Law Enforcement Is Targeting the Diamond Business. That May Be a Good Thing

Traditionally, the diamond industry has not welcomed any form of official involvement in its business

Last month, the first—but maybe not the last—Global Law Enforcement Diamond Forum was held in The Hague, Netherlands.  From June 28 to 30, members of the diamond industry rubbed elbows with agents from the FBI and Interpol—along with the now-standard NGOs—and heard presentations on one of the trade’s least favorite topics: whether are diamonds are being used for money laundering and terrorist financing.

By the end, attendees came to two conclusions: First, the law enforcement attention on the diamond business is not going away. Second, that might not be so bad.

Many in the trade didn’t always think that way. Traditionally, the diamond industry has not welcomed any form of government, and in particular law enforcement, involvement in its business because—well, what business does? Before the meeting there was a lot of one attendee calls “understandable apprehension.” Even the conference subtitle—“Diamond Trafficking, Illicit Trade, and Threat Financing”—rankled some, as it posited a direct link between diamonds and illegal activity. FBI special agent Eric B. Ives, a key organizer, says he became interested in diamond financing after following two notorious criminals who used diamond financing: Liberian president Charles Taylor and terrorist Mokhtar Belmokhtar.

By the end, most found the atmosphere refreshingly nonconfrontational.

“A lot of us going in thought, ‘Are they going to drop a bomb on us?’ ” says David Bonaparte, president and CEO of Jewelers of America. “But it was just the opposite. They wanted to hear from us. What I liked about it is their willingness to cooperate and listen and interact. For a lot of the members of law enforcement, it was Jewelry 101 education.”

Some even compared it to the GIA teach-ins for law enforcement, its annual crash course on industry basics.

“The first day everyone protected their own turf—law enforcement, the NGOs, and industry,” says one attendee. “But a conference is most important for the dialogue. The second day the dialogue increased and became sharper.”

For their part, industry representatives repeatedly talked about the efforts the trade is making to increase transparency and overall standards.

“There are a lot of very good initiatives going on to make the trade better and healthier,” says Erik Jens, head of diamond and jewelry clients for ABN Amro Bank, another attendee and speaker. “If you print all those initiatives out, it would be a meter high.”

The Kimberley Process came up, of course—but not as much some would expect. “Everyone is clear that its mandate is limited,” says Bonaparte. “It’s a good tool and it’s done a lot of good, but we have to move beyond it.”

Neither the current Dubai-based KP chair nor the head of the World Diamond Council attended the forum. There was also no trade attendance from Dubai, which was mentioned in the Financial Action Task Force report on money laundering. Two Dubai law enforcement officers did attend but didn’t participate—even as an NGO presentation took the center to task for “transfer pricing.”

One thing that struck a chord with trade members: We all know that the vulnerabilities in the diamond supply chain have hurt the trade’s image and prompted banks to flee the sector. But this activity has had another equally insidious effect: When diamonds are used for money laundering or are acquired illegally, that weakens overall prices and undercuts trade members who procure their stones legitimately.

“If a guy comes in and pays some official and is able to buy rough diamonds 30 percent cheaper, how can I compete,” notes Martin Rapaport, an attendee and speaker. “It’s not a level playing field.”

For the future, Ives wants to continue the collobaration. 

“We hope to create a network where we can have ongoing dialogue and share best practices,” he says. “I hope law enforcement now has a better sense of the global expertise that is available.”

So while the trade may not always welcome more attention from the authorities, many now feel that is part of the new world.

“We made very clear to law enforcement and to these NGOs that we should unite to prevent any abuse of the product,” says Jens. “There is a lot of pressure on the industry now, but that can be good. In my mind, the industry working together with law enforcement will only make us stronger.”

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JCK News Director

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