Frauds, Malpractices and Blood diamonds continue to haunt diamond pipeline

Blood DIamonds
[Image courtesy - NPR]

Blood diamonds have continued to make their way in the diamond supply chain one way or the other. During last year, various cases of conflict diamonds being traded in illegal ways were reported. A report by Global Witness, sheds light on the violations of sanctions put by European Union against Zimbabwe. In another case a shipment from Petra Diamonds was seized at a Tanzanian airport claiming it to be undervalued. It has also been investigated that traffickers are using social media like Facebook and WhatsApp to sell conflict diamonds. Moreover, frauds and malpractices have also continued to haunt the industry.

Israel’s binary options industry has been very popular for long, especially for foreign language speakers. Though, two months ago, the Knesset, legislative committee of Israel passed a law shutting down all the binary options industry, some of them are advertising for their employees to join them in their call centres.

These companies are posing as diamond investment firms. They sell diamonds over the phone and promise healthy profits. However, these profits and the existence of the stones is questionable.

The Times of Israel investigated these scams by getting in touch with one of the ex-employees of such a company. The ex-employee stated that around a year or two ago, owners of the call-centre he used to work at decided that the binary options industry was getting exposed and it would be safe to switch to a different scam. The company mainly involves French speakers.

The scam involved influencing random people through telephone conversations to invest in diamonds. The callers pose as diamond traders and misrepresent their location. They offer them extremely attractive investments, offering annual returns of 6 – 8% if they purchase a diamond. Getting an 8% return per annum for a diamond is said to be extremely optimistic. Owning to exceeding demand over supply of diamonds, the representatives portray diamonds as an exceptional investment option.

Earlier in November 2016, the Autorité des Marchés Financiers (AMF), the financial markets regulator, blacklisted Blue Stone Ltd. a diamond investment firm, registered in UK but operating from Israel.

According to a statement, The AMF, “has warned French investors against marketing material issued by BLUE STONE LTD via several websites proposing offers to invest in diamonds. In view of the uncertainty as to the nature of the activities carried out by BLUE STONE LTD and companies related to it and given the unbalanced character of the marketing materials, notably the absence of a mention of risk, the AMF recommends that investors do not take up these solicitations from said entities and do not communicate them to third parties, in any form whatsoever.”

After the blacklisting of Blue Stone, 80 more diamond-sales websites have been added to the blacklist and consumer protection organisations in France believe they have a connection to Israel.

While scammers are trading diamonds, which may not even exist, blood diamonds are still polluting the diamond pipeline. Kimberley Process (KP) which helps in the regulation of trade of conflict diamonds, pointed out that militia in Central African Republic have an estimated 60,000 carats of blood diamonds stockpiled in areas controlled by them.

It has been believed that the Central African Peace Unit (UPC) is one of the armed groups, who are controlling mines and selling diamonds to support its arms and ammunitions. However, they deny of any such activities and blame bandits who often attack craftsmen and steal their products.

While, KP is supporting to regulate the fraudulent practices, it has failed miserably till now. In an effort to strengthen the KP certification, European Union (EU) has taken up the chairmanship for 2018. Federica Mogherini, an Italian politician will be heading the operation. Indian would be acting as the vice-chair for the year and would be acting as a chair in 2019.

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