The Typology of risks, mitigation measures and incentives in the extractive chain is the first analytical tool that provides evidence-based analysis to understand better how corruption, defined as abuses of public or private office for personal gain, works throughout the extractive - mining, oil and gas - value chain. This includes the process from deciding to extract and the awarding of rights down through revenue collection, management and spending.
The tool examines the sophisticated patterns to channel corrupt payments, and goes beyond reporting and reconciling payments made to and received by governments. It covers a broad spectrum of inter-connected policy areas, including licencing, procurement, tax issues and public financial management.
The report also provides practical options to tackle corruption risks at both the public and private levels and calls for collective action that can be undertaken across OECD and non-OECD countries, extractive companies and civil society.
Drawing from an analysis of 131 concluded and ongoing corruption cases across different jurisdictions, the typology maps out the schemes of corruption, and vehicles used to corrupt. The typology shows how illegal payments are channelled, disguised through offshore transactions and complex corporate structures, often involving shell companies that make detecting and sanctioning corruption more difficult.
Offenses listed in the typology include bribery of foreign officials, embezzlement, misappropriation and diversion of public funds, abuse of office, trading in influence, favouritism and extortion, bribery of domestic officials, and facilitation payments.
According to the typology, corruption may arise at any point along the extractive value chain: from awarding the rights to conduct extraction operations to revenue collection, spending and social investment.
Specifically, several risks account for increased vulnerability to corruption. First, weaknesses in the anti-corruption legal and judicial system may undermine host governments’ capacity to effectively detect, prevent and sanction corruption. High politicisation, discretion in decision-making and inadequate governance leave room for favouritism, clientelism, political capture and interference, conflict of interest, bribery, and other corrupt practices that impact the extractive sector specifically. On the corporate side, gaps and discrepancies in internal anti-corruption compliance and due diligence weaken detection and prevention efforts. Third, shortcomings in corporate integrity measures in host and home governments help corruption to thrive.
High-level public officials are typically implicated in large-scale corruption involving the awarding of mining or oil and gas rights, procurement of goods and services, commodity trading, revenue management through natural resource funds, and public spending, according to the report. Lower ranking officials, such as tax officials, customs or immigration agents, and inspectors, are involved usually in violations of customs clearance, immigration rules and tax collection.
State-owned enterprises (SOEs) were involved in 20% of the 131 analysed cases. SOEs appear to be particularly exposed to corruption in awarding rights, procuring goods and services, trading in commodities, and conducting non-commercial activities such as social expenditures or management of fossil fuel subsidies.
The analysis finds no distinction among central or local government officials, local business partners, subcontractors, consultants, advisors, intermediaries and foreign companies: they can all act as initiators or beneficiaries of corruption.
The report calls for putting incentives in place to change behaviour voluntarily by pricing corruption and making it less attractive for public and private actors. This requires co-ordinated efforts across OECD and developing countries as well as extractive industries, brokering an alliance for collective action, including through the OECD Initiative for Policy Dialogue on Natural Resource-based Development.
The Initiative for Policy Dialogue on Natural Resource-based Development
The OECD has hosted since 2013 a horizontal Initiative for Policy Dialogue on Natural Resource-based Development within the framework of its Strategy on Development. This Initiative offers an inter-governmental platform for peer learning and knowledge sharing where OECD and non-OECD mineral-, oil- and gas-producing countries consult with extractive industries, civil society organisations and think tanks to craft innovative and collaborative solutions for natural resource governance and development. A Business Consultative Platform was established to dialogue with the mining, oil and gas industry and to foster mutual understanding on the implications and impact of policy options to reach mutually beneficial solutions and outcomes. Led by the OECD Development Centre, this Initiative leverages the expertise of several OECD Directorates.