Online Exclusive: Dodd-Frank's Conflict Minerals Provision Exposes Congo Connections.
Two of the central themes to emerge from the financial reform bill, which President Obama signed into law July 21, are transparency and greater oversight. From the creation of a consumer protection agency tasked with ensuring creditors explain fees in plain English to the first-ever regulatory framework for derivatives, the entirety of the U.S. financial system will feel the reverberations of the overhaul for years to come.
The provision calls for the comprehensive and easily searchable disclosure of payments to governments, both foreign and domestic, within the targeted industries. Every part of the revenue stream for the development of oil, natural gas and mineral operations--from taxes to bonuses to royalties--that's paid to a government must be disclosed annually in an interactive format. It's similar to voluntary disclosures already encouraged by the Extractive Industries Transparency Initiative, a global coalition that promotes improved governance in resource-rich nations. Former British Prime Minister Tony Blair launched the initiative in 2002.
But translating these social factors into financial risks may be easier said than done, Rosen says. He suspects the provision is intended to root out illegal payments, something already covered by the Foreign Corrupt Practices Act.
"If the idea is you're going to have a section of an annual report that says 'illegal payments,' fine, but we know that's not going to happen," he says. "If a company is bound and determined to hide an illegal payment, it's not going to be disclosed by this law."