Forensics trends in mining and metals

Theo Yameogo: Welcome Zain! As a national leader in forensics for mining and metals, you have deep insight into how the trends are going on right now in forensics and what mining companies can do. I look forward to hearing your thoughts.

Zain Raheel: Thanks so much, Theo! So excited to be here and very excited about this conversation.

Theo Yameogo: Let's get right into it. So, Zain, tell us about the trends you're seeing when it comes to forensics in mining and metals.

Zain Raheel: Sure, Theo! So excited to. Well, the good thing is that mining is hotter than ever, right? In a large inflationary environment like this, obviously, there's a big flight towards gold, silver and other precious metals. And with the green economy being what it is right now, obviously there's a huge demand for battery metals and minerals as well. So mining obviously is as popular as it's ever been. But unfortunately when times are good, there are those types of situations where people will try and take advantage.

So we've seen that certainly single-incident levels and multiple-incident levels. Maybe I'll explain a little bit further. So at a single incident, very large-impact level, a very large global mining company found themselves under the scrutiny of a global regulator fairly recently where they paid a very, very large fine because the mining company had previously, in the early 2000s, engaged a consultant who had interacted with government on their behalf.

Now, it's quite sad because subsequent to that time, this company has really invested a lot of time, money and effort in their compliance program and really does go out of their way to do things properly. But unfortunately, because of the situations of the past, they found themselves paying absolutely staggeringly large fine.

That's the risk that can happen when, you know, when you find yourself at a high risk of interaction with government officials, which obviously in the mining and metals sector, we find ourselves doing that for expropriation rights and things like that as well.

On a multiple incident level, there was a large global mining company that found themselves at a particular mine site. The allegations were that a criminal organization was operating there with impunity - all around misappropriation of funds, misappropriation of assets, theft of fuel, everything of a lot of value at the mine site level.

And you think about it, when controls don't exist or when the proper investigative protocol doesn't exist, when there's collusion amongst individuals and the security forces, these sorts of things can happen. Do they happen all over the place? Of course, you know, that's not the case. Most mining companies are very, very well run. But that doesn't mean that these sort of risks don't exist and they do have to consider how to get to the bottom.

Theo Yameogo: These are very interesting cases, Zain. Now typically corporations can be far from the mine sites and mines can be in so many different countries, different realities. What have you seen when it comes to these faraway operations, when it comes to forensics in general?

Zain Raheel: It's a great question Theo. So, you highlight a very, very important point there, which is for a lot of our North American mining companies, their assets are really quite far away. They're not in their vicinity. They tend to be in different countries. Cultures are different and things like that. And what we've seen a lot of is not the company itself behaving badly.

Unfortunately, the risk gets created by the third parties that they interact with. If you look at a lot of companies, their policies and procedures are really quite good, right? They are very explicit to say you shouldn't pay bribes. We don't pay bribes. That's not how we operate. But the Achilles heel, if you imagine, is really how they interact with third parties, because those third parties and a lot of the cases that I've worked on, a lot of the cases that we see, a lot of the cases that regulators really latch onto are how did the third parties behave on their behalf?

Sometimes there's this behavior of absolving your risk by engaging a third party to behave on your behalf. You can do that, but then those third parties have to be bound by the same ethics and morality that the companies themselves operate. What we've seen a lot is where that falls down. The third party is essentially a shell to facilitate something that the company itself really shouldn't be doing.

Often it's bad decisions made at a level that the corporate office, to your point, is not necessarily aware of to the degree that they should be aware of. And those what initially start off as potentially minor behaviors at a certain level can telegraph and become catastrophically large issues down the road when under the microscope of a global regulator.

Theo Yameogo: So what do we do about this?

Zain Raheel: It's a really great point. Ultimately, there are many procedures, tools and behaviors that companies can put in place to help prevent these sorts of issues down the road. It really helps if they know who they're dealing with, who are they interacting with? Really getting to a good understanding of, you know, who your third parties are, who your vendors are.

And a lot of that involves a lot of due diligence that is different perhaps than the standard financial due diligence. It's really using open-source intelligence, using large intelligence networks, really understanding and getting to the bottom of who you're interacting with. Is the company that you've signed the contract with, is it really the company that you want to be engaging with?

Is it really what they purport to be? Are their operations as robust as you think that they are? Have they been operating in this jurisdiction for a really long time? Or, frankly, were they set up really just to interact with a foreign government on your behalf? You know, those sorts of questions are the things that you want to get answers to.

The other thing is that, you know, companies can really use the tools and techniques that are available to them to harness their data analytic capabilities, understand at a transactional level what's happening. Because really, Theo, if you think about it, if certain transactions happen right around when you're getting a mining license and payments are being made, I think all of us would sit back and say, why is that happening?

What are those transactions? What are those payments? But often what happens is because financial systems tend to be disaggregated and not necessarily integrated, a lot of that work has to be done at the particular mine site. And so it requires a little bit of extra digging. It requires a particular forensics lens. It requires individuals who've seen this happen many, many times in the past for them to look at the transactions in their entirety in a holistic way to say, what is this story telling me?

Because often that's what it is. It's not an isolated payment or an isolated transaction. It's the holistic story of who are these individuals, why are they interacting, why are the payments happening, and why are they happening in this way? You know, sometimes it's almost like a second language and so for us in the forensics world, it's bringing all of that together, understanding, interpreting, digesting and then reframing it to say, based on what we see here, the data level, this is what we think is happening, and then to investigate that further.

Theo Yameogo: That's interesting, Zain, because you mentioned a lot of what I'll call interesting words like networks, AI, and also we know that in some of these areas we are in different jurisdictions where technology may not be there. How does your team integrate their data analytics AI piece with boots on the ground, checking reality when that reality is not actually connected to the cyber world? How does that work?

Zain Raheel: It's an excellent question, Theo. And I'm so glad you asked, because the reality of it is you cannot rely purely on the data in hand because if you did, you'd always be at a distance and you wouldn't necessarily get to the answer. The combination, as you described, of data and boots on the ground is exactly where things come together because I know often before we get out to a site, we’ll analyze the transactional data that we have available to us. Most corporate offices can get us that information. We can look at it ahead of time. But when you get to site, that's where you have to, as you describe, put your boots on the ground and get out there and understand what's going on.

And I found myself in certain situations going to what was purported to be a major corporate office and finding it to be nothing more than essentially a cell phone vendor in a shopping mall. Just using an address. And that answers a question for you pretty quickly. But if you rely purely on the data and sometimes on the documents in front of you, it'll tell you a story that everything's fine.

But your point about get on, you know, get the boots on the ground and get out there and see what's happening. Speak to local individuals because your local team is your best asset, right? Particularly when your operations are in a jurisdiction that's not in North America. You just have to ask them. So many times I've been on site and we've cracked open a large investigation and the individuals who help us say somebody just needed to ask us.

We know what's going on. We can see this. Because nobody likes bad behavior. Perhaps there are a small, isolated number of individuals who will take advantage. But the vast majority of people who are working there are ethical individuals who just want to do their job, do right by the company, do right by their local community. And when they see bad behavior, they want to be able to tell somebody about that.

Often what happens is the individuals who are perpetrating the bad deeds tend to be individuals who are in positions of power. So it's quite difficult for someone to avoid that particular cycle until you get out there and you actually start asking them. And then they usually are very willing to talk. And once you speak with the local individuals, they will often help connect the pieces for you.

Going back to that holistic view, the conversations with individuals at the local level tend to be the last few pieces of the puzzle that you can connect together to give you the whole view.

Theo Yameogo: Now let me take a different position based on what you're telling me. If I'm a corporation and I tell you, well, we put a whistleblower program in place, we should be fine. What has been your experience with those kind of programs based on cases you worked on?

Zain Raheel: That's a great question, Theo. So what I would ask that corporation is how often does their whistleblower line get used? How often does their ethics number get called? Because often what we would see, and going back to the corporate offices, being here in North America and the assets being all around the world, there's actually an interesting book out there called Culture’s Consequences.

And it what it talks about is really how different cultures respond to positions of power. And it really helps to identify that not everyone is going to respond the exact same way that we would here in North America. There's an expectation that we've put the number in. If there's a problem, just call us. Right? But ask that to somebody who's in a country that's never met the C-suite of the corporate office, understands them to be somebody who's very far away and lives in a country where speaking up is not really part of the culture.

So in those instances, we find the voluntary speak-up programs like that really have to be encouraged. They can work and they work in a different way than they do here in North America. They work if you help to coax the conversations out of individuals as opposed to just saying, we've got a number, call us if there's a problem, because those individuals will not call.

And actually a way to identify that is to sit back and say, why do we have zero calls from a particular country? You know, that would be a good step to start, really, a process to try and understand if we're getting zero calls from a particular country, is that indicative of a problem? And often it is.

Theo Yameogo: Interesting. Now you've got me thinking about two different areas of mining operations. So there's the operation running, and you talked about these cases, but there's also just transactions. How does forensic get involved in a transaction scenario versus in the operations scenario?

Zain Raheel: So in the operation scenario, we tend to focus in on the physical assets. Because those are the physical assets that have value. So the physical assets can often be misappropriated.

Mining assets are very, very high value. So stealing just even some of them can be very lucrative for, as I mentioned earlier, the criminal organization. So in those particular instances, a lot of our work is more physically focused. So we'll actually spend time physically analyzing things, you know, working with engineers on samples and things like that.

So really getting to the facts of the situation. And then on the non-operations, more transactional side, that's really where we try and understand what are the funds being paid for? Does this make sense? Are we overpaying for things? Because if we've paid for something that is astronomically high, why is that? Because often the story we get told is you don't understand our business.

We're in a remote location. It's very hard to get contractors to work here. They're very expensive. I get that. That is a limitation. But even within those sorts of limitations, you can find issues of kickbacks. Kickbacks tend to be a big one, a pay-to-play kind of scenario that if you want to work here, somebody from within the organization will say, if you even want to get on this list, you've got to be paying me something.

And so those sorts of overpayment scenarios. And then the other stuff is, as I mentioned earlier, the interaction with government, because the interaction with government is really a big Achilles heel for mining companies, because the reality is regulators around the world, particularly the US regulators, they have a field day chasing down large global organizations and saying you interacted with a foreign government and you paid a bribe to a foreign government and now we're going to penalize you for that.

And that can be, you know, a very large fine for the company if they're lucky enough to just get away with a fine. And it can be very, you know, detrimental to them, it can be actually very lucrative for regulators as well if you look at the history of it, too.

Theo Yameogo: This has been invaluable, Zain. I've learned a lot today. Thanks for being here.

Zain Raheel: Thank you so much for inviting me, Theo. It has been an absolute pleasure. I really enjoyed this conversation.