Wall Street reform rule said to increase violence in Congo

The 2010 law, enacted to prevent a repeat of the U.S. financial crisis, contained a provision directing the Securities and Exchange Commission (SEC) to draft rules requiring companies to check whether minerals they use are funding warlords in the Democratic Republic of Congo.

{mosads}Warring factions in the African nation are battling for control of its valuable supply of minerals. Dodd-Frank’s “conflict mineral” provision was designed to rid U.S. supply chains of those resources in an effort to dry up demand and decrease the violence.

Yet the resulting de facto embargo of the minerals has spilled over into legitimate trade and has further imperiled the Congolese economy, while also proving burdensome on American companies, GOP members of the House International Monetary Policy and Trade subcommittee said.

At the same time, the provision “has only led to more violence in the region,” said Rep. Bill Huizenga (R-Mich.).

The conflict mineral measure has been so impactful on the Congolese economy that it has become known there as “Obama’s law,” said Rep. John Campbell (R-Calif.), the panel’s chairman. Campbell’s assertion that the law was adversely affecting innocent bystanders was echoed by witnesses called to testify.

“People with very little to begin with are now dealing with less,” said David Aronson, a writer who has spent time in the region and launched a website that tracks the issue.

Mvemba Dizolele, an expert in U.S.-Africa policy and visiting fellow at Stanford University’s Hoover Institution said it is not the place of the SEC to promulgate rules that impact the livelihood of millions of people.

“It was inappropriate to ask the SEC to serve as the primary agency to enforce this law,” he said. “This work is simply outside this agency’s scope and mandate.”

Several members of the panel joined Dizolele in arguing that Dodd-Frank is not the proper forum to tackle human rights issues.

“I would repeal it today because I think its absurd,” snapped Rep. Mick Mulvaney (R-S.C.).

The SEC was not represented at the hearing and Democrats on the panel did not take a firm position on the provision. It did, however find support from one witness, who said there are signs that it is working.

Sophia Pickles of the non-governmental group Global Witness said the conflict mineral rule represents an important milestone on the path toward increased supply chain transparency.

“Breaking the links between the minerals trade and the conflict will deprive armed groups of a significant revenue stream,” Pickles testified. “The law has already catalyzed international engagement in eastern DRC’s minerals trade.”