10 December 2024
The extractive industry, including mining, is a significant source of revenue for many resource-rich countries. In Australia, for example, the mining sector in accounts for around 13.6% of GDP[1], and in 2023 made up almost two thirds (62.9%) of Australia’s export revenue[2].
However, despite the wealth generated in the extractives sector around the world, many communities (and sometimes, entire nations[3]) often see little to no benefit due to corruption and poor governance, with hidden ownership of companies – and the hiding of corresponding profits – being a key factor. With around one in two corruption cases in the extractive sector involve hidden ownership,[4] beneficial ownership transparency is a critical tool in limiting the theft of national and regional wealth from those who most need it. By revealing who truly owns and controls companies, this reform can curb corruption and ensure that revenues are used for public goods and development.
Companies that are part of initiatives like the Extractive Industries Transparency Initiative (EITI) have an important role to play, but there is still work to be done to meet the standards needed to drive real change.
Corruption in mining: human costs and consequences
Corruption in the mining sector has profound human consequences. In many countries, resources are mismanaged or siphoned off by a small group of powerful individuals who use hidden ownership structures to evade accountability. This secrecy enables corrupt practices such as bribery, tax evasion, politicians acquiring licenses, and illicit financial flows. The result? Diminished public trust, reduced government revenues, and a lack of funding for essential services like education and healthcare.
This siphoning-off of wealth has a markedly gendered impact. Funds earmarked for community development, often led by and for the benefit of women and other vulnerable groups, are diverted by corruption. In many societies, women are less likely to benefit from royalties or compensation schemes, further entrenching disadvantage; and women, often reliant on land for subsistence farming, are disproportionately affected when corrupt practices lead to forced evictions or unfair land acquisition.[5]
Entire communities in mining regions suffer. Corruption can lead to environmental degradation, unsafe working conditions, and displacement without adequate compensation – all of which disproportionately impact women[6]. When companies fail to disclose their ownership structures, it becomes nearly impossible to track how money is spent or who benefits from mining operations, making accountability for these human impacts, let alone justice, effectively unattainable. Without transparency, the people who should benefit most from their countries’ resources, the citizens, end up with the least.
The scale of the issue is significant. The Natural Resource Governance Institute (NRGI) reported, in a study examining over 100 cases of corruption in licensing and contracting within the extractive sector, that more than half of the winning or competing companies exhibited signs of hidden beneficial ownership linked to politically exposed persons (PEPs)[7]. On a similarly noteworthy scale, research from the OECD has found that 20% of corruption cases in resource-dependent nations involved state enterprises[8].
The loss of revenue – and the loss of development capital – that ought to have flowed back to local communities is astronomical, with the OECD estimating that one in five bribery cases worldwide involve the extractives industry, and the IMF noting that this amounts to $US1.5-2 trillion per year – close to 2% of global GDP[9].
A key pillar of the EITI Standard
One of the most effective ways to combat hidden ownership corruption is through beneficial ownership reform. This reform requires companies to disclose the true owners behind their operations, making it harder for those with hidden agendas to misuse public resources. When companies are transparent about ownership, it becomes easier for governments, civil society, and investors to hold them accountable. This can lead to better governance, more equitable distribution of resources, and stronger public trust.
The EITI has incorporated beneficial ownership transparency as part of its standards, recognising its importance in reducing corruption risks and promoting strong governance. Many elements of the EITI Standard 2023 also recognise the importance of ‘deliver(ing) natural resources in a manner that benefits societies and communities’, highlighting the significance of reducing the human cost of corruption in the sector. Requirement 2.5 encourages implementing countries to maintain a publicly-accessible beneficial ownership register including the need to disclose any political exposed persons.
For EITI supporting companies, the increased focus on beneficial ownership following from the Australian Government’s recent announcement of public consultation into the issue offers a significant opportunity to fulfil their obligations under Expectation 6:
Expectation 6: Publicly declare and publish support for beneficial ownership transparency and publicly disclose beneficial owners in line with the EITI Standard, recognising that listed companies will disclose the name of the stock exchange(s), include a link(s) to stock exchange filings where they are listed and otherwise do what is required by applicable regulations and listing requirements[10].
Upcoming Government reform: a crucial opportunity
Beneficial ownership reform is long overdue in Australia; the Government committed to reform in 2022 with a public consultation paper released in November. Now, as of November 2024, the latest consultation on draft legislation has been announced. The exposure draft suggests that there is ongoing – though perhaps somewhat sluggish – commitment towards an enhanced system of tracing hidden company ownership.
With amendments to the Corporations Act 2006 that would strengthen law enforcement’s ability to freeze ‘opaque’ (read: suspicious) holdings, and closing loopholes currently allowing hidden owner investment in major Australian corporations, there are some strong provisions in the draft bill.
However, sustained and vocal backing for beneficial ownership transparency is critical if these provisions are to be a) legislated and b) enforced. This is an important juncture for Australia, and Australian companies, to support a fairer system in which wealth cannot be illegally hidden from public view.
The Path Forward
For the mining industry to truly benefit resource-rich countries, the issue of corruption needs to be addressed head-on. Beneficial ownership transparency is a crucial step in this direction. The ongoing consultation presents an opportunity for companies to show that their commitment to transparency goes beyond lip service; by advocating for stronger ownership disclosure measures and improving their own practices, companies can help ensure that mining revenues support economic growth and development, rather than lining the pockets of the few at the expense of the many.
And where these companies are already aligned with EITI expectations on beneficial ownership reform, the demand for action is clear.
Real progress requires sustained effort and real action. It’s time for companies in the extractive sector to step up, not just for the industry’s reputation, but for the communities that deserve to see tangible benefits from their country’s resources.
Transparency can change lives but only if it’s made a priority.
Transparency International Australia has a number of resources on beneficial ownership reform and its importance as part of the Australian anti-corruption landscape. Visit our website to find out more or click through to the resources below:
Promoting Beneficial Ownership and Integrity Screening in the Mining Sector, 2021
Revisions to the FATF Recommendation 24 on Transparency and Beneficial Ownership, 2021
Fixing Australia’s loopholes that enable the flow of dirty money, 2021
[1] International Trade Administration: Australia – Country Commercial Guide (Accessed 5 December 2024)
[2] Australian Bureau of Statistics: Analysing Australian Exporter Performance (Accessed 6 December 2024)
[3] Institute for Security Studies: Rampant cobalt smuggling and corruption deny billions to DRC, 18 June 2024 (Accessed 6 December 2024)
[4] Natural Resource Governance Institute, Twelve Red Flags: Corruption Risks in the Award of Extractive Sector Licenses and Contracts, 2017 (Accessed 6 December 2024)
[5] World Bank Group: Gender and the Extractives Industries: an overview, 2020 (Accessed 6 December 2024)
[6] Oxfam: Position Paper on Gender Justice and the Extractive Industries, 2017 (Accessed 6 December 2024)
[7] NRGI, Twelve Red Flags: Corruption Risks in the Award of Extractive Sector Licenses and Contracts (Accessed 6 December 2024)
[8] EITI: Shining a light on company ownership – The role of beneficial ownership transparency in the energy transition (Accessed 5 December 2024)
[9] Transparency International: Accountable Mining (Accessed 5 December 2024)
[10] EITI, Expectations for EITI Supporting Companies, (Accessed 6 December)