“Illicit Diamonds” May Well Become Next Target For Global Action.
April 10, 03Today, a high-level policy discussion is taking place in Washington, D.C., which should give us all a reason to pause – and to reflect. The deliberations ostensibly focuses on: “The Kimberley Process to Curb Illicit Diamonds: Early Achievements, Congressional Action, and Next Steps”. Immediately, I shared with the organizers my sense of puzzlement with the stated title of the conference. The Kimberley Process was solely created to deal with conflict diamonds.
Individuals outside of the diamond industry may not be aware of the tremendous difference between ‘conflict’ and ‘illicit’. These two concepts are as different as apples and elephants. Any diamond stolen from a mine in Botswana is illicit; the task to prevent such theft falls squarely on the mining company or the respective country’s law enforcement authorities. Any evasion of any taxes and any activity in the parallel market could arguably be called illicit. Some 70% of Canada’s polished diamond market has evaded excise or sales taxes. That’s illicit. None of these matters have anything to do with the Kimberley Process.
There are increasingly voices, mostly from outside the industry, that believe that the real problem in the diamond industry is ‘illicit’ (and the money laundering that comes with it) and not ‘conflict’ (especially after the restoration of peace in Angola and Sierra Leone, the principal countries where conflict brought tremendous the human suffering). The conference organizers, the highly prestigious Center for Strategic & International Studies (CSIS), initially implied the wish to evaluate the effectiveness of the Kimberley Process on its success in the illicit area.
I argued that this must either be a mistake in language choice or a reflection of the desire to change the character of the Kimberley Process and try to apply it to combat smuggling, money laundering, etc. The organizers quickly assured me that the title was erroneous – the subject would only be “conflict diamonds.” The mistake was made in good faith, no hard feelings.
However, the chairman of the Kimberley Process, Abbey Chikane, should know better. In his press statement, announcing the next plenary meeting of the Kimberley Process in Johannesburg, Chikane says “We hope that by the end of the session we will have consolidated our hard earned achievements and move towards ending illicit trade.” That’s a noble objective. It has nothing to do with Kimberley. These “mistakes” may not be understood by many outsiders, who may start to think that conflict diamonds and illicit diamonds are synonymous. In the end, these concepts indeed may become identical, just by adapting the definition of “conflict.”
Nobody in his right mind will defend “illicit” diamonds. Nobody will disagree that eliminating illicit diamonds is a righteous cause, deserving industry cooperation. But before doing so, considerable thought must be given to the instruments or mechanisms required to curb smuggling, to prevent mine theft, or to collect proper axes in Canada, to pick some examples at random. My gut feeling says that there are those who would like Kimberley to be used for rather different than its intended purposes.
Such attempts will backfire in a momentous manner. First of all, neither the chairman nor those who negotiated the Kimberley Process, nor the representatives of the World Diamond Council, have received a mandate by their constituencies to deal with the issue of illicit diamonds. Some governments would undoubtedly withdraw from the Kimberley Process if the definitions were widened in areas beyond the government-approved mandate. Kimberley came as a result of tremendous humanitarian suffering, and the process was negotiated on the level of foreign offices with some input from commerce departments. Smuggling and money laundering are matters for finance ministries, central banks and other bodies. It is quite a different issue.
Superintendent Garry W.G. Clement, director of the Crime Branch at the Royal Canadian Mounted Police, has concluded that in diamond mining and exploration operations “losses resulting from theft can range from seven percent to thirty percent.” Then, in the same sentence in his study, he continues, “other forms of diamond industry related crime include money laundering and stock fraud. International experience has shown that organized crime is often involved in smuggling and theft from mining operations.”1 I don’t want to argue about the high or low incidence of mine theft. Rather, I want to draw attention to the ease with which totally different concepts and issues are intertwined: theft, crime, money laundering, organized crime, stock fraud, diamond mining and diamond industry. The Kimberley Process, with its great imperfections and questionable success rate, came to fill a vacuum; there was really no better way to remove the access by rebels to the proceeds of diamonds. It did help somewhat, it made some contribution. Moreover, it succeeded in averting a consumer boycott of diamonds.
Crime and money laundering are issues in which nations are highly motivated to cooperate. Every self-respecting country has at least a dozen different enforcement agencies entrusting with protecting the public and their properties. In the United States, as we reported some weeks ago, a “diamond dealer” is seen as a financial institution for anti-money laundering purposes, imposing similar requirements as imposed on banks in terms of educating staff, monitoring cash movement, reporting irregularities, etc. In the current political environment, it is not “politically correct” to argue against this – after all, it is all part of the war against terror.
Nevertheless, I don’t want concepts to be confused. A diamond merchant is not a financial institution. Nor can Kimberley be seen as an adjunct to, or a complementary instrument, in the fight against crime, etc. It would be a folly to think that any industry instrument or mechanism could have more success than the CIA, FBI, MI5, Interpol, Customs, Royal Canadian Mounted Police – or whatever. Unless a conscious industry decision is made to do otherwise, the diamond industry should concentrate on advancing the diamond business.
Getting involved in “law enforcement” activities would be a folly – not only because we would fail, but because these are areas fully falling outside our collective competences. Different things altogether – just as different as apples and elephants are. And just by changing the definition of apples, that still doesn’t turn them into elephants. Those entrusted with implementing Kimberley – including chairman Abbey Chikane -- should note this carefully.
(1) Garry W.G. Clement, “Organized Crime: Terrorism and Money Laundering in the Americas,” Oceana Publications, New York, January 2003.