Glencore has received a record fine from U.K. authorities. Will the punishment change corrupt behavior in the commodity trading industry? Are individual executives next?
Today Glencore Energy (UK) Ltd was sentenced to pay GBP 281 million, the largest ever penalty handed down to a company in a U.K. court, after pleading guilty in June this year to all seven charges of bribery brought against the company. The charges brought by the British government’s Serious Fraud Office (SFO) relate to Glencore’s oil operations in Cameroon, Côte d’Ivoire, Equatorial Guinea, Nigeria and South Sudan from 2011 to 2016, with over USD 28 million paid via employees and agents to secure preferential access to oil, including increased cargoes, valuable grades of oil, and preferable dates of delivery.
Investigations into these bribes have been equally international in scope; the SFO worked in parallel with the U.S. and collaboratively with Dutch and Swiss prosecutors on this case. The European cases are still ongoing and sentencing is due on 21 November in the broader U.S. case, the scope of which also includes bribery in Brazil, Democratic Republic of the Congo and Venezuela. Glencore PLC has already stated that it expects to pay up to USD 1.5 billion to settle bribery and market manipulations cases this year, including a separate case in Brazil in connection with the Lava Jato probe.
The question now is: what happens next? With a win under their belt, will this case lead to more ambition from U.K. authorities in their fight against extractive sector corruption? As one of the world’s major trading markets and with many companies across the extractive supply chain listed in London, the U.K. could play a crucial role in holding corrupt actors to account. With extractives corruption undercutting efforts to deliver a just energy transition, getting to grips with this problem would also support the U.K.’s wider climate policy agenda. And, with the costs of corruption cases soaring, will Glencore buckle under the pressure of its swashbuckling reputation and implement the seismic change needed to become a responsible industry player?
The Glencore conviction is a welcome win for the SFO, particularly after recent struggles in cases with Unaoil and ENRC. This case could kickstart a concerted effort from the U.K. to tackle extractives sector corruption more effectively, including using expertise that the SFO has developed from this case to tackle other allegations of commodity trading corruption. The U.K. has already made welcome progress on tackling illicit financial flows, many of which originate in the extractives sector, with two bills passing through Parliament this year that will help address money launderers’ abuse of U.K. property and companies. Yet a spate of integrity scandals has also shown the scope for private interests to unduly influence policy decisions, and highlight the ways in which members of the U.K.’s political class have aided kleptocratic elites enriched by their countries’ resources.
Three reforms needed in the U.K.
The Glencore conviction highlights three key areas where the U.K. government could drive change, beyond tightening up its general anticorruption defences. With the U.K. recently pledging to address corruption in its critical minerals strategy, implementing the following reforms would go some way to transforming this commitment into something more tangible:
First, authorities in the U.K. and Switzerland—the world’s foremost commodity trading hubs—should jointly push for a global and binding standard to ensure that companies disclose trading payments to all governments and state-owned enterprises (SOEs). A 2019 Extractive Industries Transparency Initiative (EITI) requirement was an important first step in recognition of the need for more transparency from countries, businesses and civil society actors alike. With Switzerland expressing interest in these changes, the ball is now in the U.K.’s court to push the agenda forward.
Second, the U.K. should hold to account both individuals and corporations who engage in corrupt behavior; the SFO show now prosecute the 11 individuals still under investigation in this case. Even large fines may be insufficient to deter wrongdoing if big companies can price them in as the “cost of doing business” and so executive accountability is essential. Where other allegations of extractive sector corruption exist, the U.K. should use all the tools at its disposal to ensure consequences for wrongdoing, including Unexplained Wealth Orders, Account Freezing Orders and targeted anticorruption sanctions.
Last, reforms and resourcing to better support the SFO will be essential if the organization is to effectively and assertively fight corruption. As the first-ever U.K. corporate conviction for Section 1 offenses under the Bribery Act, this landmark case should also spur the SFO into pursuing more ambitious investigations and prosecutions. This should include investigating the full picture of corruption allegations against companies like Glencore, and better identifying and compensating victims, who have been notably absent from this case.
Glencore's acts of contrition (or lack thereof?)
Understanding whether or where progress is being made within Glencore itself is unfortunately more complicated. There has been a changing of the guard, with many key figures retiring in recent years, including at the very top. Long-term leader Ivan Glasenberg stepped aside for Gary Nagle in 2021, who has stated that “we want to complete these investigations, put a line under that and move forward.”
Drawing a line under these investigations may, however, be more easily said than done. In recent weeks, an investor group has launched a lawsuit against the company, apparently related to losses linked to its recent bribery cases. The company also faces yet another investigation, with Zambia’s Anti-Corruption Commission launching a probe into an alleged payment to a political party. If Glencore is serious about moving forward, it must demonstrate a genuine shift in its culture and practices.
While Glencore’s efforts to enhance its ethics and compliance procedures and review some of its operations are welcome, these changes alone are insufficient. Earlier this year, we joined our partners—Global Witness, Oxfam America, Public Eye, Resource Matters and RAID—to outline how the company could atone its wrongdoing and avoid future violations.
We recommend that Glencore review engagements with Russian SOEs, adopt and publish measures to reduce corruption risks in business with SOEs, and make transparent its transactions with SOEs in all countries. Glencore should also cease all relations with Dan Gertler, who the U.S. sanctioned in 2017 for high-level corruption yet still receives substantial royalties from deals in the DRC. Although Gertler denies any wrongdoing, the DRC is estimated to have lost a staggering USD 3.71 billion (at least) from the deals he was involved in, alongside Glencore and ENRC.
This is the crux of our concern; Glencore is yet to show a real willingness to engage seriously with efforts to compensate victims in countries where its corruption took place. Carefully worded corporate statements can state the facts of wrongdoing, but they fail to meaningfully grapple with its consequences.
Top photo by Photo by Marlon Trottmann for Shutterstock
Glencore must take action
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