Money Laundering and Terrorist Financing through Trade in Diamonds
The FATF and the Egmont Group of Financial Intelligence Units collaborated on a typologies research project to identify the money laundering and terrorist financing (ML/TF) vulnerabilities and risks of the “diamond pipeline”, which covers all sectors in the diamond trade: production, rough diamond sale, cutting and polishing, jewellery manufacturing and jewellery retailers.
Based on research conducted, analysis of case studies collected by the project team and after consultation with the private sector, the report concludes that the diamonds trade is subject to considerable vulnerabilities and risks. The closed and opaque nature of the diamonds markets and the high value of diamonds combined with a lack of expertise in this area on the part of the authorities have left this industry susceptible to abuse by criminals.
The diamonds trade has existed for centuries. It has developed a unique culture and trade practices, which have their own characteristics and variations across countries and continents. However, the international diamond trade has changed in the last few decades:
These significant changes in the "diamonds pipeline" structure and processes raised the question of whether the risks and vulnerabilities remain the same and whether current anti-money laundering / countering the financing of terrorism (AML/CFT) standards and national regulations are sufficient to mitigate the different ML/TF risks and vulnerabilities identified in the research.
The case studies included in the report demonstrate the creative methods that criminals have used to exploit diamonds trade for the purpose of money laundering and terrorist financing. This report aims to help build awareness with the regulatory, enforcement and customs authorities as well as reporting entities about risks and vulnerabilities of the diamonds trade, and how to mitigate them.
Some of the risks and vulnerabilities of the diamonds trade, identified in this report are