Executive summary

Corruption in the value chain of extractives is a major impediment to development. The OECD Foreign Bribery Report shows the magnitude of the problem, finding that one in five cases of transnational bribery occur in the extractive sector. Corruption works as a tax on international investors, increasing the costs of doing business. It further deprives host countries of much needed revenues and significantly alters the efficient allocation and distribution of resources to achieve development objectives. Potential revenue losses are huge, considering that oil trading alone accounted for more than half of state public budgets in ten major sub-Saharan African countries in the period 2011-13. Participants in the OECD Initiative for Policy Dialogue on Natural Resource-based Development considered that a clearer understanding of the evolving patterns that perpetuate corruption is necessary for governments and companies to catalyse reforms and maximise the positive impact of extractive activities on development.

The typology of risks, mitigation measures and incentives across the extractive value chain is intended to help policy makers, law enforcement officials and stakeholders strengthen prevention efforts at both the public and private levels. It aims at improving the understanding and awareness of corruption risks and mechanisms, to better tailor responses to evolving corruption patterns and effectively counter corruption demand and supply.

The typology is based on the analysis of a sample of 131 concluded and ongoing corruption cases. The sample of cases reviewed has been compiled using publicly available databases, information in the press, a review of literature and input received from participants in the Working Group on Corruption Risks. All reported cases have been anonymised in order to collate information, identify corruption patterns and allow for frank and open exchanges among participants in the Working Group on Corruption Risks and in the OECD Initiative for Policy Dialogue on Natural Resource-based Development.

Key findings

  • The reviewed cases show that corruption risks may arise at any point in the extractive value chain. The award of mineral, oil and gas rights, and the regulation and management of operations present 34 and 59 cases, respectively. The remaining 26 cases concern revenue collection. Identified offenses include: bribery of foreign officials, embezzlement, misappropriation and diversion of public funds, abuse of office, trading in influence, favouritism and extortion, bribery of domestic officials and facilitation payments.

  • Large-scale corruption involving high-level public officials was observed in the award of mineral and oil and gas rights, procurement of goods and services, commodity trading, revenue management through natural resource funds, and public spending. Lower ranking officials (tax officials, customs or immigration agents, and inspectors) are usually involved in corruption in connection with violation of customs clearance and immigration rules and tax collection. State-owned enterprises (SOEs) were involved in 20% of the reported cases. SOEs appear to be particularly exposed to corruption in the award of rights, the procurement of goods and services and commodity trading, as well as non-commercial activities such as social expenditures or management of fossil fuel subsidies.

  • The analysis highlights that central or local government officials, local business partners, subcontractors, consultants, advisors and intermediaries as well as foreign companies may act indistinctly as instigators or beneficiaries of the corruptive behaviour.

  • The analysis further shows that sophisticated vehicles for channelling illegal payments, disguised through a series of offshore transactions (12 cases) and complex layers of corporate structures, often involving shell companies (21 cases), are recurrent features rendering the detection and sanctioning of corruption more difficult. Shell companies may be used as a way for politicians or other public officials to disguise the award of contracts to companies in which they or their proxies hold interests. Shell companies can also be used as conduits to divert public funds and channel payments to the real beneficiaries of the transaction. In the private sector, extractive industries may resort to fronting practices to circumvent local content rules. Companies can also pay illegal fees to contract with front companies in order to pay lip service to host country laws. Third parties, including intermediaries, such as agents and consulting firms, or joint venture partners, subsidiaries, business partners, lawyers and accountants are often used to either influence the decision-making process or to conceal payments made and help distance oneself from the crime (49 cases).

  • Discretion in the selection of joint venture or other business partners, in the hiring of local staff, in the application of pre-qualification criteria for the procurement of goods and services or in the enforcement of local content obligations increases corruption risks. In such cases, ill-designed local content provisions can end up favouring politically affiliated individuals and entities in which politicians and public officials or their proxies hold interests.

  • Corruption in commodity trading constitutes another emerging area of heightened risk given the substantial revenues diverted through this channel and their crippling effects on government budgets. Trade mispricing practices and complex kickback schemes to secure deals illustrate the increasing sophistication of constantly evolving patterns of corruption in this field.

  • At the local level, corruption may result from a culture of clientelism and patronage as well as informal networks of local public officials, civil servants, community leaders and local business elite. It may also result from a hasty decentralisation process carried out without proper assessment of the capacity of the local economy and of the human, technical and administrative capabilities of subnational authorities to absorb new responsibilities and large inflows of resource revenues.


  • Taking a one-dimensional approach to combatting corruption in extractives is unlikely to achieve results. Both the supply and demand for corruption need to be tackled, domestically and internationally, with granularity and differentiation across the broad range of private and public actors.

  • Understanding the nature of the problem is a necessary step to avoid investing in misguided efforts. However, in the face of evolving patterns and adaptive strategies that perpetuate corruption, a dynamic, innovative and proactive stance is needed in order to strengthen prevention alongside implementation and enforcement efforts. It is expected that recommended mitigation measures and incentives addressed to home and host governments and extractive companies will incentivise a voluntary change in behaviour, by making corruption more costly and helping to make it less attractive for public and private actors alike.

  • Closing the gap between theory and practice calls for building an alliance of home and host governments using the typology as a standard diagnostic framework to assess risk and implementing recommended mitigation measures and incentives across the value chain, and through a peer review process.