Millions of dollars in smuggled Central African diamonds are being routed through Switzerland and the United Arab Emirates to evade intensifying controls at the world’s main diamond market, say investigators trying to curb trade in conflict diamonds.
In a confidential report obtained by The Associated Press, investigators for a United Nations- and industry-backed body called for ”urgent corrective action” by the Democratic Republic of Congo (DRC), accused of actively circumventing controls.
The report is for the UN-backed Kimberley Process Certification Scheme, which is meant to certify and track diamonds from mines to jewellers’ display cases with the aim of keeping illicitly traded diamonds out of legitimate markets.
The effort is the diamond industry’s response to growing world concern about ”blood diamonds”, which fueled and funded 1990s wars in Liberia, Sierra Leone and the DRC.
The report said the DRC — in an apparent bid to conceal revenues by underdeclaring — is sending smuggled, gem-quality Central African diamonds through Switzerland at an average officially declared value of 98 US cents per carat, compared with a world market price of about $75,90 a carat.
Investigators said the republic is sending its diamonds through the United Arab Emirates, as well as Switzerland, en route to the major diamond hub of Antwerp, Belgium, to avoid Antwerp’s more rigorous controls of Kimberley certificates.
Forty-five countries have signed on since the world’s $6-billion-a-year diamond industry began the process in late 2002. The effort is named after the diamond centre of Kimberley, South Africa.
The DRC, one of the signatories, has been cited for alleged widespread violations from the start. It borders similarly named Congo and the Central African Republic, both of which are leading diamond producers.
Victor Kasongo, head of neighbouring Congo’s diamond regulatory body, said on Friday that diamonds are ”flying out” of his country because of smuggling across the Congo River to the DRC, where taxes on the trade are lower and export controls more lax.
In 2003, according to industry giant De Beers, the DRC was the world’s fifth-largest diamond producer in terms of value, accounting for $700-million in diamond production and 7% of the world market.
The DRC, however, is believed to have comparatively little actual native diamond production, and would be shut out of the global diamond market without the allegedly smuggled gems from surrounding countries.
In its report, a Kimberley team recently sent to the West African nation concluded that ”no guarantee can be provided that the diamonds flowing through the [DRC] are conflict-free”.
”From the last quarter of 2003 until the time of the mission, most shipments from the [DRC] have passed through either Switzerland or the United Arab Emirates,” the Kimberley report said.
Declared diamond exports from the DRC are ”approximately 100 times greater than its estimated production”, the Kimberley team said in the report of its May 31 to June 4 mission.
”It is therefore concluded that almost all its exports are rough diamonds that have entered the country without any official documentation whatsoever,” investigators said.
”The [DRC] therefore fails to meet the minimum requirements” of the Kimberley scheme, they concluded.
The DRC was quoted as insisting to investigators that all the exported diamonds were mined domestically. It officially reported its exports from April 2003 to May 2004 at a value of $53,8-million.
The London-based independent group Global Witness says the republic and Kimberley Process officials are discussing the allegation. DRC officials could not immediately be reached for comment on Friday.
The DRC’s noncompliance with Kimberley ”could present an opportunity for conflict diamonds to enter the legitimate diamond trade unchecked”, Kimberley Process investigators said in their report.
Swiss authorities said they believe they have no power to refuse import of diamonds if they come with the correct certificates, but said they already have expressed concern to Kimberley officials.
”We were aware that the diamonds were undervalued and we were uneasy about this,” said Othmar Wyss, spokesperson for Switzerland’s State Secretariat for Economic Affairs. — Sapa-AP