
organizations, media outlets, or other research to identify locations
and supply chains of high risk. U.S. companies should also work with
local authorities and civil society organizations to identify potential
sources of minerals that operate without ties to problematic groups and
without the use of prohibited forms of labor.
illicit gold mining
Gold, in particular, has a long history of being used as a vehicle
for money laundering and is increasingly seen as a lucrative source of
financing among armed groups and organized criminal networks.
Just last month, the International Crisis Group published a report
which warned that ``artisanal gold mining [in the Sahel] provides armed
groups, in some cases including jihadists, with a new source of funding
and potentially even new recruits.'' This report finds that ``artisanal
[gold] production now reportedly amounts to almost half the volume of
industrially produced gold'' in Niger, Burkina Faso and Mali,
representing anywhere between $1.9 and $4.5 billion per year.
Question:. What is the U.S. government doing to mitigate the risk
of illicit gold mining and the trade in illicit gold?
Answer. ICE HSI works closely with our U.S. Government and
international law enforcement partners to investigate the illegal
importation of gold and associated crimes such as money laundering and
forced labor. ICE HSI has established Transnational Criminal
Investigative Units (TCIUs) comprised of foreign law enforcement
officials who receive Department of Homeland Security training and who
have sovereign authority to investigate and enforce violations of law
in their respective countries. Through these TCIUs, ICE HSI has
increased cooperation and information sharing with foreign law
enforcement partners. ICE HSI also works to educate the private sector
on our role in conducting these investigations and how we can work
together to address this important issue.
__________
The Committee Received No Responses From Ms. Regina E. Thompson for the
Following Questions Submitted by Senator Benjamin L. Cardin
disclosure
One method to combat illicit mining is to increase disclosure in
extractive industries, which may seek to cover the unethical or
exploitative practices they use for acquiring minerals. To enhance
transparency and good governance in state-run extractive industries,
multiple countries, including the United States and European Union
members, have laws requiring the public disclosure of EI firms'
payments to governments.
In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also
known as the Cardin-Lugar provision. Section 1504 established a global
standard to require companies to disclose payments made to the U.S. or
foreign governments related to the development of oil, gas, or
minerals. Since then, 30 countries have followed the U.S.' lead,
including Canada, Norway, the U.K., and 27 other members of the
European Union.
But in 2017, through the Congressional Review Act procedure,
Congress voted to revoke the updated rule passed by the SEC that
required public disclosure. That same year, the U.S. withdrew from the
Extractive Industries Transparency Initiative (EITI).
Question. How can the U.S. lead by example when we withdraw from
initiatives like the EITI and when Congress votes to invalidate rules
that require transparency in critical sectors of the economy
responsible for illicit activities?
[No Response Received]
Question. What role does transparency play in ensuring that mining
is more fair and accountable? What are the U.S. government and U.S.
companies doing to support transparency in the mining sector, including
via the EITI?
[No Response Received]
Question. Which efforts are the most effective to reduce corruption
and other illicit activity in the mining sector?
[No Response Received]
Question. Do you agree that initiatives like the EITI are effective
means of collecting such data? Do you think the U.S. should rejoin the
EITI? If not, why?
[No Response Received]
due diligence
U.S. and EU laws require disclosures by firms on their sourcing of
``conflict minerals'' (tin, tungsten, tantalum, and gold or their ores,
known as 3TGs). If a firm sources 3TGs from the DRC--or, in the case of
the EU, from any conflict-affected or high risk areas globally--the
firm must carry out and report on due diligence monitoring of its
supply chains. The aim is to ensure that firms' purchases do not abet
illicit armed activity, corruption, or problems such as forced labor
and child labor.
Question. Please discuss the role of ``responsible sourcing''
(i.e., due diligence-based tracking of mined commodity supply chains)
to prevent mining revenues from being used to abet illicit armed
groups, criminal groups, corruption, or problems such as forced labor.
[No Response Received]
Question. What lessons learned from this approach in Central Africa
may be applicable to Latin America, especially with regard to
countering drug cartels, and other armed or criminal groups'
involvement in mining?
[No Response Received]
Question. How might the EU's application of responsible sourcing to
all ``conflict-affected and high-risk areas'' affect Latin America?
[No Response Received]
indigenous rights
Some indigenous people--such as the Yanomami in Venezuela, among
other vulnerable populations--have been forced into slavery at some
illegal mines. Indigenous populations also face threats from illegal
miners operating near or within their lands. Indigenous groups often
object to mining on the basis that it violates their ancestral land
rights, as pollution and destruction of their land damages their
livelihoods, and as they are often excluded from decision making
regarding the disposition of mining proceeds.
Question. What is the U.S. doing to promote the protection of
rights for indigenous communities exposed to the mining sector?
[No Response Received]
consumer demand
Smuggling of some mined commodities, notably gold, is common across
sub-Saharan Africa, due to overly burdensome customs and business laws,
as well as tax evasion. Smuggling from the DRC through neighboring
countries and on to the Middle East is particularly notable for its
scale.
Question. What are the primary export destinations for illicit gold
coming from Africa? From Asia? From Latin America?
[No Response Received]
Question. What roles do regulatory and tax regimes play in
incentivizing black market trade in the mining sector?
[No Response Received]
Question. How do we address demand for illicitly mined products
like gold and diamond at the national level?
[No Response Received]
sanctions
The U.S. Foreign Narcotics Kingpin Designation Act could play a
role in curtailing links between the illicit gold-related commerce and
illegal armed groups, organized crime cartels, and other criminal
networks designated as narcotics traffickers by sanctioning those
involved.
Question. What role does--or could--the U.S. Foreign Narcotics
Kingpin Designation Act play in Latin America in curtailing the
involvement in illicit mining and gold trading of drug cartels and
armed groups, including Colombian guerrilla organizations designated
under the Act?
[No Response Received]
Question. What would be the costs, challenges, and prospects for
establishing a sanctions regime aimed specifically at curbing illegal
mining?
[No Response Received]
__________
Miami Herald Article Submitted by
Senator Benjamin L. Cardin
how drug lords make billions smuggling gold to miami for your jewelry
and phones\1\
---------------------------------------------------------------------------
\1\ This article was transcribed by SFRC staff from an article in
the January 16, 2018 edition of the Miami Herald..
---------------------------------------------------------------------------
by jay weaver, nicholas nehamas, and kyra gurney
Miami Herald, January 16, 2018
``I'm like Pablo coming . . . to get the coke,'' he told two co-
workers in a text message in 2014.
A 36-year-old Florida State University graduate who once sold
subprime loans, Granda was no cartel kingpin. But his offhand
comparison was apt: Gold has become the secret ingredient in the
criminal alchemy of Latin American narco-traffickers who make billions
turning cocaine into clean cash by exporting the metal to Miami.
The previous year, Granda's employer, NTR Metals, a South Florida
precious-metals trading company, had bought nearly $1 billion worth of
Peruvian gold supplied by narcos--and Granda and NTR needed more.
The United States depends on Latin American gold to feed ravenous
demand from its jewelry, bullion, and electronics industries. The
amount of gold going through Miami every year is equal to roughly 2
percent of the market value of the vast U.S. stockpile in Fort Knox.
But much of that gold comes from outlaw mines deep in the jungle
where dangerous chemicals are poisoning rainforests and laborers who
toil for scraps of metal, according to human rights watchdogs and
industry executives. The environmental damage and human misery mirror
the scale of Africa's ``blood diamonds,'' experts say.
``A large part of the gold that's commercialized in the world comes
stained by blood and human rights abuses,'' said Julian Bernardo
Gonzalez, vice president of sustainability for Continental Gold, a
Canadian mining company with operations in Colombia that holds titles
and pays taxes, unlike many smaller mining operations.
Pope Francis condemned the horrors of illegal mining during a visit
to the Peruvian Amazon on Friday. The regions's gold boom, the pope
said, has become a ``false god that demands human sacrifice.''
In Latin America, criminals see mining and trading precious metals
as a lucrative growth business, carefully hidden from U.S. consumers
who flaunt gold around their necks and fingers but have no idea where
it comes from--or who gets hurt. The narcos know their market is
strong; America's addiction to the metal burns as insatiably as its
craving for cocaine. NTR, for instance, was the subsidiary of a major
U.S. gold refinery that supplied Apple and 67 other Fortune 500
companies, as well as Tiffany & Co., according to a Miami Herald
analysis of corporate disclosures.
Last March, federal prosecutors in Miami charged Granda, his boss,
Samer Barrage, and another NTR trader, Renato Rodriguez, with money
laundering, saying the three men bought $3.6 billion of illegal gold
from criminal groups in Latin America. The claimed the gold traders,
who eventually pleaded guilty, fueled ``illegal gold mining, foreign
bribery [and] narcotics trafficking.''
Now, those prosecutors are investigation other U.S. precious-metals
dealers suspected of buying tainted gold from drug traffickers, law
enforcement sources say. Their goal is not just to take out crooked
gold firms like NTR--they also want to kneecap the drug cartels.
Here's why: Over the past two decades, as the U.S. war on drugs
undercut the cash flow of narco-traffickers, kingpins diversified into
Latin America's gold industry. By using drug profits to mine and sell
gold to American and multinational companies, criminal organizations
can launder ``staggering amounts of money,'' said John Cassara, a
retired U.S. Treasury special agent. The end result: The gold in
American jewelry, coins and smartphones is helping finance shipments of
narcotics to the United States, as well as illegal mining in Latin
America, current and former law enforcement officials say.
Mining regions in the rainforest have become epicenters of human
trafficking, disease and environmental destruction, according to
government officials and human rights investigators. Miners are forced
into slavery. Prostitutes set up camps near the miners, fueling the
spread of sexually transmitted infections. One human rights group found
that 2,000 sex workers, 60 percent of them children, were employed in a
single mining area in Peru.
Meanwhile, strip mining and the indiscriminate use of mercury to
ferret out gold are turning swaths of the world's most biodiverse
ecosystems into a nightmarish moonscape. In 2016, Peru declared a
temporary state of emergency over widespread mercury poisoning in Madre
de Dios, a jungle province rife with illegal mining. Nearly four in
five adults in the areas capital city tested positive for dangerous
levels of mercury, according to the Carnegie Institution for Science in
Washington, D.C.
Even criminal outfits from Russia and China are investing in gold
mining, observers say, abandoning heavy machinery in the jungle once
they've extracted the metal. Soaring prices over the last two decades
have driven the modern-day gold rush. In January, gold traded at
roughly $1,300 per ounce on the open market, compared to less than $300
in 2001.
The human rights abuses and deforestation are a ``bleeding sore
that affects millions of people and their future livelihoods,'' said
Douglas Farah, a national security consultant and visiting fellow at
the Pentagon-funded National Defense University in Washington, D.C.
It's become an enormously damaging industry that very few people
are looking at seriously,'' Farah said. ``Just as with `blood
diamonds,' the gold issue . . . brings together money laundering,
forced prostitution, drug traffickers, human trafficking and child
slavery.''
Until now, the international gold market's dark side has drawn
little public attention in the United States.
The lack of scrutiny has allowed the trade in dirty gold to grow
more profitable than cocaine, according to government estimates in
Latin America.
``Criminal groups make so much more money from gold that from coca,
and it's so much easier,'' said Ivan Diaz Corzo, a former member of
Colombia's anti-criminal-mining task force.
And just like cocaine, a market for illicit metal has blossomed in
South Florida, where nearly a third of the nations's imported gold
enters.
Over the past decade, Miami, a longtime point of entry into the
United States for contraband, imported $35 billion worth of gold via
air, according to U.S. Customs records analyzed by WorldCity, a Coral
Gables-based economic data firm. That was more than any other U.S.
city.
Some of the metal shipped to Miami is refined locally. Other
batches are sent across the country to be melted down and manufactured
into jewelry and bullion. Central banks around the world are major
buyers of gold. So is the U.S. Mint. And electronics companies use
small amounts of gold in consumer products because it is an effective
conductor and doesn't corrode.
One way or another, almost everyone has Miami gold in their
pockets, portfolios or jewelry boxes.
Simple math shows it can't all be clean.
Take Colombia, a country with a substantial mining industry that
exported 64 tons of gold in 2016, much of it to the United States,
according to government statistics. That same year, Colombia's large-
scale, legal mining operations produced only eight tons, according to
the Colombian Mining
The big Colombian mines that `` [legally] produce gold can be
counted on one hand,'' said Jaime Pinilla, an engineer and legal gold
mine owner in Colombia. ``There's a huge difference in the amount that
is produced and the amount that is exported.''
And the discrepancy is not just happening in Colombia: Statistics
from other Latin American gold producing nations show similar ratios
between legal and illegal gold mining.
It's impossible to know where all the illegal gold is coming from--
but it's clear where most of it ends up. Latin America accounts for
nearly three-quarters of the gold imported into the United States,
roughly 200 tons in 2015, according to Miami-based trade analytics firm
Datamyne and the U.S. Geological Survey. That's not far off from the
total amount of gold mined in the United States annually.
a currency of pain
The parallels between gold and cocaine are striking.
Both the white powder and yellow metal are sold by Latin American
cartels at huge costs to workers and the environment. Terrorists,
including al-Qaida, use gold and cocaine to finance their plots.
Officials say they are major threats to law and order.
One big difference between cocaine and gold? Cocaine is obviously
illegal. With gold, it's hard to tell. Papers can be forged. The metal
can be melted and remelted until its origin is impossible to pinpoint.
Another distinction? Profit.
In 2014, a kilo of gold was worth between $30,000 and $40,000 in
Colombia, according to Colombian intelligence figures obtained by the
Miami Herald. By comparison, a kilo of cocaine sold for roughly $2,500.
While drug trafficking in Colombia generated less than a billion
dollars in total revenue in 2014, according to those same estimates,
illegal mining produced roughly $2.4 billion.
Gold's luster has exerted a powerful hold on humanity since ancient
times.
Today, the metal appeals to the darkest corners of the financial
system. It is a safe investment. It is rare and hard to trace. Best of
all: Human beings covet it.
Those factors, coupled with industrial mining and heightened demand
from investors and tech companies, have turned the precious-metals
business into ``the Rolls-Royce of money laundering, said Robert Mazur,
a former federal agent who infiltrated drug cartels in the 1980s.
Those cartels are always looking for ways to hide how they make
their money.
But banks can't accept big deposits of cash, let alone duffel bags
of coke-dusted bills, without checking how the funds were made. One
solution for criminals: investing in supposedly legitimate businesses.
Here's how gold fits in: Drug-cartel associates posing as precious-
metals traders buy and mine gold in Latin America. Cocaine profits are
their seed money. They sell the metal through front companies--hiding
its criminal taint--to refineries in the United States and other major
gold buying nations like Switzerland and the United Arab Emirates.
Once the deal is made, the cocaine kingpins have successfully
turned their dirty gold into clean cash. To the outside world, they're
not drug dealers anymore; they're gold traders. That's money
laundering.
The U.S. government--laser-focused on traditional money laundering
and terror financing through banks--has shied away from untangling the
twisted tentacles of gold smuggling, which can be hard to follow across
borders.
But that's starting to change--and it's happening in America's
gold-import capital, Miami.
The criminal case against Granda--the self-styled Escobar--and his
colleagues at NTR Metals is the largest money-laundering prosecution
involving precious metals in U.S. history, authorities say.
``The scope of the conspiracy is enormous,'' federal prosecutor
Francisco Maderal told a judge during a hearing in Miami last year.
So far, the scandal has not only shut down NTR and cost its Dallas-
based parent company, Elemetal, the ability to trade gold on bullion
and commodity exchanges. It's also put hundreds of employees at
Elemetal's refinery in rural Ohio out of work. Elemetal and its
executives have not been charged but remain under federal
investigation, according to sources with knowledge of the probe. The
company and its attorney, Trey Gum, did not respond to repeated
requests for comment, although Elemetal has previously said it is
cooperating with authorities.
The downfall of one of North America's biggest gold companies is
shaking the entire industry, all the way up to the bankers whose lines
of credit sustain dealers and refineries doing multimillion dollar
deals.
``The case against [the NTR employees] is a big deal,'' said Jason
Rubin, CEO of Republic Metals, based in Opa-locka, just north of Miami,
and a major rival of Elemetal. ``Financial institutions . . . have
rightfully and correctly increased their scrutiny of companies in the
wake of the allegations.''
Alejandro Esponda, a South Florida gold trader, said he fears NTR's
misdeeds will unjustly tarnish the entire industry.
``Everybody is guilty by association,'' said Esponda, vice
president of Universal Precious Metals, based in the Miami suburb
Doral.
Although Latin America's gold market is known for corruption and
danger, precious metal there is plentiful and labor cheap.
In comparison, the U.S. gold supply, mostly mined in Nevada and
Alaska, offers stiff competition and regulations. Big companies control
the big mines. Smaller companies looking to deal in U.S. gold are
restricted to buying recycled ``scrap'' gold from pawnshops and jewelry
stores. To gain a competitive edge, many U.S. gold traders look south.
But because Latin America's gold market is so fragmented--with the
metal sometimes changing hands among many small companies before it's
exported--it's hard to guarantee that individual shipments imported to
the United States are lawful, experts say.
And since gold's price is set on a worldwide basis and the vast
majority of trades are financed on credit, the metal must move quickly
between Latin America and the United States. If one importer can pay a
supplier faster than a rival can, it wins the deal. Profit margins are
surprisingly small, making gold a volume business. The need for speed
and quantity means obeying anti-money laundering laws is a costly
requirement for the industry.
The top three traders at NTR seemed to spend their days dreaming up
ways to avoid those restrictions.
heart of darkness
Juan Granda met Samer Barrage, 40, and Renato Rodriguez, 43, when
they were hawking subprime loans at HSBC, according to federal court
documents. Barrage and Granda later moved to work at Kaplan University,
a for-profit school.
Barrage, a London-born U.S. citizen who traveled back and forth
between an NTR office in Colombia and his wife and children in Miami,
eventually recruited Granda and Rodriguez to work with him buying gold.
In 2012, the company did relatively little business in Latin
America.
But the next year, NTR struck a rich vein, becoming the largest
U.S. importer of Peruvian gold with $980 million worth of deals,
according to federal prosecutors.
How did they do it?
With help from Peruvian businessman Pedro Perez Miranda, who is
suspected by authorities in Peru and the United States of laundering
drug money through the gold trade.
Shell companies tied to Perez, whose alias is Peter Ferrari,
quickly became some of NTR's biggest suppliers. None of his firms had
any track record selling gold. That raised suspicions back at the
headquarters of NTR's parent company, Elemetal.
The firm's compliance officer repeatedly warned Barrage and at
least four Elemetal executives that criminal gold mining and smuggling
were serious problems in Peru--and that Ferrari seemed to be involved.
``We need to be extremely careful going forward,'' the compliance
office, led by retired U.S. Customs Service agent Steve Crogan, told
Barrage and his Elemetal bosses in an August 2012 email cited by
federal prosecutors.
Ferrari even came to visit Elemetal's giant refinery in rural
Jackson, Ohio, according to one employee who saw him at the plant.
``He was wearing blue jeans and a T-shirt,'' said the worker, who
asked not to be named. ``It didn't feel right. He wasn't dressed like a
businessman. His appearance didn't match the amount of money he was
supposed to represent.''
The warnings were ignored.
For the three NTR traders--who declined to comment for this story
through their lawyers--breaking the law meant big money: Elemetal
``incentivized Barrage, Rodriguez and Granda to purchase as much gold
as possible with volume-based commissions,'' court documents show.
In 2013, NTR went on to buy $400 million in gold from Ferrari--
whose birthday party in Lima early that year was attended by Granda, an
avid watcher of the Netflix show ``Narcos,'' and his two fellow
traders. The trio flew in from Miami for the celebration.
The NTR traders hid the purchases from Elemetal's compliance office
through front companies and false U.S. Customs declarations, and by
arranging to bribe Peruvian customs officials, according to court
documents.
The scheme didn't last long: NTR's Peruvian operations collapsed at
the end of 2013 when local authorities raided a storage facility
outside Lima holding gold that belonged to Ferrari and other traders.
Agents seized $18.8 million worth of gold bound not only for NTR Metals
but three other Miami-based gold importers, as well as refineries in
Switzerland and Italy, according to local media reports.
The year after the gold raid outside Lima, NTR's exports from Peru
dropped 92 percent.
But the party wasn't over--it simply moved to neighboring
countries.
In 2014, Granda and his colleagues began smuggling gold across the
border to Ecuador and Bolivia to hide its origins, according to text
messages and confidential informants interviewed by U.S. prosecutors.
Soon, NTR's purchases in Ecuador and Bolivia soared by $485 million.
Some deals were disguised through the use of companies like furniture
store in Coral Gables, prosecutors alleged.
In February 2015, Barrage laid out the plot in a text message
obtained by the government: ``We need more Peruvian gold from Bolivia
and Ecuador,'' he told Granda. ``Can u make it happen?''
Granda couldn't. Local governments in those countries had also
begun cracking down.
The party moved again, this time to Colombia. In 2015, NTR's
imports from Colombia soared to $722 million, more than double the
previous year's haul. That accounted for more than half of the
country's gold exports to the United States. Barrage, who owns houses
in Nicaragua and Spain, ran the show in Colombia, where he made $2
million overseeing NTR's operations, prosecutors said.
The company often hid its dirty dealing by exporting gold from
Colombia's free-trade zones, which are tax- and duty-free economic
development areas where customs regulations are weaker.
But the smuggling ring finally came crashing down in 2016 after two
gold brokers who collaborated with NTR became confidential informants
for the U.S. government. One worked as a private customs broker in Peru
and dealt directly with Granda, helping him smuggle gold out of the
country. The other was a courier based in Chile who carried shipments
of illicit gold on flights from South America to Miami. As NTR grew
more and more desperate for gold, the courier told investigators that
he was sent to Africa, a no-go zone for U.S. gold companies, to secure
more metal.
Subpoenas flew, parent company Elemetal began an internal
investigation, and Granda, Barrage and Rodriguez were arrested last
spring.
Then, last week, federal prosecutors investigating NTR indicted
Ferrari, his twin sons and another Peruvian man on a money-laundering
charge filed in Miami.
Ferrari's lawyer in Peru, Benji Espinoza Ramos, said his client,
who is in custody in his home country on domestic money-laundering
charges, did not break the law. Espinoza said the gold operations were
legitimate.
``We believe there is no proof of the existence of illegal gold,''
he said.
Granda, Barrage and Rodriguez pleaded guilty to a money-laundering
conspiracy that carried a maximum of 10 years in prison. They are
cooperating with federal prosecutors and providing information about
foreign suppliers with narco ties, and about Elemetal. On Friday,
Granda and Barrage were sentenced to six and nearly seven years in
prison, respectively. Rodriguez will be sentenced later this month.
Will their case scare off other unscrupulous operators in the gold
industry?
That's unlikely, experts say, as long as overwhelming demand from
U.S. consumers and corporations fuels the market for narco gold.
``The cartels are so powerful,'' said Mazur, the former federal
agent. ``They buy banks. They buy refineries. The amount of money they
have is ridiculous.''
And the lure of gold's profit is too strong.
__________
Venezuela, The Smugglers' Paradise Article
Submitted by Benjamin L. Cardin
organized crime controls gold exploitation in venezuela
by algimiro montiel and jorge benezra
All ingredients for a conflict mineral can be found in southern
Venezuela. A dangerous cocktail of multiple armed groups and
corrupt officials control the extraction of the country's gold
before taking it to the borders.
The long road that starts in Ciudad Guayana, Bolivar state, and
heads southward marks the route of illegal gold mining in Venezuela.
Hundreds of people travel the route each day in search of El Dorado--
riches that might allow them to flee from an unprecedented economic
crisis in the South American country.
Food, medication, fuel, and cash have been scarce for years in the
rest of the country, but along these roads in southeastern Venezuela
they're available--as if the riches from gold mining have created a
parallel world.
The most important stop is El Callao, a town also in Bolivar state
clustered between mountains about 530 miles (850 kilometers) from
Caracas. El Callao is known for its colorful carnival but has been
rebranded as the region's mining capital.
The explosion of mining has turned the place into a nightmare. Its
streets are crowded with cars, motorcycles, and vendors who mostly
sleep in public plazas as the hotels are fully booked.
The once serene village had 20,000 inhabitants in 2011. It was a
place where small businesses sold rudimentary gold jewelry and gold
pebbles without fear of robberies. Now, some 100,000 people live in the
area of El Callao and anywhere from 300,000 to 500,000 miners roam the
numerous mines of southern Venezuela.
El Callao is part of the Orinoco Mining Arc, a government-sponsored
mega project that covers 12 percent of Venezuela's surface.
Launched by President Nicolas Maduro in February 2016, the project
is an attempt to find resources in the wake of the collapse of the oil
industry, which sustained the South American nation for a century. As
part of the plan, the government is trying to validate and certify gold
reserves amounting to 9,810 tons (8,900 metric tons) by 2025. That
would give Venezuela the world's second-largest gold deposits.
But it's not all is abundance and glamour. Gold mining in the area
used to be run by transnational corporations. Now, criminal groups and
armed gangs monopolize the business. And the people of El Callao, like
many villages in the south, have learned to live with the terror spread
by armed groups.
Local media has reported on the discovery of mass graves, but
villagers say that many of the dead, victims of violence and disease,
are never found and are hidden in the Venezuelan jungles.
According to the Venezuelan Observatory of Violence, El Callao was
the most violent locality in Venezuela in 2018, with a homicide rate of
619.8 per 100,000 inhabitants.
An employee of the state-run Venezuela General Mining Company
(Minerven), who wants to remain anonymous in fear of reprisals,
explains that ``irregular groups'' are getting rich with the gold
business. They force the miners and their families to live in hell,
with practices that border on sadism, he describes.
Some witnesses, including miners who fled to Colombia, confirm
these accusations and mention other abuses such as forced prostitution,
torture, massacres and beheadings by armed groups that have control of
the mines.
Currently, several criminal elements dominate El Callao and the
rest of the Orinoco Mining Arc. According to NGO's, opposition
legislators, and eyewitnesses, dissidents of the Revolutionary Armed
Forces of Colombia (FARC) and members of Colombia's National Liberation
Army (ELN) are present in the mines of Bolivar and neighboring Amazonas
state.
Until recently, the FARC was the largest guerrilla group in Latin
America. Based in Colombia and created in 1964 to fight for equal land
distribution and the rural poor, it remained a guerrilla movement until
it signed a peace deal in 2016. Now ELN is the biggest guerrilla group
on the continent.
The two organizations share the territory with crime syndicates, or
sindicatos, run by gang leaders known as pranes. There are also
Committees for the Defense of the Revolution (CDR), which have started
their own mining groups and are ideologically aligned with the Maduro
government.
The gangs, which have been in the mining area since 2010, used to
be the dominant players but have lost ground to the Colombian
guerrillas in recent years, said a 25-year-old National Guard soldier.
He's still amazed when he remembers the first time he saw the ELN
march through Bolivar state.
``We saw patrols of 200 armed men walking by our side identified as
the ELN,'' he said. ``What are we supposed to do? We just greeted them
as if they were old friends.''
Control of the area by armed groups and corrupt military units
prevents miners from speaking openly.
``Here it is better not to comment if you want to be alive. There
are a lot of mafias,'' said a local entrepreneur who asked to remain
anonymous. ``The military arrived to do business, not to protect the
citizens. Every week there is a murder.''
Miners complained that all the parties are extorting them, charging
a ``tax'' to work or bring in equipment, but there are few other
options.
``We go to the mine and work in groups to take care of each
other,'' said an artisanal miner, who wears a shirt of the ``Piar
Mission,'' a government program designed to fight illegal mining.
``[The armed groups] take away our cell phones and our belongings
before entering the mines. We need the work, but if we complain they
don't allow us to come back.''
the labyrinth of gold avoids the central bank
Luis Rosales, a lawyer from the city of Valencia, about 78 miles
(125 kilometers) from Caracas, arrived in the mining town 2 years ago,
hoping to work in the goldfields. Now, he sells mining tools on the
street.
``Families are sleeping everywhere, in the bus terminal and the
square, trying to make a living, not only through gold but by selling
whatever they can,'' he said. ``You suffer, but manage to put some food
on the table.''
In and around El Callao, miners and their families live in shacks
made of wooden poles and plastic bags for walls. Crime and disease are
rampant.
The Venezuelan government has not released figures on malaria
recently but the World Health Organization registered 411,586 new cases
in 2017, an increase of 811 percent since 2010. And the mining area
around Bolivar state has the highest concentration of cases, according
to experts.
Without any sort of security measures, men, women and children dig
with their hands or use rudimentary tools looking for gold. If they can
find una grama, a gram of gold (.04 ounces), they can make 5 times the
monthly minimum wage, which is currently about 7 U.S. dollars.
The promise of gold riches, as other sectors of the Venezuelan
economy have collapsed, has triggered a mass migration to the south of
the country.
Now, dredging machines, suction pumps, pickaxes and shovels,
cyanide and mercury are increasingly present in southern Venezuela,
threatening to contaminate the fish stock.
Miners are also inhaling the mercury vapor that comes from burning
gold amalgam. The United Nations Environment Program (UNEP) says
there's no cure for mercury intoxication, which can cause irreparable
neurological damage.
To complicate matters, about 45 percent of the miners in the region
are children or adolescents, according to a report by Cecodap, an NGO
that looks after the rights of children and adolescents in Venezuela.
The Organization for Economic Cooperation and Development (OECD)
and the European Union define ``conflict minerals'' as mining that
contributes to forced labor, money laundering, child labor and human
rights abuses. All these ingredients are present in Venezuela's
conflict-ridden mines.
booming demand
The global demand for gold in 2018 reached 4,888 tons (4,435 metric
tons), almost half of it coming from the jewelry sector.
Venezuela is currently the 32nd largest gold producer, according to
the World Gold Council, with an output of 25.3 tons (23 metric tons) in
2018. Maduro's Mining Sector Plan sets production goals of 28 tons
(25.4 metric tons) in 2019 and 87.5 tons (79.4 metric tons) by 2025.
To hit those targets, the government says it plans to ``coordinate,
organize and control small scale mining inside the Orinoco Mining
Arc.''
There are two large groups currently soaking up the gold produced
by small, informal miners. One is a group of private investors; the
other is Minerven.
The private operators buy gold from illegal miners and sell it to
wholesalers who then ``in theory'' sell it on to the Central Bank, said
one of the 570 local gold buyers in El Callao, who handles about 4.4
pounds (2 kilos) of gold per week.
``That hardly ever happens,'' he explained. ``[Wholesalers] make
more money smuggling the [gold] out of the country and getting paid in
dollars, and not the bolivares that the state is offering.''
Minerven is the main supplier of gold to the Central Bank, which in
turn sells the gold to clients in countries such as Turkey and the
United Arab Emirates.
Minerven also gets most of its gold from small miners and
cooperatives, even though it's aware that it's coming from illegal
mining, said a company representative who asked for anonymity.
Founded in 1970, Minerven has been overhauled at least 3 times in
the last decade amid collapsing production. After hitting a production
``milestone'' of 13.48 tons (12.23 metric tons) in 2009, mining output
collapsed from 2010-2015 as international mining companies pulled out
of the country.
Even for the company employees, Minerven's operations are shrouded
in mystery as the government produces no information on gold purchases
or sales.
``How much [gold] is Minerven producing? We don't know that either,
but they continue to produce,'' one of its employees said. ``We don't
know how much because it's never made public and that's worrying.''
When asked for a statement, none of the Venezuelan government
agencies replied to our requests.
smuggling routes
The government considers El Callao a ``special military zone'' and
keeps it heavily guarded. On any given day, groups of hooded military
men with automatic weapons patrol the streets and escort government
``high officials'' who leave and enter the Minerven plants at all
times.
But despite the military presence, the area is the starting point
for smuggling routes that lead to neighboring Guyana, Brazil and
Colombia. And criminal organizations use human ``mules,'' boats,
armored cars and small planes to avoid scrutiny.
In the neighboring town of Guasipati, gold is flown out on private
flights to Aruba, Curacao, Dominica and Puerto Rico, an official said.
But other trafficking routes exist, including from the industrial city
of Ciudad Guayana to the Dominican Republic and Honduras, with the
United States as the final destination.
gold mules
To smuggle the illegal gold into neighboring Colombia, criminal
organizations use a network of young carriers or ``mules'' for the job.
While drug mules often swallow their product to smuggle it across a
border, gold mules take the ingots and grams of gold hidden under their
clothes or inside their body cavities. Gold is considered a strategic
asset by the Veneuzelan government and smugglers, if they're caught,
can be severely punished. They're also threatened by the criminal gangs
and the soldiers who operate the mines and control the borders.
Ramon, one of the gold mules, was recruited in Caracas early this
year.
Telling his story to Climax magazine , Ramon, who used a fictitious
name for security reasons, said he traveled by bus from Caracas to
Upata, in Bolivar state. There he was picked up by people driving two
white Toyota 4Runner.
They removed the SIM card and battery from his telephone, covered
his head with a cloth bag and put headphones over his ears.
Hours later, when they removed the hood, he was in Las Claritas, a
mining town near the Brazilian border. He spent 4 days incommunicado in
a makeshift camp guarded by two hooded men with automatic weapons.
On the fourth day, Ramon left Las Claritas carrying 6.6 pounds
(three kilos) of gold hidden in the soles of his shoes, in his jacket
and in the seam of his trousers. Another 4.4 pounds (two kilos) of gold
were divided between two fellow passengers.
They traveled by helicopter from Las Claritas to Ciudad Bolivar,
about 302 miles (486 kilometers) away, where buses belonging to the
Encava transportation company took them to a coastal town that ``looked
like Cumana'' in northern Venezuela. There, they were met by a soldier
in uniform and put on a plane without having to show identification
papers and flown to a private airport in Tachira state, along the
border with Colombia.
A Ford Explorer took them to the border town of San Antonio, where
they walked across the Simon Bolivar International Bridge that connects
to Colombia.
Ramon panicked. He knew that if he was caught with contraband gold,
he could take about 30 years in prison. But he followed the orders he
was given and, using certain passwords to identify himself to the
soldiers, he walked across the bridge unimpeded.
When he reached Colombia immigration he was received by a corpulent
woman. After using her first name, as he'd been instructed, she told
him to ``go on'' without checking his papers or identity documents.
That's when Ramon realized that the smuggling scheme ``also exists in
Colombia.''
In the Colombian border town of Cucuta he waited for his two
companions, who entered the country on informal trails, or trochas.
They called the buyer, a man from Ecuador, and agreed to handoff
the gold at a fast-food chicken restaurant in the city center. When
they walked into the establishment the doors were locked behind them
and the employees disappeared.
The businessman pulled out a bag full of 100 U.S. dollars bills and
a scale to weigh the gold. He paid and left. For transporting
Venezuelan gold to Colombia, Ramon was paid 1,500 U.S. dollars.
on the border
In Zulia state, in northwestern Venezuela, a long line of about 40
cheavy cargo trucks idle in the dark, waiting to cross the Paraguachon
checkpoint into Colombia.
At about 11 p.m. the trucks turn on their engines and start honking
their horns. Venezuela's National Guard wave them through without
inspecting the cargo, and the trucks roll by Colombian migration
unimpeded.
This border has been officially closed since Sept. 7, 2015, when
Maduro shut it down to prevent the smuggling of food, fuel, and
medicine. But that hasn't stopped it from becoming a thoroughfare for
trucks hauling illicit goods, including smuggled gold.
The Troncal del Caribe, which connects Venezuela and Colombia, has
at least 14 checkpoints run by the Venezulean National Guard, Army and
regional police. But no one dares interrupt the flow of cargo trucks or
inspect them, according to local officials.
Many of the trucks have special passes, salvoconductos, issued by
the Zulia Defense Strategic Zone (ZODI), a military division that
claims the trucks are carrying ``export products,'' said an Army
corporal with the 13th Infantry Brigade who asked not be identified.
``If we check these vehicles, we can get into trouble,'' he said.
``It appears that the owners of the vehicles are influential people,
who can put our obs at risk.''
The official said the trucks are often carrying coltan, silver,
gold and other items that shouldn't be exported.
``We know this because when we have checked some cars, we found
everything from liquid cocaine to gold and other illegal products,''
said the 24-year-old soldier.
When asked for a statement, the Venezuelan Armed Forces and
Ministry of Defense didn't reply to our requests.
In the town of Maicao, Colombia, just 8 miles from the Venezuelan
border, shops buy the Venezuelan gold.
At a shop called Amiga, a merchant says he buys up to 5.3 ounces
(150 grams) of Venezuelan gold, ``which is brought from the south of
the country; it comes directly from the mines because it is in
grains.''
He says the people selling the precious metal are not miners but
military officials.
``Rarely have I dealt with traders who are buying it there cheaply
and selling it at another cost here,'' he said.
A Venezuela National Guardsman in Paraguachon, who insisted on
anonymity, described how he stopped an official government vehicle in
the town of Dabajuro in December, 2018, at about 2 a.m.
It was a Toyota Hilux with two women and a male driver. The
passengers said they worked for the government and were coming from
Caracas but they seemed nervous so the soldier and his partner
conducted a search. They discovered the car was actually coming from
the mining area of Tumeremo, in Bolivar state, and inside they found a
cardboard box with 8.8 ounces (250 grams) of silver, 10.6 ounces (300
grams) of gold and 1,000 U.S. dollars in cash.
The panicked travelers exchanged their valuable cargo for their
freedom.
``The arrest and confiscation were without effect,'' scrubbed from
the record, the soldier said, ``and we shared the profit.''
__________
Global Witness Statement Submitted by Benjamin L. Cardin
global witness statement for the hearing record
Hearing titled Illicit Mining: Implications for U.S. National Security
and International Human Rights
Dear Chairman Rubio, Ranking Member Cardin and Members of the
Subcommittee:
Global Witness welcomes the opportunity to submit a statement for
this important hearing.
We are an international non-governmental organization with offices
in Washington, London and Brussels. For almost 25 years, Global Witness
has investigated and uncovered corruption in fragile states, focusing
on the role of natural resources in driving state corruption and
conflict. We have exposed how timber, diamonds, minerals, oil and other
natural resources have incentivized corruption, destabilized
governments, fueled and financed violent conflict, organized crime and
terrorist organizations.
This hearing is a powerful opportunity to examine these systemic
issues and discuss tools that help broaden our understanding of their
causes and consequences.
This statement will provide background and examples of how minerals
fuel corruption, conflict and human rights abuses and, given the
context of this hearing, the national security risks this poses for the
U.S. We will discuss systemic reforms that are needed to address this
problem, including the need for greater transparency in the mining
sector and along mineral supply chains. We will examine enforcement of
sanctions and visa bans for those responsible for human rights
violations and corruption related to the mining sector and protecting
human rights defenders who are at risk from exposing these problems.
how minerals fuel corruption, conflict, human rights abuses and
threaten u.s. national security
Around the world, the extraction and trade of minerals continues to
provide lucrative funding to predatory armed groups, organized crime,
terrorist networks and other corrupt and rights abusing actors. Serious
human rights abuses have been documented across all types of mining
operations, from informal small-scale artisanal mining to industrial,
large-scale, mining projects. Trading routes have been subject to
extortion and bribery, and minerals illegally smuggled across
international borders deprive governments and communities of tax
revenue and benefit sharing.
The links between mining, corruption and conflict are not limited
by geography or type of mineral. Our research has shown that this is
not a problem of a few corrupt politicians or companies acting in bad
faith. Rather, these are symptoms of a broken system, perpetuated by
greed and secrecy.
Mining and the Trade in Valuable Minerals Finance Conflict, Instability
and Fuel Corruption
Last year, Global Witness exposed how the Islamic State in
Afghanistan (ISKP) controls major mining sites in eastern Afghanistan
and has a strategic interest in the country's rich mineral resources.
Global Witness research also uncovered evidence that the Taliban are
making millions a year from talc alone \1\--part of the $200-$300
million a year they are estimated to make from minerals across
Afghanistan.\2\ Although Afghanistan's mineral wealth could
significantly grow its economy, mining has, instead, been a key driver
of instability, providing significant revenue to key insurgents and
illegal militias.\3\
We have seen a similar phenomenon in eastern Democratic Republic of
Congo, where, for almost two decades, armed groups and members of the
Congolese national army have used profits from the trade in tin,
tantalum, tungsten and gold, to perpetuate violent conflict and
abuses.\4\
Diamond revenues in Zimbabwe have provided millions in secret off-
budget funding for state security forces, who have been consistently
implicated in widespread human rights abuses and oppression.\5\ Since
2010, the country has officially exported over $2.5 billion in
diamonds, although only a small percentage of this money can clearly be
identified in the state budget.\6\
In some cases, corruption can stain a project before mining even
begins. Between 2010 and 2012, Dan Gertler, a close friend of the then
Joseph Kabila, the President of Democratic Republic of Congo (DRC),
secretly purchased major mining concessions at a steep discount, using
offshore companies to hide his identity. These assets were then sold to
two major multinational companies. The Congolese state is estimated to
have lost out on at least $1.36 billion in the process--the equivalent
of twice the country's health and education spending at the time
combined.\7\
In Burma, the jade sector provides another example of how corrupt
elites siphon off vast profits while the local population sees little
benefit and suffers human rights abuses. In 2014 alone, we estimated
the production of jade to be worth up to $31 billion,\8\ or nearly half
of the country's GDP,\9\ but the precise value is unknown. Industry
sources estimate that between 50 percent and 80 percent of that
production was smuggled to China, depriving the government of much
needed revenues.
Global Witness investigations have exposed how the jade sector is
controlled by a group of elites linked to the former military
government, including the family of former dictator Than Shwe, crony
businessmen, army companies, Chinese business interests, ethnic armed
groups and U.S. sanctioned drug lords. Global Witness investigations
have found that military-owned or affiliated companies profit from the
most lucrative jade concessions.\10\ Preliminary research also
indicates that the military and corrupt elite control over jade may
extend to the valuable ruby sector as well. These stones are being
smuggled to neighboring countries, including Thailand, where they enter
the global supply-chain with some likely ending up on the U.S.
market.\11\
Profits From the Extraction and Trade of Lucrative Minerals Benefit
Criminals and Drug Traffickers
Particularly in impoverished and fragile states, increases in metal
price or the discovery of a new mine can incite mass migration of
people seeking better economic opportunities. As the population
increases, so does demand for goods and services, which often gives
rise to illicit economies and organized crime.\12\
Gold mining in southeastern Peru has, for example, been accompanied
by recent reports of human trafficking and forced labor.\13\ In
particular, the Madre de Dios region, where illegal mining is rampant,
has become more dangerous and violent, as its population rises and
miners fight for access to lucrative mining sites. In 2016, the
region's homicide rate climbed to almost 4 times the national
average.\14\
Gold, in particular, has also become a desirable vehicle for money
laundering, given its high value relative to small volume, evident from
recent cases linking the U.S. gold market to senior figures in
international narcotics cartels, including the brutal Sinaloa cartel,
and money laundering schemes.\15\ In one case, three employees of the
Miami-based company NTR Metals, have been sentenced to prison for their
involvement in a multi-billion dollar gold money laundering scheme
after an investigation by U.S. authorities into the company's
suspicious import of over $3 billion worth of gold from Latin America
into the U.S.\16\
Civil Society Fighting Corruption and Human Abuses in the Mining Sector
are Under Threat
Behind each of these case studies are dozens more that exploit the
same systematic weaknesses and loopholes, just with different names and
locations. In many of these examples, civil society leaders play an
important role in documenting and drawing attention to corruption,
human rights and environmental concerns associated with extractive
projects across the globe. However, these defenders of human rights
often come under attack and face grave risks for their efforts to
expose these problems and hold governments to account. This is
particularly the case in countries with autocratic regimes and weak
rule of law, where civil society faces particular challenges in its
ability to operate and speak out on these issues.
Our report, Defenders of the Earth, found that 2016 was the
deadliest year on record for environmental and land defenders. Nearly
four people were murdered every week in 2016 protecting their land and
the natural world from industries like mining, logging and
agribusiness, with killings across 24 countries.\17\ As part of an
ongoing trend, the number of defenders murdered rose in 2017; two
hundred and seven activists were killed, leaving communities without
their courageous spokespeople and champions.\18\ More than 1,000
murders have been recorded by Global Witness since 2010.\19\
Corruption and Conflict in the Extractives Sector Threaten U.S.
National Security Interests
As illustrated by the case studies above and in various academic
studies, there is strong evidence that fragile states that are heavily
reliant on natural resource revenues are more likely to experience
conflict than those countries without an abundance of these
resources.\20\ Secrecy in the extractives sector combined with weak
rule of law enables corrupt government officials and their cronies to
divert cash from minerals and other natural resources to terrorist
organizations, insurgents, and militias. Strengthening transparency and
accountability in the mining sectors of fragile states is in the
interest of the United States because it decreases the likelihood and
severity of conflicts and mitigates the threat of the resource curse.
The Extraction and Trade in Minerals is not Inherently Problematic
It is the systems that enable ill-gotten minerals to enter
legitimate supply chains without scrutiny that must be addressed and
reformed. Problems flow from unmanaged risks that are ignored and swept
under the carpet by companies with a responsibility to ensure their
business activities do not finance conflict or abuses. We need to move
toward normalizing open, transparent, and honest conversation about the
risks we know are out there, and what has been done--and is yet to be
done--to manage them.
Identifying and analyzing these risks requires nuance. In carrying
out risk assessments, it's easy to focus on binary terms like `legal'
and `illegal,' `licit' and 'illicit,' and `formal' and `informal.' It's
easy to assume artisanal mining is bad and industrial mining is good,
despite the many examples that prove otherwise. Instead of providing
any real clarity, these terms only serve to muddy the waters to
distract from efforts to identify and manage the underlying risks and
harms that should be the focus of attention for all of us, and
companies in particular.
Going Beyond the ``Governance Problem''
To date, some efforts to address links between mining and conflict
have tended to focus on the need for governance reform in producer
countries. While poor governance is part of the problem, we cannot let
it detract from the larger systemic issues that also demand our
attention. Such reforms are critical to securing the conditions under
which responsible trade can flourish to the benefit of producer
communities.
We urge the U.S. government to use its diplomatic and development
tools to support governance reform at all levels--from the national to
the local. Smaller producers and the communities where valuable
resources are found are too often left behind by a scramble for
investment and industrialization. However, reforms that focus only on
producers and suppliers in mining areas at the beginning of globalized
supply chains will inevitably fall short if they are working against
powerful economic forces. To bring about greater transparency and
comprehensive reform, policy makers must enlist the demand side in the
process of identifying and dealing with problems.
Greater contract transparency and payment disclosures can safeguard
against corruption risks. Throughout supply chains, the very network of
traders and suppliers that link U.S. companies and customers to
conflict and rights abuses can be harnessed and leveraged to facilitate
much needed reforms and improvements.
systemic problems require systemic reforms: actions the u.s. government
should take
Despite numerous exposes and widespread reporting on the many links
between minerals, corruption and conflict, these abuses have long been
viewed as isolated incidents--the misdeeds of a few bad apples within
the global extractives industry. But when viewed together, we believe
there is ample evidence of a broken system in need of reform. Without
transparency and due diligence requirements in place and effectively
implemented and enforced throughout the extractives sector, this is
unlikely to change. Policymakers, companies and their stakeholders need
more information to better understand why these problems persist and
how to fully address them.
Left unchecked, this system continues to contribute to national
security implications for the United States by exposing U.S. markets
and companies to the very real risks of funding or fueling corruption,
conflict and abuses at home and overseas. Our investigation exposed how
an Islamic affiliate and the Taliban are fighting over talc mines in
Afghanistan and how consumers and companies in the U.S. could,
unknowingly, be funding the Afghan insurgency. The talc mined in
Afghanistan is transported across the border into neighboring Pakistan
where it is mixed with Pakistani mined talc before exported--some forty
percent of talc exported from Pakistan goes to the U.S.\21\
Transparency is a critical first step toward creating extractive
industries and mineral supply chains in which the people in the country
benefit from the resources, responsible companies are rewarded, and the
criminal and corrupt are held to account. To realize this goal, our
statement provides three recommendations for what the U.S. government
should do to increase transparency and accountability in the mining
sector:
First, companies that trade and use minerals in their products must
carry out robust due diligence in line with international standards on
their supply chains, including publishing annual reports disclosing
efforts to mitigate the risk of contributing or facilitating human
rights abuses through their trade.
Companies rely on an array of minerals and metals for the
production and function of a number of consumer and industrial
products; they have unique visibility over their supply chains and are
uniquely placed to leverage their market power to affect change.
Through engaging with suppliers, carrying out checks on their supply
chains and publicly sharing information on potential abuses, companies'
supply chain due diligence can improve mineral sourcing practices, and
support other policy interventions from sanctions enforcement to
governance reform.
Based upon the U.N. Guiding Principles on Business and Human
Rights, which establish that companies have a responsibility to ensure
that they do not profit from serious harm to individuals, societies or
the environment,\22\ the Organization for Economic Cooperation and
Development (OECD) developed the Due Diligence Guidance for Responsible
Supply Chains of Minerals from Conflict-Affected and High-Risk Areas in
2010. The OECD Guidance, which consists of a five step framework meant
for companies all along the supply chain, is the international standard
for due diligence on mineral supply chains.\23\ The OECD Guidance makes
clear that individual companies are responsible for the quality of
their due diligence--this includes the supply chain checks undertaken
by companies further up the supply chain.\24\
The risk of minerals fueling conflict or human rights abuses can
occur in any type of mining operation and these types of supply chain
risks are part of the reality of doing business in high-risk areas. The
OECD Guidance does not encourage companies to stop sourcing minerals
from conflict-affected and high-risk areas, or to stop sourcing
specific minerals. Rather, companies that do source from these high-
risk areas must demonstrate how they can do so responsibly. The primary
question for a company's due diligence practices is how a material has
been sourced and traded, not where.\25\
The OECD Due Diligence Framework is now a Requirement for Many Major
Companies Around the World
In the U.S., Congress passed the conflict minerals provision in
2010, in an effort to break the link between minerals and the
entrenched conflict in eastern Congo.\26\ Section 1502 of the Dodd-
Frank Act, which had its origins with a bill introduced by Senators
Brownback, Feingold, and Durbin \27\, specifically requires U.S.-listed
companies that manufacture products containing tin, tantalum, tungsten
or gold to carry out checks in line with the OECD Guidance on minerals
that may originate from Congo or its neighboring countries.\28\ In the
last year, several companies, including Tiffany & Co.,\29\ Apple,
Richline, and Intel,\30\ have publicly emphasized the importance of
supply chain due diligence. 129 Investors, representing over $4.8
trillion in assets, wrote in a letter to the SEC, that the due
diligence disclosures required by Section 1502 provide valuable
information about how companies manage supply chain risks.\31\
Shortly after the law was passed, some companies stopped buying
minerals from the Great Lakes region. Although the market has now
readjusted, to some extent, the market response affected thousands of
artisanal miners' livelihoods. Disengaging from specific regions at the
first sign of risk, with no regard for the livelihood impact, is also a
form of irresponsible sourcing.\32\ These consequences speak to an
urgent need to continue building on what has been achieved to date in
an effort to develop and implement policies that serve also the most
vulnerable members of global mineral supply chains. In addition to
Section 1502, supply chain due diligence is also now law in DRC and
Rwanda,\33\ and there is voluntary guidance in China.\34\ In 2017, the
European Union finalized a supply chain due diligence regulation,
covering minerals linked to human rights abuses around the world, which
will come into full effect in 2021.\35\ Risk-based due diligence is
also central to modern slavery laws around the world, including the
U.K. Modern Slavery Act,\36\ and the French Corporate Duty of Vigilance
Law.\37\ Recognition of business responsibility for supply chains is
growing and due diligence has become a global norm.
Public, Annual Reporting on Risk Management is Critical to Demonstrate
Responsible Sourcing Efforts
Annual, public reporting--the fifth step of the OECD Guidance--
serves several purposes: it demonstrates progress in managing risks
over time, allows information to be scrutinized by the public, and
provides companies the opportunity to share information about risks so
that they can address them together, facilitating collaboration and
collective action. These reports are crucial to turning transparency
into impact, ensuring the collective resources of the entire supply
chain are enlisted in the process of finding risks and doing something
about them.
In its 2018 report to the SEC, Apple reported on seven distinct
supply chain risks and the steps it takes to follow up on these
risks.\38\ In the previous year, Apple's report contained information
on fifteen specific risks.\39\ We recently did an analysis of 65
companies exporting tin, tungsten, tantalum and gold from Congo, Rwanda
and Uganda and found that 45 percent of these companies had due
diligence reports in 2015, and seven of these reports included detailed
information about identified risks.\40\ This is a significant increase
from 2013, when there were no company reports on responsible sourcing,
and demonstrates that public reporting on risks can be done, and marks
an important first step towards doing something about the problems that
have been found.
Public due diligence reports can also assist governments with
sanctions enforcement. Over the last four years of conflict minerals
disclosures to the SEC under section 1502, 43 different companies
reported that Central Bank of North Korea \41\ was a potential supplier
of gold, a potential and clear violation of U.S. sanctions.\42\
Additionally, it was reported by Reuters in 2016 that the United Wa
States Army, a group sanctioned for narco-trafficking, is operating in
a tin mine in Burma, which has allegedly been supplying tin to one of
the largest tin smelters in the world, Yunnan Tin Company Ltd.\43\ It
is because of supply chain due diligence regulations that companies
have been able to better understand their supply chains and identify
potentially problematic or risky suppliers.
Failing to Conduct Robust Supply Chain Due Diligence can have
Significant Consequences
If a company ignores a risk it leaves itself and its investors
vulnerable to financial, legal and reputational harm. By doing thorough
assessments, and engaging with suppliers to better understand the
circumstances of how minerals are mined and traded, supply chain due
diligence protects against future liabilities and risks.
As an example, a 2016 report by the Global Initiative of
Transnational Organized Crime, alleged that Miami-based NTR Metals, a
major U.S. refiner and a subsidiary of Elemetal LLC, engaged in
criminal acts arising from the seizure of gold in Peru between 2013 and
2014 and laundering the proceeds of illegal mining.\44\ The U.S.
government investigated the suspicious import of over $3 billion worth
of illegally acquired and/or smuggled gold from Latin America to Miami
between 2012 and 2015 by NTR Metals. The U.S. Department of Justice
indicted three former NTR Metals employees for their alleged
involvement in a multi-billion dollar gold money laundering scheme.\45\
All three former employees have pleaded guilty to a money laundering
conspiracy, and reportedly all three have been sentenced to between six
and seven and a half years in prison.\46\
Industry Schemes are not a Replacement for Individual Due Diligence
In parallel to existing laws and emerging legislation, major
industry bodies have developed responsible sourcing audit frameworks
and certification schemes.\47\ These aim to facilitate implementation
of the OECD Guidance and encourage industry collaboration. While these
can provide helpful tools for companies to better understand their
supply chains and identify possible risks of contributing to harms, in
many cases, these programs are built on weak systems that rely too
heavily on third-party audits and binary certification schemes.
As an example, when the Global Initiative's 2016 report was
published, Elemetal Refining LLC, a gold refiner in Jackson, Ohio was
certified by the LBMA and the Conflict Free Smelter Initiative
(CFSI).\48\
However, it was not until a year later, in March 2017, when
Bloomberg published investigators' findings in relation to NTR Metals
that the LBMA de-listed Elemetal Refining LLC.\49\ It is unclear what
the industry schemes were doing in the interim to assess and manage the
risks associated with the allegations linked to NTR Metals.
The OECD recently concluded a study evaluating five major industry
schemes to see how closely they aligned with the OECD Guidance. The
report found that even though many of the schemes appeared to align
with the due diligence guidance on paper, these schemes lack the
ability to assess whether companies are actually implementing them in
practice.\50\ Ultimately, the ability of these schemes to affect real
changes in the way minerals are sourced and traded pales in comparison
to the collective impact of individual companies working to responsibly
address risks in mineral supply chains.
Enforcement by governments is critical to ensure that companies are
undertaking robust checks on their supply chains; without proper
enforcement these laws mean little. Though Section 1502 only covers
minerals from the Great Lakes region of Africa, this important due
diligence requirement has redefined how companies look at risk in their
supply chains and must be fully enforced. However, in April 2017, the
then-acting chair of the SEC announced that the agency no longer
recommends enforcement of the bulk of the conflict minerals provision,
including the supply chain due diligence requirement despite the
statutory mandate.\51\ This decision not only creates uncertainty in
the minerals market, it sends a dangerous signal that there is wavering
support for these important supply-chain checks.
Second, extractive companies must publish what they pay to
governments for natural resource extraction on a project-by-project
basis and governments must publish the revenues they receive to
increase accountability for how natural resource wealth is used.
Beyond the occurrence of human rights abuses along mineral supply
chains and the potential for and reality of conflict and terrorist
financing, the corruption risk in major mining deals is another
significant problem that cannot be overstated. For too long, many of
these deals have been negotiated behind closed doors and the terms of
these deals kept out of public view, keeping poor countries poor,
propping up dirty and rogue regimes and posing significant risks for
investors.
A stark example of this is the involvement of Glencore in secretive
deals to purchase major mining concessions in the DRC part of a series
of opaque transactions that led to the Congolese state losing out on an
estimated $1.36 billion in potential revenues.\52\ On July 3, 2018
Glencore Ltd, a subsidiary of Glencore Plc, the world's largest
commodities trader, received a subpoena from the U.S. Department of
Justice related to U.S. overseas corruption laws focused on operations
in Democratic Republic of Congo, Nigeria and Venezuela. The company's
troubles seem to largely stem from its deals in DRC with Dan Gertler, a
close friend and associate of DRC's former President Joseph Kabila.\53\
Extractive industry payment transparency is an important tool to
better understand the deals corrupt and repressive regimes make with
companies for lucrative mining concessions. In order to hold
governments and companies accountable, payments for natural resources
must be made public so that citizens, journalists and civil society
groups know how much money is being paid to their governments, and can
hold their governments to account for how it has been spent.
Section 1504 of the Dodd-Frank Act Catalyzed Global Action
In 2010, Section 1504 of the Dodd-Frank Act, known as the Cardin-
Lugar provision, was passed by Congress, establishing a global standard
requiring oil, gas and mining companies to disclose project-level
payments to governments. Thirty other major economies around the world
followed suit, including Canada, Norway, the U.K. and the other twenty-
seven members of the European Union.\54\
As these laws have been implemented, citizens and watchdogs in
resource-rich countries can now see what their governments are being
paid from individual resource projects and demand that those who pay or
receive bribes are held to account. As transparency becomes the norm,
companies will cease being able to operate in secrecy and will be
deterred from bribery in the future.
Unfortunately, in early 2017, Congress voted to vacate the SEC rule
implementing this law. Nevertheless, many American, and even Russian
and Chinese companies are already complying with similar laws, without
any business disadvantage, according to a study by the U.K.
Government.\55\ There is therefore no reason for the U.S. companies to
be left out of this global transparency standard. The SEC is currently
working on a new rule to implement Section 1504, which should be
aligned with similar laws in other countries. We hope that the U.S.
reclaims its position as a leader on this issue.
The Extractive Industries Transparency Initiative
In addition to these payment disclosure laws, the Extractive
Industries Transparency Initiative (EITI) is a voluntary, multi-
stakeholder initiative comprised of governments, companies and civil
society organizations to promote transparency in oil, gas and mining
sectors. The EITI publishes country-specific reports including data on
payments by mining companies to governments and revenues received by
governments. The EITI Standard also requires countries to publish
timely and accurate information on key aspects of their natural
resource management, including how licenses are allocated, how much tax
and social contributions companies are paying and where this money ends
up in the government at the national and regional levels.\56\
EITI's disclosures have made it possible to compare company
payments with revenues received by governments. This helps to identify
places where money may have been mismanaged or siphoned off for private
gain. For example, in the DRC, our analysis of EITI data shows that
over $750 million of mining sector revenues from copper and cobalt that
flowed into DRC's national tax agencies and state mining companies
between 2013 and 2015 did not reach the national treasury. Although
there is no clarity on where these missing millions ended up, our
research indicates that at least some of the funds were distributed
among corrupt networks linked to former President Joseph Kabila's
regime.\57\
Beneficial Ownership Disclosure Helps Identify the True Owners of
Extractive Companies
In 2013, EITI agreed to make beneficial ownership disclosure a
criterion for compliance from 2016 onwards.\58\ This new provision
recommended that countries maintain a publicly available register of
the beneficial owners of companies that bid for, operate and invest in
the extractive industries.
This type of transparency is important in countries like Burma,
where many of the companies operating in its jade, ruby and gemstone
sector are secretly controlled by networks of military elites, drug
lords and crony companies associated with the darkest days of junta
rule. Through analyzing company licenses and using open data sources,
we have been able to piece together how the families of notorious
figures including former dictator Than Shwe and former ruling party
officials are major players in the jade trade. We have also identified
how U.S.-sanctioned drug lord Wei Hsueh Kang, a major figure in the Wa
ethnic armed group, plays a dominant role through a web of front
companies. In addition, we have uncovered more information on the way
Burma's army is helping itself to a gigantic slice of the pie via its
own conglomerates that control some mines and operate others in joint
ventures with these and other companies whose beneficial ownership
remains hidden.\59\ The situation in Burma is a problem found in many
other countries where information about the true owners of companies is
not publicly available or accessible.
Third, the U.S. government must hold corrupt officials and human
rights violators to account and protect human rights defenders who come
under attack for exposing these problems.
The U.S. government can exert significant leverage in holding human
rights violators and the corrupt to account through the use of targeted
sanctions, including visa bans and asset freezes. The Global Magnitsky
Act, which was passed in 2016 with bi-partisan support, is chief among
these tools. This law allows the U.S. government to sanction
individuals and companies implicated in serious human rights abuses
and/or guilty of significant corruption so that their visas are denied
and assets frozen, crippling them of the many privileges of the
American banking system. The U.S. government should effectively
implement and promote this provision and also rigorously enforce the
Foreign Corrupt Practices Act.
As Global Witness has found through its research, human rights
defenders face a high level of risk across the globe. The U.S.
government must promote an enabling for civil society and support and
protect human rights defenders who come under attack for exposing these
problems.
conclusion
Transparency won't end conflict or resolve insecurity, but it is an
important step towards disrupting an economic landscape that too often
incentivizes continued instability over peace. It is only through
increased access to information about supply chains that we can discern
where the loopholes and weaknesses exist that enable conflict financing
and corruption. Furthermore, increasing transparency and accountability
over management of natural resources will promote greater stability and
economic development in Latin America and countries across the globe,
help protect U.S. national security interests and promote a more stable
operating environment for American companies.
recommendations:
The U.S. government should:
Recognize good governance of natural resources as a national
security priority and promote natural resource governance as a
core part of its assistance to resource-rich countries, as well
as key trading and processing hubs.
Promote implementation of the OECD due diligence guidance by U.S.
firms sourcing and trading minerals from all conflict-affected
and high-risk areas, and ensure that the conflict minerals
provision, Section 1502, is fully enforced.
Support anti-corruption tools like the Cardin-Lugar extractive
transparency provision, Section 1504, to improve governance in
the mining sector and minimize risk of allowing corrupt deals
to go forward; issue a strong 1504 rule requiring U.S.-listed
oil, gas and mining companies to publicly report payments to
governments on a project-by-project basis, with no exemptions.
Strongly enforce the Global Magnitsky Act.
Support and protect human rights defenders at risk by strengthening
and implementing the pre-existing State Department guidelines,
in close collaboration with local civil society, and ensuring
training in their implementation for all embassy staff.
Companies should:
Carry out comprehensive supply chain checks in line with the OECD
Guidance and publish detailed reports listing steps taken to
address their specific supply chain risks.
Publish their natural resource payments to governments in all
countries of operations and take additional steps to increase
transparency, including through publication of contracts.
Speak out to condemn threats and attacks against human rights
defenders wherever they occur and guarantee that no business
project goes ahead without the free, prior and informed consent
of affected communities at every stage of the project cycle.
Trade associations should:
Take steps to ensure members are robustly implementing supply chain
due diligence and payment transparency and are taking
responsibility for their own individual efforts.
----------------
Notes
\1\ Global Witness, `At Any Price We Will Take the Mines,' May
2018, pg. 34.
\2\ Matt DuPee, `The Taliban Stones Commission and the insurgent
windfall from illegal mining', Combatting Terrorism Center, March 10,
2017.
\3\ Global Witness, `At Any Price We Will Take the Mines,' May
2018, pg. 4.
\4\ See Global Witness reports: `Under-Mining Peace,' 2005; Faced
with a Gun, What Can You Do? War and Militarization of Mining in
Eastern Congo,' 2009; `The Hill Belongs to Them, The need for
international action on Congo's conflict minerals trade,' 2010; `River
of Gold', 2015.
\5\ Global Witness, `An Inside Job,' September 11, 2017, pgs. 8,
20.
\6\ Kimberley Process Certification Scheme, Public Statistics Area;
see also Global Witness, `An Inside Job,'' September 11, 2017, pg. 6.
\7\ Global Witness, `Secret Sales,' May 13, 2014.
\8\ Global Witness, `Jade: Myanmar's ``Big State Secret'',' October
2015, pg. 26.
\9\ World Bank, `Myanmar profile.'
\10\ Global Witness, `Jade: Myanmar's ``Big State Secret'',' pgs.
10-12, 37.
\11\ Natural Resource Governance Institute, Multifaceted:
Governance and Conflict Risks in Myanmar's Ruby Industry,' March 2018,
pgs. 5, 7.
\12\ Olaya, Angela, `GameChangers 2016: Illegal Mining and
Continuing Criminal Diversification,' Insight Crime, January 11, 2017;
see also Global Initiative against Transnational Organized Crime,
``Case study: illicit gold mining in Peru,'' November 2017, pg. 2.
\13\ Weaver, Jay and Nicholas Nehamas, `How drug lords make
billions smuggling gold to Miami for your jewelry and phone', January
16, 2018, Miami Herald.
\14\ Clavel, Tristan, ``Illegal gold Mining Fueling Crime, Violence
in Peru,'' October 10, 2016, InSight Crime.
\15\ Weaver, Jay and Nicholas Nehamas, `He sold antiques in
Florida. Then he helped `El Chapo' launder $100M of dirty gold,'
January 16, 2018, Miami Herald.; see other articles in theMiami Herald
`Cash, Dirty Gold' series, January 2018.
\16\ Weaver, Jay, `Illegal gold dealer weeps as he's sent to prison
for money laundering', January 31, 2018, Miami Herald.
\17\ Global Witness, `Defenders of the Earth,' July 2016, pg. 5.
\18\ Global Witness, `At what cost? Irresponsible business and the
murder of land and environmental defenders in 2017,' July 2018, pg. 7.
\19\ Global Witness, `Defenders of the Earth,' July 2016, pg. 8.
\20\ Natural Resource Governance Institute, The Resource Curse--The
Political and Economic Challenges of Natural Resource Wealth.
\21\ Global Witness, `At Any Price We Will Take the Mines'', May
2018, pgs. 4, 41.
\22\ U.N. Human Rights Office of the High Commissioner, ``U.N.
Guiding Principles on Business and Human Rights'', 2011.
\23\ OECD, ``Due Diligence Guidance for Responsible Supply Chains
of Minerals from Conflict-Affected and High-Risk Areas'', 2016, see
annex II for more detail.
\24\ Ibid., pg. 41.
\25\ Ibid., see annex I for more detail.
\26\ United States Congress, 111th Congress, Dodd-Frank Wall Street
Reform and Consumer Protection Act, Pub. L. No. 111-203, passed July
2010; see also Securities and Exchange Commission, ``Conflict Minerals;
Disclosure of Payments by Resource Extraction Issuers; Final Rules,''
17 CFR Parts 240 and 249b, September 12, 2012.
\27\ United States Senate, 111th Congress, bill S. 891: Congo
Conflict Minerals Act of 2009, introduced, but did not pass.
\28\ In 2015 Global Witness and Amnesty International analyzed 100
reports filed by companies with the Securities and Exchange Commission
(SEC) under Section 1502 of the Dodd-Frank Act. For more information,
see Global Witness and Amnesty International, `Digging for
Transparency,' April 2015.
\29\ Tiffany & Co. statement supporting diligence, transparency in
addressing conflict minerals, February 2017.
\30\ ``Why Apple and Intel don't want to see the conflict minerals
rule rolled back,'' Washington Post, February 23, 2017.
\31\ Boston Common Asset Management et al, Comments on
Reconsideration of Conflict Minerals Rule Implementation--Supplemental
Submission to February 17, 2017, March 7, 2017.
\32\ Disengagement should only be considered in cases where risk
mitigation has proven to be infeasible.
\33\ See `Arrete ministeriel no. 0057 CAB.MIN/MINES/01/2012 du 29
fevrier 2012' in Congo, and `Ministerial Regulations No. 002//2012/
MINIRENA of 28/03/2012 on the Regional Certification Mechanism for
Minerals' in Rwanda.
\34\ China Chamber of Commerce of Metals, Minerals and Chemicals
Importers & Exporters (CCCMC), `Guidelines for Social Responsibility in
Outbound Mining Investments', 2015.
\35\ The EU Regulation applies to companies whose imports of ores
or metals containing tin, tantalum, tungsten or gold into the EU exceed
certain specified annual thresholds. The law will require companies to
conduct due diligence on their supply chains broadly in line with the
OECD Guidance. Unlike the EU's Regulation, the OECD Guidance applies to
all mineral resources and to the entire supply chain, including
companies that buy or trade products containing the four minerals. The
final text of the EU Regulation is available here: http://ec.europa.eu/
trade/policy/in-focus/conflict-minerals-regulation/legal-texts-and-
documents/
\36\ U.K. Parliament, Modern Slavery Act 2015, March 26, 2015.
\37\ Assemblee Nationale, Loi n+ 2017-399 du 27 mars 2017 relative
au devoir de vigilance des societes meres et des entreprises donneuses
d'ordre.
\38\ Apple, Conflict Minerals Report, March 7, 2018, pg. 9.
\39\ Apple, Conflict Minerals Report, May 5, 2017, pg. 4. For more
information, see Global Witness, `Why it's a good think that Apple
isn't declaring its products ``conflict-free''', April 2016.
\40\ Global Witness, `Time to Dig Deeper,' August 30, 2017, pg. 3.
\41\ Global Witness search, using advanced search function, search
term ``Central Bank of DPR Korea'' of SD forms between 01/01/2015--07/
24/2018.
\42\ Schectman, Joel, `North Korea Gold Taints U.S. Firms: Country
Was Source of Metal Used in Variety of Products,' Wall Street Journal,
June 4, 2014.
\43\ Lee, Yimou and Joel Schectman, ``For Apple and others, tin
supply chain has ties to rebel-held Myanmar mine,'' Reuters, November
28, 2016.
\44\ Global Initiative Against Transnational Organized Crime,
`Organized Crime and Illegally Mined Gold in Latin America', April
2016, pg. 18. See also Weaver, Jay, `Illegal gold dealer weeps as he's
sent to prison for money laundering', Miami Herald, January 31, 2018.
\45\ Department of Justice, Southern District of Florida, `Four
Peruvian Members of Multi-Billion Dollar, International Gold Money
Laundering Scheme Indicted', January 9, 2018.
\46\ Elemetal and its subsidiary NTR reportedly pleaded guilty on
March 16, 2018, to one count of failure to maintain an adequate anti-
money laundering program. Elemetal agreed to a fine of $15 million as
part of a plea agreement with federal prosecutors. See Weaver, Jay,
`Firm behind gold-fueled Miami-based money laundering racket fined $15
million,' March 16, 2018, Miami Herald.
\47\ Industry associations that have developed certification
schemes to facilitate due diligence include the London Bullion Market
Association (LBMA), Dubai Multi-Commodities Center (DMCC), the
Responsible Minerals Initiative (RMI-formerly known as the Conflict
Free Sourcing Initiative or CFSI), Responsible Jewelry Council (RJC)
among others.
\48\ See Bloomberg Business Week, `How to become an International
gold smuggler', 9 March 2017; LBMA, List of LBMA refiners on the former
Good Delivery list; see also Elemetal Refining LLC's Conflict Free
Policy stating CFSI certification, dated June 2015.
\49\ LBMA, List of LBMA refiners on the former Good Delivery list.
Elemetal Refining, LLC is no longer listed as a conformant gold refiner
by the Responsible Minerals Initiative (previously CFSI), see also
Elemetal Refining LLC's Conflict Free Policy stating CFSI
certification, dated June 2015.
\50\ OECD, `Alignment assessment of industry programmes with the
OECD minerals guidance,' April 17, 2018, pg.11.
\51\ SEC, Division of Corporation Finance, `Updated Statement on
the Effect of the Court of Appeals Decision on the Conflict. Minerals
Rule,' April 7, 2017.
\52\ Global Witness, `Glencore and the Gatekeeper,' May 2014.
\53\ Global Witness press statement, `A bad year for Glencore,''
July 3, 2018.
\54\ Global Witness, Revenue disclosure laws--Cardin-Lugar and the
Global Transparency Standard, January 30, 2017.
\55\ U.K. Government, Department for Business, Energy and
Industrial Strategy, Post Implementation Review of Reports on Payments
to Governments Regulations.
\56\ Extractive Industries Transparency Initiative (EITI).
\57\ Global Witness, `Regime-Cash Machine,' July 2017.
\58\ EITI, Beneficial Ownership.
\59\ Global Witness, `Jade: Myanmar's Big State Secret,' October
2015.