Summertime Blues...
August 05, 04My inbox did overtime this week, as if people forget that it is vacation time. A well-known Antwerp dealer wrote: “Dear Chaim. When I read that the 9/11 Commission in Washington had found ‘no persuasive’ (or, come to that, even UNpersuasive) ‘evidence that Al Qaeda funded itself by trading in African conflict diamonds’, I immediately thought of you, and the support you've always given to those of us who were trying to shine a little light on all this nonsense and obfuscatory hypocrisy. Now, the question poses itself -- at least to me -- does that mean we can now bin the absurd costly and trade-retarding "Kimberley Process"? Well, I'm not holding my breath, but still, it's nice to be vindicated, even if it comes from the most unexpected sources. Jack.”
The letter writer is not alone. CIBJO president (and WDC director) Dr. Gaetano Cavalieri issued a statement noting, “these [al Qaeda] charges besmirched the reputation of the products we sell. The commission’s report has, I believe, vindicated the diamond industry in this respect.”
The findings by the prestigious “National Commission on Terrorist Attacks upon the United States” certainly should give us reason to give a small sigh of relief – but not much beyond that. These finding are too little, too late and of no relevance to what is taking place right now.
The United States, the European Union and scores of governments officially declared having evidence of so-called trade-based terrorist financing activities using diamonds. Moreover – and this is something my friend Gaetano and others should note – it is claimed that the use of diamonds by terrorists came mostly AFTER 9/11, as a result of the freezing of bank accounts around the world of suspected charities and other organizations. The 9/11 Commission states clearly that al Qaeda raised it funds mostly through charities – through fundraising. Prior to 9/11 there was hardly any trade-based financing in al Qaeda, and the Commission report confirms that.
Diamond trade-based financing facilitates both laundering and the transfer of funds. This, say many government reports (especially the United States government), is taking place today.
Back to history. The much reported al Qaeda links with diamonds prior to 9/11 always seem to concentrate on the very same one or two unrelated reports linked to Sierra Leone and an arrest in Italy. These reports have always been minor, often discredited, and incidental. They might be true; I don’t think that is very relevant today.
Our concern should be with what governments think have happened after 9/11. The intelligence services of countries claim to have evidence of trade-based financing and for that reason our governments have already imposed – or are in the process of imposing – quite excessive suspicious transaction reporting and client due diligence requirements on the diamond industry.
The 9/11 Commission findings will neither change nor reverse that process. And, indeed, the worldwide diamond industry specific Anti Money Laundering and the Combat Financing of Terrorism (AML/CFT) rules will be costly, cumbersome, and somewhat trade disruptive. They will probably lack any chance of ever contributing to finding a single terrorist, but even that has ceased to be relevant.
My gut feeling says that caution is in order. Gaetano Cavalieri’s statement to the thousands of his organization’s members and beyond may backfire if, and when, other reports will present contradictory contemporary information. The 9/11 Report talks specifically about African conflict diamonds; it doesn’t talk about diamonds in general. Alex Yearsley of Global Witness points out in another e-mail this week that the suspected link between al Qaeda and conflict diamonds was not a major focus for the Commission’s inquiry. Highlighting it as a major finding (from a report of hundreds of pages) may lack credibility.
In the Commission’s Staff Statement (no 15), where the much quoted vindication sentence also appears, it is mentioned in a sub-chapter that deals with “Funding al Qaeda in Afghanistan” and it appears together in the very same sentence with the drug-trade, for which also no terrorist financing evidence was found. Indeed, it wasn’t a “major finding” – and we should be careful not to overstate the significance, despite the obvious temptation to do so. There is no room for terrorist (or otherwise criminal) elements in the diamond industry. When, occasionally, news of “bad apples” appears, industry leaders (including CIBJO) do not issue press releases. It is better not to officially react to these reports, news stories and books.
The Antwerp letter writer, in his enthusiasm, forgets that the Kimberley System, when created, had absolutely nothing to do with al Qaeda, but solely dealt with African civil and national wars and severe humanitarian suffering. Kimberley will not be going away, as it is now viewed as mostly “preventive” in nature – it may prevent future wars in Africa.
The same holds true for the AML/CFT rules. Even if no single terrorist will be found, these systems have already been defined as effectively serving mostly preventive purposes. Therefore, these systems will be with us for a very, very long time. As these preventive systems have become (or will become) a permanent fact of (industry) life, it is better to concentrate on trying to use and transform the irritating bureaucratic burden into a positive consumer confidence enhancing practice. This will make the exercise a worthwhile one – not only from a humanitarian or civic responsibility perspective, but also from a commercial vantage point.
Enjoy the rest of your summer.