Royal Decree For Antwerp Diamantaires
May 20, 04The long-awaited Royal Decree detailing the controls on the Belgian diamond trade was published in the Official State Journal (Moniteur) on May 13. This decree does several things: it defines who is a diamantaire; requires prior registration with the authorities before one can conduct diamond transactions; notes that control on imports and exports are only required on transactions with non-EC member states; and provides a list of details which diamantaires must report each December 31. But these annual reports go beyond just reporting inventories. In the case of manufacturers the value and resulting yields of diamonds before and after processing must be produced, to name just one of a long list of requirements. The Belgian diamond industry will have to give “hard data” to the government.
The decree follows the Program Law of August 2002, and, in the preamble, the decree refers to a number of other legal instruments or governmental investigations. What is very relevant is that there is no reference to the Anti-Money Laundering Law of January 2004. This law only becomes effective after the Royal Decree defines the term “diamantaire”. That has happened now, so it seems that the requirement for diamond companies to become Anti-Money Laundering and Anti-Terrorist Financing compliant will now take effect.
There is nevertheless some “overlap” between the two different legal instruments. Both require the keeping of transaction records, including the keeping of import and export documents. The Royal Decree requires all diamond players to provide a “due diligence” on themselves: such as the identity of the company owners and so on, while the anti-money laundering law requires the diamantaires to collect similar information on their clients.
What the Royal Decree really does is provide a “recognized status” to the diamond industry. You have to meet certain criteria and you cannot operate anonymously. On first reading of the decree it isn’t clear whether the financial reporting requirements (inventories, etc.) go beyond what has to be reported anyway in annual balance sheets and tax returns, but it certainly gives the feeling that the government will be getting far more information than ever before. Issues such as percentage yield out of rough don’t normally appear on balance sheets.
It seems that – in working together with the industry – the Belgian government has now taken the lead in its demands for full transparency and accountability. Although the absence of internal borders in the EC has certainly made the controls more difficult, the government has found a way to tighten its supervision over the industry, without conflicting with EC rules. The Belgian government ought to be congratulated – and the governments of other cutting and trading centers should feel challenged to follow suit. At the end of the day, however, what counts is the actual implementation and that is not going to be easy.
As the Royal Decree has triggered the implementation of the AML/CFT laws, diamantaires should now take another look at the Anti-Money Laundering Law that imposes on the industry:
- Complex due diligence processes on clients, suppliers and other stakeholders;
- Mandatory reporting of unusual or suspicious transactions;
- Transaction evidence record keeping well beyond standard accounting norms;
- Limitations on the use of cash;
- Introduction of corporate anti-money laundering and anti-terrorist financing compliance programs;
- Adherence to international conventions on corporate ethics and good governance;
- Extensive training and screening programs for employees;
- Development of internal auditing procedures to ensure effectiveness of programs, and more – far more is expected to come.
We strongly suggest that diamond companies should see the Royal Decree and the Anti-Money Laundering Law as a ‘single package’ which will make the Belgian diamond industry probably the most controlled diamond trade anywhere. This is undoubtedly a burden on the industry, although – ultimately – the complete transparency of the sector will eventually translate into reputation issues.
The new rules will enhance the comfort level of trading with Belgium and also provide greater certainty to those in other countries who also have to meet AML/CFT compliance standards.
Half a century ago there was a consensus that strong government controls over the diamond business “will drive the business away” and the Netherlands has often been cited as an example. Belgium was always seen as being attractive because of either its lax controls or its “laissez-faire” approach to enforcement. It is remarkable how the industry horizon has changed. The stricter controls, the mandatory registration, and the meeting of certain standards before a license to operate as diamantaires will be granted, are now seen as positives.
It will take some time to study all the ramifications of last week’s Royal Decree and this comment should be seen only as an initial comment. It does appear that the Decree has “updated” the legal environment and reflects contemporary requirements. Taking the Royal Decree and the Anti-Money Laundering Law together, these acts represent a “new Belgium”. I am not sure whether a Belgian diamond company would be allowed to add to its logo the words “with Royal Approval”.
But I am convinced these laws will ensure the continued flourishing of the diamond industry and provide a stamp of confidence for the Belgian diamond product. Provided, of course, that these acts are indeed carried out as intended by the legislature and government.