Can the Kimberley Process Also Tackle Counterterrorism?

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The World Diamond Council (WDC) came into being in order to combat the horrors of conflict diamonds. Its mandate, in its own words, is “the development, implementation and oversight of a tracking system for the export and import of rough diamonds to prevent the exploitation of diamonds for illicit purposes such as war and inhumane acts.” Most industry watchers state unequivocally that the WDC has done an effective job in this endeavor, being one of the key stake-holders in the Kimberley Process (KP), along with nongovernmental organizations (NGOs) including Global Witness and Partnership Africa Canada. However, at its 2004 annual meeting, held in Dubai between March 29 and 31, the WDC strayed from its mandate into the world of international counterterrorism and money laundering.

New Challenges

WDC Chairman Eli Izhakoff, while reporting great progress in the battle to halt conflict diamonds, also noted “the KP system is designed to restrict the trade in conflict diamonds. But it will also address all challenges to the integrity of our trade, including allegations of the use of our products to finance terrorism. Because the KP scheme is effective and transparent and because it is effectively monitored for compliance, it works to protect our industry from all claims that it is vulnerable to exploitation by criminals. If the system works, no criminal element can be safe from detection of trade in conflict diamonds.”

De Beers Chairman Nicholas Oppenheimer, in his report, noted that foremost among the challenges “is the vulnerability of the diamond and jewelry industry — as with other commodities — to misuse and abuse by criminals and the perpetrators of terror. The governments of the Free World have recognized that financial irregularity, ‘informal’ banking and tax evasion are just a short step on the road to money laundering and the financing of terrorism and have introduced new laws and regulations to govern ‘financial institutions.’” Oppenheimer expressed his delight that William Fox, director of the United States government’s Financial Crimes Enforcement Network (FinCEN), was participating.

Fox, in his presentation, outlined some of the features of the USA PATRIOT Act, legislation passed in the wake of the 9/11 terrorist attacks on the United States. He focused on criminal networks and cited an example where narcotic traffickers in the New York area were identified as converting bulk cash proceeds into gold, which was then smuggled into Colombia. He added that black-market peso exchange is a way that drug proceeds generated in the United States are laundered. He noted “money laundering is a necessity for any profit-generating criminal activity and those that engage in it are always looking for the weakest points in whatever regulatory regime we erect.”

The question that industry insiders are asking is: Can the WDC and the Kimberley Process, focused on stopping the illegal trading in rough from specific geographic areas, be expanded and transformed to tackle these new challenges? Some have expressed the opinion that these problems can only be handled by a completely separate body with a different and specific mandate. To stretch or expand the Kimberley Process, they say, might be its undoing.

Recurring Problems

This is not to say that the KP in its original format was forgotten at the meeting. In his report, Ian Smillie of Partnership Africa Canada noted that alluvial diamonds present a difficult regulatory problem. These diamonds have attracted hundreds of thousands of young men who, in each case, eventually became the recruits for, or slaves of, rebel forces. The wars in Sierra Leone, Angola and the Democratic Republic of Congo (DRC), all of which were fuelled in part by these diamonds, have ended. Smillie cautioned against the optimism expressed by some who said that the KP certification scheme itself might not be needed much longer. He reported that a huge number of young men still swarm over the alluvial diamond fields of Africa — an estimated 200,000 in Sierra Leone, 700,000 in the Congo and perhaps 300,000 in Angola. That means that approximately one million unregistered alluvial diamond diggers, who might not make much individually, are producing 10 or perhaps as much as 20 percent of the diamonds being sold around the world.

These young men work for the diamond industry, Smillie stated, adding that they are potentially dangerous — just how dangerous they have demonstrated in the past. He said what needed to be done was twofold: create viable economic alternatives for these young people and make the informal, unregistered digging system more formal with the establishment of bodies like diggers’ cooperatives.

Alex Yearsley of Global Witness stated that the big concern was that certain people not engaged in the Kimberley Process were letting the industry down. He proposed some sort of global standard like an ISO certification to cover mining companies, dealers and retailers.

A report by Global Witness that found its way into the press — which claimed diamond retailers’ contribu-tion to the United Nations – backed initiative to prevent conflict diamonds was “little more than a public relations maneuver” — was hotly rebutted by Izhakoff. He and WDC General Counsel Cecilia Gardner stated that the methods used

by Global Witness did not constitute a valid sampling procedure.

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