Zim diamonds plundered in illicit international deals

via Zim diamonds plundered in illicit international deals | SW Radio Africa by Alex Bell  December 17, 2013 

A new report on the global diamond trade has exposed how illicit and corrupt deals, facilitated by international groups, are resulting in the plunder of Zimbabwe’s diamonds.

The report published this month by the World Policy Institute , has revealed a complex structure of diamond deals and dealers that span the globe, with some of Africa’s most controversial diamond producers, including Zimbabwe, being ‘looted’ to the benefit of a corrupt few.

In March this year a key player in the industry, a Belgian firm called Omega Diamonds, was handed a record breaking fine for tax evasion. The fine of $195 million is the highest the Belgian governed has ever imposed on a national company.

The report also points out that just days before the fine was imposed, Omega’s former attorney was appointed as Belgium’s Finance Minister, whose ministry led the prosecution of Omega. This could explain why no further sanction has been brought against the firm, despite investigators claiming that close to $4 billion in international diamond profits had simply ‘vanished’ as a result of Omega’s ‘tri-continental’ diamond dealings.

Omega’s illegal diamond trade links countries in Africa to Omega’s subsidiaries in Dubai and the European diamond trading hub of Antwerp. The World Policy Institute report details how Omega, by “employing corrupt African autocrats and money-hungry businessmen,” would purchase diamonds of questionable origin for little to no money in Angola, the Democratic Republic of Congo and Zimbabwe. They would then ship the diamonds to Dubai, where they would be mixed together, undervalued and given ‘certificates of mixed origin’ under the international Kimberley Process (KP) Certification Scheme. From Dubai, the prices for the diamonds were then inflated and sent to Antwerp for international auction.

The KP certification is meant to be an international stamp of approval, but as the report details, money gained from those sales would finance the personal bank accounts of Omega and “many of the corrupt characters they employed in their tri-continental scheme.”

The report goes on to detail that the key failing in the diamond trade, which is allowing this illicit activity to continue, is the flawed nature of the KP, under which members like Dubai can certify the diamonds it receives, thus “serving the purpose of removing the origin of diamonds through certificates of mixed origin.” The report also explains that the KP’s narrow mandate of stopping the trade in blood diamonds, while commendable at its inception, has actually helped the looting of Africa’s diamonds.

“The root cause of the problem…lies in the Kimberley Process’s commendable goal of removing the stain or reputation of ‘conflict’ from diamonds, through a process of certification. Subverting this process requires narrowly defining the concept that now frames rebels as the sole source of conflict in Africa,” the report states.

It adds: “The Kimberley Process definition has enabled a 99 percent clean diamond industry to exist largely because the real violence of the industry is whitewashed, ignored, or excluded entirely from the framework.”

This narrow definition means the KP certifies and allows international sales of diamonds, mined in countries where corrupt and dictatorial governments are responsible for mining-linked atrocities, like in Zimbabwe. This includes last week’s auction of over 300,000 carats of Zim diamonds in Antwerp, despite the stones coming from an area where there have been serious human rights atrocities, like the murder of over 200 diamond panners by the military in 2008.

Farai Maguwu, who heads the Centre for Natural Resource Governance in Zimbabwe, told SW Radio Africa that the loopholes in the KP system means profits from the domestic diamond trade are not reaching the national coffers. He explained that a select few, well connected people, are the main beneficiaries of this “opaque” trade, with high level syndicates facilitating trade with Dubai.

“The crisis we have in Zimbabwe is what we are getting are peanuts, and some of the syndicates are helping facilitate these illicit transactions, and getting their kickbacks from Dubai, while the fiscus is bleeding,” Maguwu said.

The World Policy Institute report contains much more detail about the failings in the diamond oversight system, but ultimately emphasises that the KP’s mandate must be broadened to tackle the illicit deals that its failings have allowed to flourish.

“The definition of conflict diamonds must be broadened to include economic and political conflicts—rather than simply violent conflicts—underwritten by illicit profits. No country that does not actually produce diamonds should be allowed to issue Kimberley Process certificates, and producing countries governed by authoritarian regimes, or dominated by big corporate players, who refuse to disclose pricing policies to investigating authorities should be suspended from the process,” the report states.