Partnership Africa Canada Finds Diamond Fraud in Brazil

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(Rapaport…March 13, 2006) The following press release is from Partnership Africa Canada:

Brazil is one of the oldest diamond producing countries in the world, but nobody can say where half of the diamonds it exports have been mined, and government certificates accompanying fully one quarter of Brazilian exports are fraudulent. That is only one finding in a major new report issued today by Partnership Africa Canada (PAC). PAC is now calling for Brazil to be suspended from the global Kimberley Process Certification Scheme for rough diamonds, until a full and independent investigation can take place.

PAC, a leader in the campaign against “conflict diamonds” and a member of the intergovernmental Kimberley Process Certification Scheme for rough diamonds, was attacked by the government of Brazil in 2005 for its warnings that fraudulent exports threatened to undermine both the Brazilian diamond economy and the fight against conflict diamonds.

PAC’s 2005 report, The Failure of Good Intentions: Fraud, Theft and Murder in the Brazilian Diamond Industry was rejected by Brazil’s National Department of Mineral Production. But not by Brazil’s Federal Public Prosecutor and the Brazilian Federal Police.

Following up on cases of fraud identified by PAC, police made simultaneous raids in three Brazilian cities in February 2006, resulting in the arrest of ten people – diamond miners, diamond dealers and money changers – who are now facing charges of fraud, tax evasion and money laundering.

The arrests came during a new PAC investigation, which now shows that more than half of Brazil’s diamond exports over the past three years are suspect.

For 2004 alone, the PAC report provides solid proof that one quarter of Brazil’s diamond exports were fraudulent. Brazil’s second largest diamond miner has been arrested, but that is only the beginning of the story.

Brazil’s supposed fourth largest diamond producer turns out to be a

part-time waiter who until recently lived in a homeless shelter. And

Brazil’s sixth largest producer is a ghost – a man who died five years ago.

Visits by PAC researchers to the supposed mining sites of the waiter and the ghost found no evidence of mining whatsoever, and government claims to the contrary appear to be cover-ups for bad management at best, and complicity at worst.

Where exports are concerned, the situation is even more damaging. Hassan Ahmad, a Lebanese diamond dealer from Africa and one of those arrested last month, was responsible for more than half of Brazil’s diamond exports in 2004. In 2005 PAC detailed a series of frauds involving one of his government-certified exports to Dubai. Ahmad claimed to have purchased the diamonds from a company that in reality deals only in mineral pigments.

Ahmad further claimed that the diamonds had been mined in the space of seven days, from untouched ground – by a dead man. On top of all that, the diamond export was undervalued by more than $2 million.

The PAC report demonstrates that Brazil’s diamond sector is in deep crisis, a crisis that affects the credibility of the newly-minted global system to block trade in the conflict diamonds that fuelled four of Africa’s most horrific wars. “In order to protect the overall diamond certification system and the world’s legitimate diamond industry, the KPCS must suspend Brazil until there is a full accounting both for the origins of its diamonds, and their destination,” said Ian Smillie, Research Coordinator for Partnership

Africa Canada.

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