Are diamonds a launderer’s best friend?

If they are good enough for Monroe and Beyoncé, then they must certainly be good enough for the international money FCA - Monroelaunderer. The Financial Action Task Force’s latest report provides analysis of money laundering and terrorist financing using the diamond trade as a cover. Diamonds are attractive to money launderers for several reasons: they are currency and a means of storing wealth, money can be laundered through the stages of the diamond trade, they lend themselves to trade based money laundering, opaque offshore centres and free trade zones are often associated with diamonds and smuggling.

From the report: “Belgium and Israel have significant cases relating to diamond dealers and diamond trading companies,  whereas the US identified as a retail market show more laundering through jewellers. Several intelligence gaps still remain due to the lack of cases from several African mining counties and financial hubs such as the United Arab Emirates.”

Conflict diamonds, gems mined in countries in conflict, civil war or which are the subject of sanctions, are mined by slaves and sold to fund arms and other supplies to keep a trigger happy and press ganged army on its feet, as popularised in the movie Blood Diamond. In Lord of War, the dramatisation of Viktor Bout’s life, the protagonist accepts diamonds in exchange for arms sales to teenage paramilitaries in Sierra Leone.

A number of changes to the so called legitimate diamond trade in the past 15 years have prompted concerns from observers about the potential and actual exploitation of the business by those wishing to move money and remain out of sight from transaction tracking software.

The diversification of the diamond sector geographically, from traditional centres such as South Africa, Belgium and the Netherlands, towards an increased dominance by Indian, Chinese and Emirate (Dubai) trading centres has created new flows of precious stones and cash, which could provide opportunities for terrorist financing and cleaning the proceeds of crime.

The report includes red flags, typologies and analysis of ML/TF in the diamond trade.

This video gives a good reminder of where diamonds come from and why, despite these ugly truths, people still keep buying diamonds.

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2 comments

  1. Please let us the World Federation of Diamond Bourses have an e-mail address to submit a response to a story you carried on diamonds.

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