Rio, BHP, Xstrata contend with UK Bribery Act

Mike Savage, a fraud investigator with Ernst & Young, told companies gathered at the Prospectors & Developers Association of Canada conference in Toronto that payments to local government officials, especially in emerging countries, to open a mine or keep it operating will be explicitly prohibited by new laws.

"What we are seeing now is much more attention and many more resources being allocated to anti-corruption units," said Mr Savage.

For example, he said, Britain’s pending Bribery Act stipulates that "failure to prevent bribery" is an offence. The act also states that facilitation payments, or payments to gain access, aren't a valid defence to charges of bribery.

The Bribery Act is scheduled to be implemented in April, though that date could be pushed back by multinational companies seeking more guidance, he said.

The law would apply to all UK-based companies, including Rio Tinto PLC (RIO, RIO.LN), BHP Billiton PLC (BBL, BLT.LN) and Xstrata PLC (XTA.LN).

Greater protection and reward for whistleblowers under the Dodd-Frank Act, passed in the US last year, effectively encourages more policing by employees of possible acts of bribery and fraud, said Mr Savage.

The Dodd-Frank Act rewards whistleblowers with between 10 per cent and 30 per cent of any financial sanctions against companies, he noted.

While the anti-bribery regulations apply to all industries, mining companies should take particular notice, said Mr Savage. He noted that mining companies have already targeted deposits in stable countries, Australia, Canada and the US, and are increasingly targeting less stable nations to mine coal, iron ore, and diamonds.

Citing Transparency International, a watchdog group, he noted that Angola, rich in both oil and diamonds, is now perceived as the most corrupt by the mining industry, with Paraguay and Russia not far behind.

Ernst & Young's fraud investigation units have found that the most common types of fraud in remote locations involve fuel, food and other consumables. Employees will siphon off fuel from mining sites and sell it to local officials and businesses to win regulatory approval, avoid sanctions or keep the mines operating, he said.

He advised mining companies to watch for red flags - projects that consistently run over budget, which could indicate payment of bribes; existing contracts being over-ridden and replaced with higher contracts; and lack of accurate records.(Business with the wall street journal)