When a Diamantaire is Not a Diamantaire
April 01, 04In January, we reported that Belgium’s very comprehensive anti-money laundering regime, which was upgraded at the end of 2003 by new legislation, prohibits the receipt of more than 15,000 euros in cash in any trade transaction. The law also imposes specific obligations on the diamond trade, including client identifications, maintaining records and so on. With some issues, the law provides for a “transition” period before the measures take effect whereas on other provisions the law is fully enforced.
Diamond traders don’t sense any difference between “before” and “after” – and we were asked whether both industry and government had pragmatically decided to “ignore” the legal requirements. This is not the case by any means. Technical difficulties have arisen surrounding the definition of “diamantaire”. As we reported earlier, the Belgian anti-money laundering law applies to “traders in diamonds who are registered in accordance to Article 169, §3, of the Program Law of August 2002”.
The relevant provisions of the Program Law amend the governmental controls over the diamond sector and contain the legal requirements for diamond merchants to report to the Ministry of Economic Affairs on diamond inventories as well as the requirement to declare the origins of each diamond transaction. Needless to stress, this relevant part of the Program Law was mostly Kimberley Process facilitating legislation.
Article 169 §3 requires that “in order to facilitate the aforementioned governmental control of the diamond sector, each diamantaire domiciled in the Kingdom of Belgium is obligated to register himself with the Ministry of Economic Affairs, before he can engage in the professional activity of diamond trading. This also means that proof must be delivered certifying that all the formalities have been met to engage in the profession of diamond trading.” [The translation is mine – thus not official.]
The following paragraph, §4, states “the Crown will decide on the conditions, procedures, rules and authorities needed to implement the aforementioned registration”. And here is the catch: the Crown has not yet officially proclaimed what the legal prerequisites are that allow a diamantaire to register as a diamantaire. Strictly speaking, no diamantaire would be allowed to work as a diamantaire in Belgium if he didn’t first register in accordance with Article 169 of the Program Law. This, however, hasn’t prevented the smooth and continued operation of the world’s largest diamond trading center.
Now, about a year and a half later, an anti-money laundering law that imposes certain obligations on the diamond industry has come into effect. Logically, the obligations must be carried out by all locally registered diamantaires (and, though the law doesn’t specify so, we think the obligations must also apply to foreigners trading diamonds in Antwerp). So now the diamantaires find themselves in a legal vacuum: as the Crown has not yet issued the prerequisite rules to enable the registration of diamantaires, not a single diamantaire has registered.
And since the anti-money laundering laws refer solely to “registered diamantaires”, there is not a single diamantaire in Belgium to whom the law applies... Does this make sense? Of course it does. It plainly means that more regulations and clarifications have to be issued before the new law can actually be enforced. In a way, the Belgian diamantaires face a problem that has also become a concern in the United States: the law specifically excludes the activities of visiting diamantaires or of African rough traders wanting to sell their goods on the Antwerp market.
In Belgium pragmatism always prevails. If the cash-limitation does not apply to foreigners, it will somehow also be circumvented for the local diamantaires – most likely with the full approval of government. Anti-money laundering laws will not be used to create either artificial trade barriers or to grant one group a competitive advantage over others.
The fact that there is no Royal Decree yet to implement the Program Law must be seen as a technicality. The U.S. Department of State, earlier this month, expressed appreciation of the way the Belgian government has implemented anti-money laundering rules. In its report on Belgium, the State Department observes that “despite this strong legislation, Belgium remains vulnerable to money laundering”. Noting the inclusion of the diamantaires in the latest amendments, the State Department said, “This law explicitly targets the diamond trade, whose largest venue for global trading is Antwerp. The Government of Belgium seeks to close off the use of diamond trading to accomplish money laundering through this law. This is important because Belgium has already logged cases of terrorist groups attempting to use the diamond trade.”
The restrictions imposed on the diamond sector in Belgium seem more severe than those that in other European countries. We assume that, eventually a harmonization of rules will take place. The State Department, which has privileged communication channels with the Belgian government, must have good reasons to pay tribute to the Belgian efforts. The laws should be seen as providing, first and foremost, a protective umbrella over the diamond industry. The entire diamond industry – not only the Belgian center – ought to appreciate this. The law is expected to be fully implemented – as soon as the technical obstacles have been solved.