How Compliance became the ‘fifth C’ in diamonds


 The diamond industry has for decades, done business with a truly international pipeline — diamonds are mined in some continents, sorted and distributed through centers elsewhere, cut and polished in yet other places, set into jewelry in centers that could be in a fourth geographic location and finally consumed in bulk in places like the US, Japan and China — the first two having had nothing to do with the process pipeline whatsoever.

Less than 20 years ago, a diamantaire could easily have bought diamonds from a supplier in one location, have them shipped to another location and perhaps a company that was distinct from his own firm, which was doing the ordering and paying.

There were many variations to this. For example, if the buyer was purchasing rough from unorganized suppliers or from countries with limited and untrustworthy banking systems, he might ask to pick up the diamonds through another company in a free zone area and settle the outstanding through a bank transfer — or even in kind — to a different company in another part of the world as instructed by the supplier.

Banks and shipping agents merely followed instructions, and no eyebrows were raised as this was considered trade practice. Everybody understood that all the diamantaire was doing was optimizing his own process pipeline with financial and security safety built in.

Not today. A process trail like that will be viewed as a money-laundering process. The banks and financial institutions would not participate. I personally know of instances when legitimate business payments have been stopped by banks in the US (all dollar payments are routed through US banks, though neither the receiver not the sender were in the US) for compliance scrutiny. The money was only release after three or four weeks after the parties provided satisfactory documentation to convince the bank that the process was legitimate.

This article, written by Pranay Narvekar of Pharos Beam Consulting LLP, first appeared as a blog on

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Source Idexonline