Conflict Minerals Rule Ineffective

The Securities and Exchange Commission's  2012 conflict minerals disclosure rule has not reduced violence in the Democratic Republic of the Congo (DRC) and has likely had no effect in adjoining countries, according to a GAO report released October 7th.

The SEC rule requires companies to file reports on their use of tantalum, tin, tungsten, and gold, which are mined in the DRC. GAO found no empirical evidence that the rule has decreased the occurrence or level of violence in the eastern DRC, where many mines and armed groups are located.

GAO also found the rule was associated with a spread of violence, particularly around informal, small-scale gold mining sites. This may be partly because armed groups have increasingly fought for control of gold mines since gold is more portable and less traceable than the other three minerals.

Further, GAO found that the number of violent events in the adjoining countries did not change in response to the SEC rule.

The number of companies filing conflict minerals disclosures in 2023 increased for the first time since 2014, but majority of the companies that conducted due diligence reported being unable to make such a determination. 

The report also finds companies interpret  guidance issued by SEC staff in 2014 and 2017 to mean that the SEC will not enforce penalties related to the rule.

DRC government officials interviewed in Kinshasa expressed appreciation for the rule’s effect in drawing attention to conflict in the DRC and minerals’ role in the conflict. .

Although traceability schemes exist for tantalum, tin, and tungsten, tracing chains of custody for gold—which is more portable, valuable, and fungible—is more difficult.  The illicit gold trade is estimated to generate more than a billion dollars annually, according to USAID 

"Ten years after companies first submitted disclosures under the SEC rule, conflict persists and evidence indicates that the rule has not contributed to a measurable improvement in peace and security in the DRC."

[Highlights].   [Full Report]