Compliance: Top Agenda for Canadian Extractives Companies

Posted by Amanda Nieweler

on November 6, 2015

Canadian oil, gas, and mining companies should be dusting off their compliance programs

Starting in 2016, the ‘Extractive Sector Transparency Measures Act’ (ESTMA) comes into force, and Canada’s oil, gas, and mining companies will be required to start tracking payments to government recipients. This new law will require these companies to disclose payments made to government officials relating to the commercial development of oil, natural gas, or minerals, at home and over seas. Companies that are already required to disclose such payments in other jurisdictions, such as the US and Europe, will be relieved from having to disclose again under the new law. The Act delivers on Canada’s 2013 G8 commitment to contribute to global efforts against corruption in the extractives sector. 

Canadian companies that fall within the scope of this law will be required to publicly report each year on specific types of payments made to all levels of government, in Canada and abroad. And payments made indirectly through third-parties are also covered by the law.

This reporting will apply to publicly traded companies, as well as medium and large private extractive companies, operating or headquartered in Canada involved in the commercial development of oil, natural gas, and minerals, and export of these materials out of the country.

Canada’s extractive sector is a pretty big player globally. In 2013, Canadian headquartered mining and exploration companies accounted for nearly 31% of global exploration expenditures. In 2013, over 50% of the world’s publically listed exploration and mining companies were headquartered in Canada. These 1500 companies had an interest in around 8000 properties in over 100 countries around the world. Safe to say that Canada is a strong player in this game.

The purpose of this Act is to ensure ‘Canada’s international commitment to participate in the fight against corruption through the implementation of measures applicable to the extractive sector, including measures that enhance transparency, and that impose reporting obligations with respect to payments made by entities. These measures are designed to deter and detect corruption including any form of corruption under the Criminal Code and the Corruption of Foreign Public Officials Act’.

In doing their part, Canadian companies will need to ensure that they have adequate accounting practices and compliance procedures in place to comply with the new law. Having a strong corporate compliance program is crucial if these companies want to stay within the bounds of this law. If an offence under this law is committed or continued on more than one day, it constitutes a separate offence for each day on which the offence is committed or continued.

Therefore, the importance of having an effective compliance program to strengthen an organization’s internal controls, and detect and prevent violations is so important.

The purpose of a compliance program is to prevent or detect violations of law or company policy. Considering this new law affecting the extractives sector will go into effect January 1, 2016, it’s best that Canadian companies ensure their compliance programs are structured to mean all regulatory requirements, and soon!

We’ve laid out 10 best practices to build a strong compliance program.

eBook: 10 Best Practices to Build a Strong Compliance Program