In our cyberfinance environment, we are prone to navel-gazing and focusing on the dark side of cryptocurrencies, i.e., money-laundering or scam facilitation. In doing so, we forget that the legacy economy and finance are genetically driven by corruption and money laundering. One example? The U.S. SEC‘s latest order against Rio Tinto. The company has agreed to pay a $15 million civil penalty to settle the SEC’s corruption charges.
The U.S. SEC charged Rio Tinto with violations of the Foreign Corrupt Practices Act (FCPA) arising from a bribery scheme involving a consultant in Guinea. In July 2011, Rio Tinto hired a French investment banker and close friend of a former senior Guinean government official as a consultant to help the company retain its mining rights in the Simandou mountain region in Guinea.
The consultant began working on behalf of Rio Tinto without a written agreement defining the scope of his services or deliverables. Eventually, the mining rights were retained, and the consultant was paid $10.5 million for his services, which Rio Tinto never verified.
The SEC’s investigation uncovered that the consultant, acting as Rio Tinto’s agent, offered and attempted to make an improper payment of at least $822,000 to a Guinean government official in connection with the consultant’s efforts to help Rio Tinto retain its mining rights. Furthermore, none of the payments to the consultant was accurately reflected in Rio Tinto’s books and records, and the company failed to have sufficient internal accounting controls to detect or prevent the misconduct. Rio Tinto has not developed the mine.
Rio Tinto consented to the SEC’s order without admitting or denying the findings that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934 and agreed to pay a $15 million civil penalty.
