Paris-based Financial Action Task Force (FATF) released an international report on money laundering and terrorist financing on 2 February 2014. The report aims to provide a general overview of the global diamond industry and how it is fostering money laundering and terrorist financing.
Main highlights of the report:
• In India, there are reported instances of diamond prices being over-valued for purposes of laundering and suspect financing.
• 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.
• In cases of suspicious money laundering instances of diamond trade, the funds transfer occurred from India, Israel and Switzerland to the UAE.
• India reported a relatively large number of sanitised cases (12) in which suspicious transaction reports were received (in connection with diamond trade). In these specific cases, Hong Kong, China is a destination for illicit cash flows related to the diamond trade.
• Diamond trade, as an international phenomenon, needed a complete and global analysis to understand and determine money laundering and terrorist financing threats and vulnerabilities related to this unique trade.
Some of the risks and vulnerabilities of the diamonds trade, identified in this report are
Global nature of trade: The trade in diamonds is transnational and complex, thus convenient for ML/TF transactions that are, in most cases, of international and multi-jurisdictional nature.
Use of diamonds as currency: Diamonds are difficult to trace and can provide anonymity in transactions.
Trade Based Money Laundering (TBML): The specific characteristics of diamonds as a commodity and the significant proportion of transactions related to international trade make the diamonds trade vulnerable to the different laundering techniques of TBML in general and over/under valuation in particular.
High amounts: The trade in diamonds can reach tens of millions to billions of US dollars. This has bearing on the potential to launder large amounts of money through the diamond trade and also on the level of risks of the diamonds trade.
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