Compliance and verification

The Extractive Sector Transparency Measures Act (ESTMA, or the “Act”) Compliance Program supports data integrity and effective administration of the Act. All entities under the ESTMA, including those that do not enrol or submit a report, may be subject to compliance verification and enforcement requests and actions. Read on to learn more about the ESTMA Compliance Program.

Compliance approach

The ESTMA Compliance Program aims to improve the accuracy and completeness of ESTMA reported information, using data analytics, review of entity information, fieldwork, and public outreach. The approach includes:

• Data reconciliation – ongoing data analytics processes are employed to flag potential errors in the ESTMA dataset and to improve data integrity. Activities may include but are not limited to:
  • Payment validation – detecting potential data entry errors by identifying statistical outliers in payment data
  • Currency translation rate validation – detecting and addressing issues related to currency and translation rates on ESTMA reports using historical translation rate data
  • Broken links – detecting and tracking instances of broken report links
  • Payee name standardization – standardizing similar payee names in the database to facilitate payee- and location-based risk analyses
• Compliance reviews – entity-specific reviews, which are based on entities and their operations. Reviews will request information related to specific compliance questions and issues of concern. Depending on the issues of concern, reviews may include more involved verification such as interviews and site visits.
• Compliance promotion – ongoing information sessions for entities (and companies that support entities’ ESTMA reporting) on reporting obligations and common reporting errors. This will be complimented by periodic publication of high-level statistical information on compliance trends and common reporting errors.

Selecting entities for a compliance review

NRCan has implemented a hybrid complaint- and risk-based monitoring approach to compliance review selection, which aligns with best practices established by other regulating bodies in Canada and abroad. High risk ratings and/or third-party complaints can lead to information requests and compliance reviews.

Risk-based monitoring

NRCan tracks all report submissions and communications with all entities. Using this internal data on entities and their reports, as well as external data from reputable sources (e.g., public corporate disclosures, stock exchange information, recognised country corruption indexes), entities are assigned a risk rating for potential non-compliance with the ESTMA.

Compliance risk factors include factors related to an entity’s reports (late reports, report validation errors, broken report links, etc.) and factors related to companies and their operations (countries in which they operate, entity size, etc.). Factors related to entities and their operations are especially important for entities that have not enrolled or submitted a report. This will ensure that entities that have not attempted to report are held to the same standard as those that have reported.

Examples of risk criteria that may be considered when determining entities that are at a higher risk of non-compliance include:

• Entities that submit a report with multiple errors;
• Entities that do not rectify errors in their reports in an acceptable and timely manner;
• Entities that did not report on or provide context on why they did not have to report on joint ventures;
• Entities that are flagged for data errors and anomalies;
• Entities that submit late reports; and
• Entities that do not maintain report accessibility requirements (e.g., broken links).

Third-party complaints

Requests from third parties for further examination of a report submitted under the ESTMA will be considered, provided that reasonable grounds are provided to merit further scrutiny.

See the section on “Submitting a third-party complaint” for more information on how to submit a request for further examination of a submitted report.

Compliance review process

Compliance reviews will generally follow the process outlined below. Compliance reviews will take place on an ongoing basis.

1. Selection of entities – Entities are selected for compliance review based on risk-rating and third-party complaints. A list of entities will then be vetted by an oversight committee to ensure no bias in the selection process.
2. Letter of intent – Entities will be notified that they are being reviewed through a Letter of Intent. This is intended to inform the entity of the compliance review and to obtain contact information for the purposes of the review.
3. Request for Information – The Request for Information will communicate specific compliance questions and issues of concern. This request may ask for supporting documentation, if applicable. The process may result in scope revisions based on preliminary findings, which would lead to additional information being requested.
4. Detailed review (Fieldwork) – This is a more involved step in the review, where more detailed information may be requested. Interviews and/or site visits may also be requested. Following this phase, compliance review findings and recommendations are drafted and reviewed by the oversight committee.
5. Summary and recommendations – Once the compliance review findings and recommendations are approved, they are presented to the entity in the form of a final report. Entity risk ratings are updated based on the review, and the entities reviewed will undergo a heightened level of compliance oversight for several years thereafter. These final reports will not be made public.

The length of the ESTMA compliance review process is contingent on several factors such as the number and complexity of issues identified. Requests for information may also be revised or expanded based on the responses received from entities, which may extend the compliance review. However, most compliance reviews are anticipated to last approximately three to four months from beginning to completion.

Escalation policy

The ESTMA Compliance Program uses escalating enforcement actions proportional to the level and extent of non-compliance. These actions are also designed to ensure a consistent and unbiased approach to escalating compliance actions. Specific escalation actions include:

• Preliminary escalation measures (emails and telephone calls);
• Warning letters;
• Ministerial Orders;
• Third-party audit request at the entities’ own cost; and
• Recommendation for prosecution.

These actions are intended to be applied sequentially, but steps may be skipped depending on the facts and circumstances of each case. Cases will not always be escalated to prosecution, but the application of any escalation measures will affect an entity’s overall risk rating.

Non-compliance

NRCan is committed to undertaking outreach and working with industry to ensure that reporting obligations are well understood. If a person or entity is found to be willfully not compliant with reporting requirements or corrective measures, obstructs an audit, knowingly provides false or misleading information, or fails to comply with any other provisions in sections 9, 12 or 13 of the Act, NRCan may recommend prosecution to the Director of Public Prosecutions under section 24 of the Act, which allows for fines of up to $250,000 per day per offence.

The ESTMA was developed to deter and detect corruption, including any forms of corruption under any of sections 119 to 121 and 341 of the Criminal Code and sections 3 and 4 of the Corruption of Foreign Public Officials Act. The responsibility for investigations of any possible criminal activity will rest with the relevant law enforcement agency. Any suspected evidence of bribes, corruption, or related offences uncovered by, or provided to, NRCan staff will be immediately referred to the Royal Canadian Mounted Police (RCMP) and any other relevant law enforcement agency. Entities, external auditors, and other relevant persons are strongly encouraged to report any suspected bribes or related offences directly to the RCMP (see the Report Corruption section of the RCMP’s Corruption website).

Submitting a third-party complaint

NRCan will consider requests by third parties to further examine a report submitted under the ESTMA if there are reasonable grounds that support further scrutiny. Requests for further examination of a submitted report can be sent by email or regular mail to:

Extractive Sector Transparency Office
Lands and Minerals Sector
Natural Resources Canada
580 Booth Street, 9th floor
Ottawa, ON, K1A 0E4

Upon receipt, a request will be reviewed based on the following criteria:

• made in good faith and not be frivolous
• clearly related to non-compliance with the ESTMA
• includes credible information
• falls within NRCan’s jurisdiction

Third-party requests submitted for examination should include all relevant information to demonstrate the request meets the above criteria.

An anonymous third-party complaint may be submitted without having a name and identity associated with it. However, where information is provided anonymously, NRCan will not be able to contact the complaining party for additional information nor will it inform them of the findings or status of a resulting compliance review. If you wish to submit identifying information along with a third-party complaint for communications purposes while also remaining anonymous, please clearly indicate this in your communications with NRCan.

Connect with us

If you have questions on ESTMA reporting or the ESTMA Compliance Program, please send us an email:

• General Inquiries: estma-lmtse@nrcan-rncan.gc.ca
• ESTMA Reports: estma_reports-rapports_lmtse@nrcan-rncan.gc.ca
• ESTMA Compliance: estma_compliance-conformite_lmtse@nrcan-rncan.gc.ca