How the EITI is being used to fight corruption

The extractive industries are known for being prone to corruption. Allegations and scandals have plagued the sector for decades, too often depriving citizens of precious revenues and economic development, and addressing corruption continues to be a pressing challenge in many countries.

That is why the EITI has joined diverse stakeholders – including leaders from government, civil society, industry, media and partners – for the 20th International Anti-Corruption Conference (IACC) this week to rally around the shared objective of uprooting corruption. As energy systems undergo rapid transformation and trigger substantial shifts in revenue flows, there is an urgent imperative to keep corruption risks in the extractive sector at bay.

The EITI can play an instrumental role in strengthening multi-stakeholder oversight and supporting anti-corruption agendas, for instance by exposing natural resource management processes prone to suspicious deals, and ensuring public access to company ownership information and contracts. Several EITI countries have started to use the EITI platform to address corruption risks in the extractive sector. Recently, EITI National Coordinators from more than 50 countries gathered in Oslo to discuss how EITI implementation can be used to support national priorities and anti-corruption efforts, particularly on issues of licensing and sub-contracting, revenue management and cooperation with national anti-corruption agencies.

Strengthening accountability with multi-stakeholder oversight

There is broad support for EITI multi-stakeholder groups’ (MSGs) to collaborate more closely with anti-corruption agencies to target corruption risks in the extractive industries. This would be especially timely for mineral-rich countries, as the expected surge in demand for transition minerals presents an urgent opportunity to strengthen governance of mineral value chains for the energy transition. The EITI’s latest study outlines 20 risk areas for transition minerals, and provides recommendations for diverse stakeholders to address them.

Some countries are already laying the groundwork in this area, for example Indonesia and the Philippines which together account for nearly half of the world’s total nickel output. The Philippine MSG is conducting an analysis of corruption risks in the nickel value chain to guard against revenue leakages that might arise with potential windfall gains from growing nickel demand. Indonesia EITI established a focus group to analyse governance risks in the critical minerals supply chain for its battery industry, and the MSG is linking these efforts to the country’s national anti-corruption plan.  

Other countries have also started to look into how EITI reporting and data can be used to identify corruption risks across the extractive sector, including in Armenia, Gabon, Mongolia and Togo, as well as some countries in Latin America. Although these anti-corruption efforts are still at the early stages, they demonstrate a growing appreciation for the EITI’s potential in tackling corruption.

Using company ownership data to identify red flags

While the EITI’s beneficial ownership disclosure requirement has been in force since 2020, the past year has seen concerted efforts to advance beneficial ownership transparency in 10 countries through the Opening Extractives programme. Under the programme, several countries are making important strides in combatting the use of anonymous companies, which can be used to hide illicit practices such as money laundering. The programme’s latest policy brief demonstrates the potential of company ownership data to challenge those seeking to abuse their positions for personal gain.

Some countries are also applying innovative approaches to beneficial ownership transparency. In Ghana, beneficial ownership reforms are seen as a tool in fighting corruption, with the EITI playing a key role in making data available and publicly accessible. And in Colombia, the EITI developed a tool in partnership with Directorio Legislativo to identify corruption risks related to politically exposed persons (PEPs). The tool cross-checks beneficial ownership data for extractive companies with financial disclosures to generate red flags – such as potential conflicts of interest in licensing and contracting – of which nearly 20% have involved high- and middle-ranking officials. With the support of the Opening Extractives programme, the tool is being piloted in Nigeria, drawing on data from the country’s forthcoming beneficial ownership registry.  

Using export and production data to tackle illicit behaviour  

Corruption in the extractive sector is linked to tax evasion and illegal markets, which annually lead countries to lose billions of dollars in illicit financial flows. For example, smuggling of minerals has resulted in losses of public revenues and in some cases has helped fuel conflict. Comprehensive and detailed disclosures of data on the production and export of oil, gas and minerals can be leveraged to identify patterns of illicit trade and corrupt practices.

Granular production and export data can also help stakeholders identify underreporting of commodity volumes or values, which could point to tax evasion or corruption. EITI countries are increasingly disclosing production data by project, which enables more meaningful analysis of the payments made by governments. As the value of production affects the government’s revenues, reliable production data is key for understanding if the government is collecting what it should.

Looking ahead: Data-driven approaches to tackling corruption

Reliable, granular and timely data is key to fighting corruption. EITI reporting offers an important entry point for strengthening anti-corruption measures and policies, and can be complemented with data beyond the EITI Standard to detect illicit practices. More technical assistance will be needed as MSGs increasingly consider how to strengthen their role in identifying and mitigating corruption risks. The EITI’s guidance provides a step-by-step approach for defining the EITI’s role in mitigating corruption at the country level, drawing on good case practices across the EITI network.  

Looking ahead, the energy transition will entail profound transformation for resource-rich nations. The global shift away from fossil fuels may trigger some oil and gas producers to enter into hasty deals, while increased demand for raw materials needed for renewable energy technologies creates urgency for mineral-rich countries to strengthen governance of their mining sectors. Moreover, renewable energy projects may be particularly vulnerable to corruption in environments where legal and institutional frameworks are not yet well developed. Experience has shown that the EITI’s multi-stakeholder approach has a key role to play in supporting transparency and good governance, and can provide an inclusive platform as countries seek to manage their natural resource sectors in an evolving global context.