Corrupt Practice – By Kate Bateman February 7 2017


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POTUS’s Repeal of Section 1504 of Dodd-Frank Will Hurt U.S. National Security

Last week, along largely partisan lines, Congress voted to repeal a Securities and Exchange Commission rule requiring oil, gas, and mining companies to disclose the payments they make to governments for access to natural resources. According to congressional Republicans and some in the oil and gas industry, the rule creates unacceptable burdens and puts U.S. companies at a disadvantage to foreign competitors. Validity aside, these claims ignore the central purpose of the law. Mandated by Section 1504 of the 2010 Dodd-Frank Act but not scheduled to go into effect until late 2018, it has already become a core element of U.S. leadership in fighting corruption around the world. Since passage of Section 1504, 30 other countries have passed similar disclosure rules for the extractives sector. And because large-scale corruption is a driver of insecurity, conflict, and terrorism, repeal of the SEC rule makes Americans less safe.

Resource-rich, underdeveloped countries often have weak institutions and rule of law. Payments by foreign companies can easily end up in the overseas bank accounts of a tiny, corrupt elite and do nothing to spur economic growth, provide basic services to deprived populations, or build capable, professional security forces.

At its core, Section 1504 (also known as the Cardin-Lugar amendment) aimed to prevent the curse that afflicts so many resource-rich countries simply by bringing more transparency to the natural-resource business. Government officials have a harder time hiding money when that money is publicly recorded. In turn, instead of enriching the few, vast mineral wealth can set poor countries on a path to greater prosperity and peace.

That is good for the citizens of such countries, but it is also good for Americans. Serious threats to the United States emanate from countries where systemic corruption has undermined the government’s legitimacy and ability to function. For example, corruption has hollowed out security forces that are needed to fight terrorist groups or counter external aggression, as in Nigeria and Ukraine. Corrupt patronage networks also channel funds and materiel to insurgent and terrorist groups, as in Iraq and Syria. Moreover, by eroding citizens’ trust in their governments, corruption has shattered the state-society compact that underpins stability in many nations. Look no further than Iraq, Libya, Nigeria, Somalia, Syria, and Venezuela to see how the resulting grievances fuel unrest, insurgency, and terrorism.

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