ENFORCEMENT WORKSHOPS FINAL REPORT - English

8/7/2019 ENFORCEMENT WORKSHOPS FINAL REPORT - English

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DIAMONDS WITHOUTBORDERS:

AN ASSESSMENT OF THE CHALLENGES OFIMPLEMENTING AND ENFORCING THE

KIMBERLEY PROCESS CERTIFICATION SCHEME

A REPORT TO THE 2010 KPCS PLENARY

SUBMITTED BY PARTNERSHIP AFRICA CANADA AND THE

GOVERNMENTS OF CANADA AND THE UNITED STATES OF AMERICA

NOVEMBER 1-4, 2010

JERUSALEM


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KIMBERLEY PROCESS CERTIFICATION SCHEME ENFORCEMENT SEMINAR 1

SECTION I : EXECUTIVE SUMMARY

iamondsby

their

very

nature

present

tremendous

challenges

to

governments

who

wish

to

ensurethattheextractionandtradeinthisnaturalresourcecontributestonationalandlocal

economic development. As a small, highvalue commodity, it is easily smuggledby those

whoseektoavoidtheformalmarket,whetherforbenignorcriminalmotivations.Diamondsareeasy

totransport,market,andevadecontrolsatnationalborders.Theyarenotoriouslyeasytosmuggleout

ofproducingcountries,butalsoquiteeasytoimportintocountriesthatdonotconformtotheKim

berleyProcessCertificationScheme(KPCS)requirements.

Efforts to combat smuggling directly contribute to the goals of the KPCS, which seeks to stem the

flowofconflictdiamonds.Thediamondsonceusedbyrebelgroupstofinanceconflictsinwestand

southern Africa were all mined illegally, and then smuggled onto theblack market. Minimizing

smugglingalso

shores

up

public

finances,

as

diamonds

going

through

formal

channels

can

be

taxed.

Effortsto legalizediamondflowscanalsosupporteconomicdevelopmentindiamondminingcom

munities,wherecommunityreinvestmentprogramsexist.

Although the KPCS imposes extensive requirements on its members to prevent conflict diamonds

fromenteringthelegitimatetrade,manycountriesstruggletoimplementtheserequirements,bothon

thesideofexportingcountriesandonthepartofimportingcountries.Loopholesinthedesignand/or

implementationofinternalcontrolsallowfordiamondsmugglingtooccur,creatinganenablingenvi

ronmentforthereemergenceofconflictdiamonds.1

Sincediamondsmuggling isacrossborderphenomenon, it isclear thatcrossbordercooperation is

requiredbothattheregional level(betweencountrieswithporousborders)andattheinternational

level(between

exporting

and

importing

countries,

who

need

to

take

more

responsibility

for

prevent

ingtheinfluxofillicitdiamondsintothelegitimatediamondsupplychain).

Recognizingtheimportanceofstrengtheningeffortstoaddressdiamondsmuggling,theKPCSChair

for 2010 (Boaz Hirsch) identified enforcement as a key priority for the Chairmanship of Israel. To

supporttheChairseffortstomakeprogressontheissueofdiamondsmuggling(inparticular,efforts

tokeep Ivoriandiamonds fromentering theblackmarket) theUnitedStates fundednationaldialo

gues on diamond smuggling in four countriesGuinea, Cte dIvoire, Sierra Leone and Liberia

withthetechnicalassistanceofPartnershipAfricaCanadaandfinancialsupportofUSAIDsProperty

RightsandArtisanalDiamondDevelopmentProject(PRADD).

Thepurposeoftheworkshops,whichwereconvenedbycivilsocietyorganizationsineachcountry,

was to create a space for multistakeholder dialogue on diamond smuggling and the Kimberley

Process.2Abroadanddiverserangeoforganizations,includingmineministries,civilsociety,artisan

alminers,unionmembers,diamonddealers,customsandpolice,attendedtheworkshops.3

Followingtheworkshops,nationalprofilesondiamondsmugglingwerecreatedforeachcountryand

presentedat the firstKPCSEnforcementSeminar,held inTelAvivat theJune2010KPCS Interces

sional.Representatives ofcivil societyorganizations and governments from the Mano River Union

1 Analyses of loopholes in the Kimberley Process are available on the websites of Partnership Africa Canada

(www.pacweb.org)andGlobalWitness(www.globalwitness.org).

2

See

Annex

I

for

short

descriptions

of

the

civil

society

partners

in

each

country.

3 Priortoholdingtheironedayworkshop,GreenAdvocates(thecivilsocietypartnerinLiberia)conductedextensiveconsul

tationsinLiberiasdiamondminingcommunities,aswellasoneononeinterviewswithkeystakeholders.

D

Executive Summary


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2 KIMBERLEY PROCESS CERTIFICATION SCHEME ENFORCEMENT SEMINAR

countrieswerejoinedbypolice,customsandbankingofficialsfromarangeofKPCSparticipantsto

discusswaystoaddressdiamondsmugglingusingdevelopment,governanceandenforcementsolu

tions.SummariesofthediscussionatthisEnforcementSeminar,aswellasthefournationalprofiles,

arepresentedinSectionsIIandIIIofthisdocument.

Asaresultoftheseenforcementrelatedinitiatives,theKPCShasanopportunitytomoveforwardin

asystematicfashiontoaddressanissuethatliesatthecoreofitsmandate:minimizingtheillicittrade

inroughdiamonds.Priorityactionssuggestedbystakeholdersincludedthefollowing:

Multilateral Solutions

InteragencyCooperation. Interregional diamond smuggling requires regionwide responses, espe

ciallyamongenforcementagencies.Whateverinstitutionalformitmighttake,stakeholdersagreedon

theimportanceofhavingsometypeofhighlevelforumthatcouldbringtogetherofficialsfromkey

enforcementagencies inbothexportingand importingcountries todevelopeffectiveapproaches to

combatfraud,smugglingandotherillegalactivitiesarounddiamonds.

WorkingGrouponEnforcement.Given thecentralityof this issueto theworkof theKPCS,many

stakeholderssuggestedthattheKPCSeithersetupaWorkingGrouponEnforcementorensurethatenforcementissuesweremoreregularlydiscussedinexistingworkinggroups.

WorkPlanonEnforcement.Oncepartnershavefoundamechanismtocometogetherforcoopera

tionandinformationsharing,theKPCSshouldcoordinateimplementationofacomprehensivework

planonenforcementencompassingsolutionsatthelocal,national,regionalandinternationallevels.

InformationSharingandTrustBuilding.OneofthefirstitemsonanEnforcementWorkPlanwould

becreatingmechanisms forenforcementagencies toshare informationandbuild trust,bothwithin

occupationalgroups(e.g.,policeofficialsfromdifferentcountries)andacrossoccupations(e.g.,bring

ing customs officials and police together). Existing multilateral institutions should create spaces/

networks/institutions

to

enhance

information

sharing.

TrustFundonEnforcement.SeveralstakeholdersnotedthatalthoughtheKPCShasextremelyhigh

expectationsofthetypesofenforcementactionsthatAfricancountriesshouldundertaketoprevent

diamondsfrombeingsmuggledout,resourcestofinanceenforcementactivitiesremainscarce.

RegionalFocus.Stakeholdershighlightedtheimportanceoffocusinglimitedresources inthe initial

stagesofdevelopingKPCSenforcementinitiatives.AfocusonCtedIvoirewassuggested.

National Solutions

While multilateral cooperation is essential for dealing with smuggling, a number of nationallevel

actionswerehighlightedaswell.Threetypesofsolutionswereputforward:

Developmentsolutionsencompassideasonhowtopreventsmugglingfromoccurringbydealingwithissuesoffairnessandsecurityfromtheperspectiveofartisanalminers.Centraltothesedis

cussionswere strongrecommendations forgovernments toexamine closely the pricesartisanal

minersreceivewhentheyparticipateintheformalmarket,andtodevelopandpromotecommu

nityreinvestmentinitiativestohighlightthesocialvalueofparticipatingintheformalsystem.

Governancesolutionswerealsoputforwardfornationalgovernmentstoimprovetheoversightandaccountabilitysystemsinthediamondsupplychainthatmakeitmoredifficultforindividu

als tosmugglewithoutbeingcaught.Arecurring themewas forgovernmentofficials to takea

moresystemicapproachtomonitoringthediamondsupplychainby introducingmorerandom

auditsandspotchecksintotheoversightsystemssetupatthenationallevel.Stakeholdersalso

highlighted

the

importance

of

collecting

meaningful

production

data,

and

continuing

to

hold

multistakeholderdialoguesonKPCSissues.


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Enforcementsolutionsfocusonimprovingtheeffectivenessofinstitutionsdesignedtointerceptdiamond smugglers andbring them tojustice. Numerous stakeholders emphasized the impor

tanceof improvingcollaborationbetweenenforcementagenciesat thenationalandregional le

vels,andprovidingeducation,trainingandlogisticalsupportforenforcementofficials.Aninno

vativeproposaltoinvolvecommunitymembersinmonitoringporousbordersemergedfromthe

Liberianworkshop,

as

ameans

to

compensate

for

limited

state

resources

to

monitor

remote

bor

derareas.


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SECTION II: KPCS ENFORCEMENT SEMINAR

(TEL AVIV - JULY 24, 2010)

mmediatelyfollowingtheKimberleyProcess

(KPCS) Intercessional in June 2010, a day

long seminar was held with representatives

of governments, civil society, and the diamond

industrytoexplorethecomplexissuessurround

ing fraud and diamond smuggling. Co

sponsoredby the Governments of Canada and

the

United

States,

with

the

financial

support

ofmany organizations, the Enforcement Seminar

brought together a group of actors under the

KPCSbannerthatarerarelyaffordedtheoppor

tunity to meet together at KPCS meetings, par

ticularly customs and police officials. The En

forcement Seminar created a welcome opportu

nity for these officials to interact with govern

ment, industry and civil society in order to ex

changeinformationandperspectivesonwaysto

strengthen the principlesand practices of KPCS

enforcementmeasures.

The morning session consisted of two sets of

panel presentations followedbybreakout meet

ings and then a plenary wrapup (See Annex II

for the workshop agenda). Specialists from the

diamond industry and customs organizations

provided indepth reviews of the nature of di

amond smuggling and other associated illicit

activities. Workshop participants greatly appre

ciated theeloquentrecountingofthecurrentdi

amondsmuggling

situation

and

the

complexities

involved in combating fraudulent trading prac

tices.Civilsocietygroupsandmultilateralorgan

izationsalsoprovideduniqueandcomplementa

ryperspectivesondiamondsmuggling.

The afternoon consisted of presentations and

small group discussions focused on Kimberley

Process enforcement issues in West Africa. This

sessionbuilt upon the extensive preparatory ef

forts of national delegations from West Africa

and

some

participants

sponsoredby

the

Cana

dianandUSgovernments.

For the sake ofbrevity, the following summary

highlights the key points emerging out of the

panel presentations and discussion groups. In

lightof thesensitivitiessurroundingreviewson

actual smuggling cases, panelist presentations

are not attached. Rather, the summariesbelow

reflect the general views ofboth panelists and

participants.

Summary of Panel Presentationsand Discussions

he Enforcement Seminar panelist presen

tationsdescribedvividlythemechanisms

bywhich illegaldiamonds flow from the

pointofproductionthroughexportchannelsand

into importing countries for processing and

eventual retailing. Specific examples of fraud

and smuggling were describedby some of the

customs agencies present, along with advice on

how todevelopan enforcementstrategy.Panel

ists also shared the views of artisanal miners

themselvesontherootcausesofsmuggling.

Themajorpointsemergingoutofthediscussions

were:

DiamondsaretheMostValuableCommoditiesintheWorld.Thediamondtradebrings

both good andbad. Crime, corruption, and

other

illegal

activities

accompanies

the

gen

eration of wealth and economic growth

linkedtothediamondtrade.

Diamonds Attract Criminality. As an extremely highvalue and lowvolume com

modity,thediamondindustry ishighlysus

ceptibletosmuggling.Diamondsareeasyto

transport,market,andevadecontrolsatna

tional borders. Diamonds are notoriously

easy tosmuggleoutofproducingcountries,

but also quite easy to import into countries

that do not conform to the Kimberley

I

T

Kimberley Process EnforcementSeminar Summary

June 24, 2010


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Process certification requirements. Until

now,diamondswerenotamongthetopfour

or five commodities monitoredby interna

tional customsbodies, despite the fact that

diamonds are extremely attractive to crimi

nalsand

terrorists.

EvolutionoftheDiamondIndustryContributes to New Forms of Diamond Smug

gling.Theinternationaltradeindiamondsis

rapidly evolving. Buying houses dominated

thetradeinthepast,oftenmaskingtrueval

ue through fraudulent invoicesaimedates

caping national taxes. Lebanese family net

worksplayedakeypart inthetrade inpro

ducing countries. Money laundering and

opportunities

for

fraud

continue

today

de

spiterestructuringofthediamondeconomy.

Newandcomplexsmugglingtechniquesof

ten surpass the monitoring capacity of en

forcement agencies. Policing illegal flows of

diamonds is extremely difficult because of

the sophistication of the illegal diamond

network, the large numbers of actors in

volvedinthetrade,andthelackofsufficient

informationontheflowsandmechanismsof

fraudulentexchanges.

Linkages Develop between Drug Smugglingand IllegalDiamondExports. A new

and worrisome trend in West Africa con

cerns the linkagebetween money launder

ing,drugsmuggling,andthediamondtrade.

Examples from West Africa were cited that

showcase thisnewconnection.Unfortunate

ly,neithergovernmentsnorthediamondin

dustry have looked at this serious issue ex

tensivelytodate.

Weak Enforcement Persists in ExportingCountries. The panelists and participants

presented numerous examples of why

measurestakentohaltfraudandsmuggling

are so difficult to enforce inboth exporting

and importing countries. Representatives

from Africa cited cases of why it is nearly

impossible to control the flow of diamonds

acrossporousnationalborders.Nationalcus

tomsagenciesarefragile,corruptionisoften

timesrampant

at

all

levels,

and

considerable

flows of uncontrolled migration across na

tionalborders all contribute to the ineffec

tivenessofmeasurestohaltdiamondsmug

glingandfraud.

Interagency Cooperation in ImportingCountries isLacking. Representatives from

enforcementagenciesofimportingcountries

also noted how limited or nonexistent Inte

ragency coordination and information shar

ing undermines effective policing. Enforce

mentagenciesarenotwellequippedtodeal

with the very high degree of sophistication

of the criminal elements involved in the di

amondindustry.

IncentivesforFraudandSmugglingThriveat thePointofProduction. The representa

tivesof

Diamonds

for

Development

Interna

tional (DDI) and the national dialogues on

enforcement coordinated by civil society

(Partnership Africa Canada, with national

civilsocietyliaisons)spelledoutinconsider

able detail the factors contributing to weak

enforcement and the drivers underlying

smuggling from the perspective of artisanal

miners. Few incentives at the local level as

sist miners to engage in the legal diamond

economy.

Porous

and

unwatched

borders,

unfair prices offered by government di

amondbuyers, high fees for official mining

licenses, corrupt officials, weak prosecution

for illegal activities, and harassment of arti

sanalminersallcontributetosmuggling.The

reality must not be maskedtracking di

amondsfromthepointofproductionisdiffi

cultinmanyWestandCentralAfricancoun

tries.Clearly,existingregionalapproachesto

combating fraud and smuggling are inade

quate.

Special Session on West Africa

uring the afternoon, the Enforcement

Seminar included a special session on

the diamond enforcement situation in

West Africa. The session included a

presentation summarizing the results of four

workshopsondiamondsmugglingheldinWest

Africa, followedby small group discussions in

bothFrenchandEnglish.

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The process leading up to this session merits a

short review for it illustrates the constructive

working relationships that canbebuiltbetween

thethreeactorsthatmakeupthetripartitenature

of the KPCS: government, civil society, and in

dustry.This

portion

of

the

seminar

emerged

out

of national multistakeholder dialogues orga

nizedinJune2010bycivilsocietygroupsinfour

West African countries (Sierra Leone, Guinea,

Cte dIvoire, and Liberia) with the technical

assistance of Partnership Africa Canada and fi

nanciallysupportedbyUSAIDsPropertyRights

and Artisanal Diamond Development Project

(PRADD). In all countries, the daylong work

shops were well attended. Highly informative

andhonestdebates focusedon therealitiescon

fronting all actors seeking to redress the weak

nesses in the internal chain of custody. Prior to

their national dialogue, Liberia took the addi

tionalstepofsendingoutrepresentativesofmin

istriesandcustomsorganizationstodiscusswith

mining communities the nature of smuggling

andKPCSenforcementissuesencounteredatthe

local level.Theassembliespresentedmanycon

creteproposals.

Theresultsofthenationaldialoguesonenforce

mentand

smuggling

were

presented

at

the

out

setoftheafternoonsession.Keyfindingsareout

lined here. More details are included in Section

IIIbelow.

Multiple Challenges. Participants shared alitanyofconcerns affecting the fightagainst

fraud and diamond smuggling, noting the

challenge of monitoring the complex path

ways of diamond smuggling, money laun

dering,andother illicitactivitiesacrosspor

ousborders.

For

instance,

enforcement

agen

cies confront many obstacles in uncovering

theoriginsofdiamondsbecauseofthewell

knownconstraintsofmonitoringflowsofdi

amondswithin thecommoditystream.Lack

of viable enforcement measures are com

pounded insomecountriesbyweak legisla

tive frameworks; stronger legislation is

neededtocombatsmugglingandotherillicit

activities. Lack of interregional cooperation

tofightsmugglingofteninhibitsnationalef

fortstohalt illegal tradingactivities.Partici

pantsalsoprovidedexamplesofhowmoni

toring and combating illicit activities sur

rounding diamonds is extremely hazardous

in parts of West Africa controlledby rebel

groups.Peaceand internalsecuritymustre

turn

as

a

precondition

to

any

other

meas

ures designed to combat diamond smug

gling.

NationalSolutions

SetUpDiamondEnforcementSquads.Participantsnotedwithapprovalthespecialized

diamond enforcement team in Belgium, a

major cutting and polishing center. Several

participantssuggestedthatothercuttingand

polishingcenterssetupsimilarteams,noting

thatthe

expenditures

for

enforcement

should

notfallsolelyondiamondproducers,butal

socountriesthatimportroughdiamondsfor

cuttingandpolishingpurposes.

Address Root Causes. There are multipledriversunderlyingsmuggling.Someofthose

driverscanbe addressedby listening to the

concerns ofartisanal minersandaddressing

themfairly(e.g.,providingafairpricetoar

tisanalminerswhen theysell theirgoods to

governmentbuyers,

lowering

the

cost

of

re

gistering for mining licenses, developing

meaningful community reinvestment pro

grams that canbe shown to flourish when

minerssellthroughlegalchannels,etc.).

Involve Communities. Governments lackthe resources to monitor border crossings

and artisanal diamond mining areas com

prehensively. An untapped resource, how

ever,isthelocalcommunitymembersthem

selves,

who

(with

their

intimate

knowledge

of the people and landscape) can multiply

the eyes and ears on the ground and help

identifyandtrackcriminalactivity.National

governments were encouraged to consider

community policing/community monitoring

modelsaspartoftheirenforcementtoolbox.

RegionalSolutions DevelopaTypologyofMoneyLaundering.

The Francophone group suggested that re

searchbe

carried

out

to

develop

atypology

ofmoneylaunderingarounddiamondsnow


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occurring in West Africa. The group noted

the sophisticated ways in which money

laundering now occurs throughout the re

gion. Diamonds mask the flow of capital in

and out of countries and financial streams

areoften

linked

to

awide

array

of

secondary

economies, like real estate or agricultural

imports.Atypologyoftherangeofillicitac

tivitiesarounddiamondscouldthenbeused

tohelptraincustomsandotherenforcement

agenciestobettercombattheproblem.

Revise Mining Codes and Other Legislation. It was suggested that there wouldbe

value in revising (throughout West Africa)

miningcodesandothertextstopermitmore

effective

responses

to

the

new

dynamics

of

fraud presently unfolding in the region.

These texts need tobebrought into confor

mitywiththeKPCS,EITI,andotherinterna

tionalandregionalobligations.

Steps taken by Brazil to CombatFraud and Smuggling

t the end of the Enforcement Seminar

session,thedelegationfromBrazilmade

a presentation on measures taken to

combat fraud around the diamond in

dustry. Initially, Brazil created a Task Force, or

nationalforum,ofgovernment,civilsociety,and

the diamond industry with the mission to fight

fraud,but also to resolve disputes among con

tending parties in the economy. The Task Force

allowed all parties to conduct open discussions

on how to deal with the difficult issues of the

day. Academics, scientists, policymakers, gov

ernment, and the diamond industry all worked

togetherto

develop

acommon

approach.

The Task Force ended up recommending the

suspension of all diamond production for eight

months, even in the alluvial and artisanal di

amondminingsector.Recognizingthehardships

a suspension in diamond production would

cause to the most vulnerable members of the

supplychain,foodaidwasprovidedtoartisanal

miners during the interim. Permits were eva

luated and reissued. A permanent coordinator

for

the

Task

Force

was

set

up,

as

well

as

a

gener

al secretary. The tripartite institutional arrange

ments were preserved. This successful frame

workhasledtothedevelopmentofnewrulesto

regulatetheindustry,andasasidebenefit,con

tributedtoamarkeddeclineinconflictsbetween

different parties. Other countries mightbenefit

fromsetting

up

similar

multi

stakeholder

bodies

toaddressdiamondsmugglingandotherKPCS

implementationissues.

The Way Forward

he Kimberley Process Enforcement Semi

nar participants made the following rec

ommendations.

RecommendationsfortheKimberleyProcess

Kimberley Process and Enforcement. Theseminar

panelists

and

participants

acknowl

edged that the Kimberley Process has not

takenanactiverole indevelopingstrategies

to address fraudulent trading practices like

moneylaunderingandcorruptionwithinen

forcement agencies. While the KPCS is de

signed to monitor and combat fraudulent

transactions,relativelyfewresourcesaread

dressedtothesystemicissuesbehindtheilli

cit trade in diamonds. Combating the com

plex

issues

raised

during

the

Enforcement

Seminar is the purvey of most KPCS work

inggroups;however,noneaddresstheissue

specifically.Forthisreason,newinstitutional

arrangementswithin theKPCSmayneed to

besetup.

WorkingGroup on Enforcement. Many ofthe participants promoted the suggestion of

settingupanewKimberleyProcessworking

groupa Working Group on Enforcement.

However,

others

noted

that

these

functions

are already in the mandate of working

groups,butought tobeastronger focusfor

the Working Group on Monitoring or the

Working Group of Diamond Experts. Con

sensusneverthelessemergedaroundtheim

portance of having some type of highlevel

forum that brings together enforcement

agencies in both exporting and importing

countries todevelopeffectiveapproaches to

combat fraud, smuggling, and other illegal

activitiesaround

diamonds.

A

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LessonsLearnedfromtheWestAfricanEnforcementSeminarPreparations. The inno

vativepreparationscarriedoutbytheKPCS

tripartiteofgovernment,thediamondsector,

and civil society in West Africa (Sierra

Leone,Guinea,

Cte

dIvoire,

and

Liberia)

il

lustratestheimportanceofmultistakeholder

cooperation and engagement for combating

smuggling and other fraudulent activities.

The inclusion of artisanal miner representa

tives in theconsultativeprocess highlighted

theplacelocalcommunitiescanplayinmon

itoringandpolicingthesector.AstheBrazil

ian case also showed, institutionalization of

thetripartiterelationshipatthenationaland

locallevelscangoalongwaytowardbuild

ing the trustbetween the partiesanessen

tial condition for Kimberley Process com

pliance.

Trust Fund on Enforcement. Small groupparticipantsstressedtheimportanceofcreat

ing some type of Kimberley Process trust

fund designed to support efforts to combat

fraudarounddiamondexports.Enforcement

agenciesare indireneedoftrainingandca

pacitybuilding,andsometypeofpermanent

fundingis

required

to

train

staff

in

the

latest

ways to combat fraud. Some participants

suggested that this trust fund couldbe fi

nanced from the sale of confiscated di

amonds. The participants recognized the le

galconstraintsofsettingupthismechanism,

butnoted that theKPCScouldadvocate for

changes in national laws to support the use

of confiscated diamonds sales for enforce

ment purposes. Mention was also made of

the

role

that

the

International

Monetary

Fund (IMF) Trust Fund on AntiMoney

LaunderingandCombatingtheFinancingof

Terrorism might play in contributing tech

nical assistance and financing to strengthen

enforcementmeasures(seebelow).

Work Plan on Enforcement. Some type ofstrategyorworkplanneedstobedeveloped

toturnideasintoaction.Forinstance,identi

fiedenforcementissues,liketheAdministra

tiveDecisionofNovember6,2009regarding

recommendationstoimproveGuineascom

pliance with the KPCS, remain unresolved.

Interregional diamond smuggling requires

regionwideresponses,especiallyamongen

forcementagencies.As therepresentativeof

the World Diamond Council noted, minis

tries

from

countries

affectedby

smuggling

needtomeetseparatelyfromdonorstocraft

a plan among themselves. A smallbut elite

group of government enforcement agencies

shouldbesetuptomonitorillegaldiamond

flows and recommend appropriate new en

forcement measures. Carefully targetedbut

harmonized approaches are essential be

tweenKPCSmembercountries.

InformationSharing.Participantsnoted theimportance

of

sharing

better

information

about diamond smuggling across borders,

bothwithinoccupationalgroups(e.g.,police

officialsfromdifferentcountries)andacross

occupations (e.g., customs officials and po

licetogether).Theyfeltthatexistingmultila

teral institutions could create spac

es/networks/institutionstoenhanceinforma

tionsharing.

Cellule de Renseignements Financires(CRF).

Small

group

participants

hig

hlighted the importance of setting up

some type of institution to provide in

formation on suspicious financial trans

actions associated with diamond and

other illegalexports.Somecountriesare

setting up institutions to monitor finan

cialtransactions,butasisoftenthecase,

thesestructuresaresorelyunderfunded.

Staff are simply not equipped with the

skillsand infrastructureneeded tocarry

outtheir

functions.

World Customs Organization (WCO)/Interpol.ItwassuggestedthattheKPCS

WorkingGrouponMonitoringmightbe

able to function as an information hub

helping to facilitate diamondrelated in

formationflowsacrossthesetwoorgani

zations,building on the Israeli proposal

for enhanced collaborationbetween the

KPCSandtheWCO

Diamond Industry. Representatives ofthe diamond industry expressed a wil


11/28


lingness to provide technical assistance

and information on fraudulent trading

practices.Furtherdiscussion on this im

portantcontributionisneeded.

RecommendationsforMultilateralOrganizations

National Conventions against Corruptionand Money Laundering. One participant

noted that some countries have not set up

framework legislation making corruption

andmoneylaunderingillegal.

Fraud and Smuggling Monitoring. Theworkshop participants uniformly noted that

monitoring the flow of illegal diamonds is

extremelydifficultduetotheirexceptionally

high

value

and

small

size.

Monitoring

smugglingatbordercrossingswillalwaysbe

quiteproblematic.However,somebestprac

tices of ways to monitor statistics on smug

gling are needed. Customs agencies are not

abletoobtainsufficientandhighquality in

formation. New information protocols are

necessary.

Monitoring of Unusual Financial Flows.Workshop participants surmised that moni

toring

and

discovery

of

illegal

flows

of

di

amondsbebestcarriedout through investi

gationsoffinancialflowswithintheinterna

tionalbanking sphere. Creation of a service

denqutesfinanciers(specialagencyformoni

toring financial flows) for diamonds might

befarmoreeffectivethansimplystrengthen

ingcustomscontrolsatbordercrossings.

Trust between Enforcement Agencies.Manyoftheparticipantsnotedthatthemost

pragmatic way to combat the very sophisti

cated diamond smuggling rings is tobuild

and strengthen working relationships be

tween customs and police forces. Building

policetopolice trustbetweenexportingand

importing countries is essential. Several ac

tors, like the Royal Canadian Mounted Po

lice,expressedaninterestinparticipatingac

tivelyinaforumtodevelopbestpractices,as

well as providing training and capacity

building.

CENNetwork.TheWCOsuggestedthattheextensivedatabaseofanalysisofbackground

information on trends, statistics, and alerts

for many commodity chains couldbe used

moreeffectivelyforthemonitoringofillegal

diamondflows.

Representatives

of

countries

exporting diamonds encouraged the council

to set up new protocols to provide training

and other technical assistance in the use of

thisnetwork.However,someneeds,suchas

computers and connections to the Internet,

aresorelyneededbysomecustomsagencies

inexportingcountries.

EngagementofGovernment, theDiamondSector,andCivilSociety.Thetripartiterep

resentativesall

expressed

adetermination

to

support measures to develop concrete ac

tionstocombatfraudandsmugglingaround

diamonds. The diamond industry, as noted

by the DeBeers representative, is very ea

gertodevelopmechanismstoexchangein

formation on illegal diamond flows. Euro

pean and northern American enforcement

agencies similarly expressed an interest in

exchanginginformationandprovidingtrain

ing under an appropriate institutional

framework.

IMF Topical Trust Fund on AntiMoneyLaundering and Combating the Financing

ofTerrorism. Workshop participants noted

thecreationofthenewIMFresourcesof$31

million over five years to contribute to ef

forts to combat money laundering and the

financingofterrorism.Thetrustfundworks

with 16 African countries and provides a

range of technical assistance programs and

seminars

targeted

at

helping

countries

ad

dress institutional weaknesses. This fund

mightbe available to contribute to some of

theproposalshighlightedintheEnforcement

Seminar.


12/28


AcknowledgementsTheEnforcementSeminarorganizerswould liketothankthemanycontributorstothisfruitfulses

sion.ThechairoftheKimberleyProcessandtheGovernmentofIsraelgraciouslyhostedtheseminar

andcovered

many

important

costs

of

the

event.

Special thanks to theGovernmentsofCanadaand theUnitedStates forcosponsoring theEnforce

mentSeminarandsupportingmanyoftheexpensesoftheworkshop,includingcoveringthecostsof

travelforsomeparticipants.

TheworkshopgratefullyacknowledgestheindispensableassistanceoftheKimberleyProcesstripar

titeforwhichthisinnovativeworkshopcouldnothavehappened.Governmentsupportforthework

shop was further aidedby the Government of Belgium; the diamond industry played a key role

throughthecontributionsoftheWorldDiamondCouncil;andcivilsocietywasbroadlyrepresented

throughacoalitionofnationalactorsfromWestandCentralAfrica.PartnershipAfricaCanada,with

financial support from USAIDs Property Rights and Artisanal Diamond Development Project

(PRADD),

facilitated

the

strong

presence

of

civil

society

actors

and

the

voices

of

the

artisanal

mining

communities expressed through national workshops on enforcement and smuggling held in Cte

dIvoire,Guinea,Liberia,andSierraLeone.ThisactiveengagementoftheKPtripartiteatthenational

and local levelsbrought freshconcerns,perspectives,andhopes for the future.To theseactors, the

workshopsponsorsaredeeplyindebted.

Deepappreciationtothespeakersandpanelistswhoofferedsomuchinformation,richperspectives,

andvisionsforthefuture.

BoazHirsch,ChairoftheKimberleyProcess

A.KpandelFayia,MinistryofLands,Mines,andEnergyofLiberia

AgimDebruycker,GovernmentofBelgium

EphremLuteteMaketama,MinistryofFinance,DRC

BenotDjahaKonan,CENTIF,CtedIvoire

DorotheGizenga,DiamondDevelopmentInitiative

JonnyCappelle,Customs,Belgium Tami Avisar,IsraeliCustoms ColinBrown,DeBeers WynetSmith,UNGroupofExpertsonLiberia ShriGurdeepSingh,MinistryofFinance,

India AkoiGawola,SeniorCollectoratGantaCustoms

Collectorate,Liberia

NadimKara,PartnershipAfricaCanada


13/28


SECTION III: DIAMOND SMUGGLING IN WEST AFRICA AND THE

KIMBERLEY PROCESS CERTIFICATION SCHEMEOverview

tedIvoire iscurrently theonlycoun

trythatisprohibitedunderaUNSecu

rity Council Resolution to trade its

roughdiamonds.4Despiteaban on exportsof

Ivoirian diamonds, 100% of diamonds pro

ducedinCtedIvoirearesmuggledoutofthe

country and into the diamond supply chain,

according

to

various

United

Nations

and

Kim

berley Process Certification Scheme reports.

TheUN; theKPCS;andstakeholders from the

Mano River Union countries of Guinea, Sierra

Leone,LiberiaandCtedIvoirehavealliden

tified diamond smuggling in the region as a

priorityissue.

By minimizing flows of illicit diamonds, gov

ernmentscanreduce theprobability thatrebel

groupswillbeabletousediamondstofinance

arms purchases. Minimizing smuggling also

shores up public finances, as diamonds going

through formal channels canbe taxed. Efforts

to legalize diamond flows can also support

economic development in diamond mining

areas, where community reinvestment pro

gramsexist.

Tosupportefforts to make progresson the is

sue of diamond smuggling, the United States

funded national dialogues on diamond smug

gling in four West African countries: Cte

dIvoire,Sierra

Leone,

Guinea

and

Liberia,

with

the technical assistance of Partnership Africa

Canada and financial support of USAIDs

PropertyRightsandArtisanalDiamondDevel

opmentProject(PRADD).

The workshops, convenedby civil society or

ganizationsineachcountry,createdaspacefor

multistakeholderdialogueondiamondsmug

4

UN

Security

Council

Resolution

1643

(2005).

Available

at http://daccessddsny.un.org/doc/UNDOC/GEN/

N05/644/81/PDF/N0564481.pdf?OpenElement.

glingandtheKimberleyProcess.5Ineachcoun

try, civil society organizations invited abroad

anddiverserangeoforganizationstotakepart,

includingmineministries,civilsociety,artisan

al miners, union members, diamond dealers,

customsandpolice.6

Whiletheformatofeachworkshopwasdiffer

ent, most asked some variant of the following

questions:

Whatisthecurrentstateofaffairswithrespecttosmuggling?

Whatarethemaindriversofsmuggling? What isbeingdone toaddresssmuggling;

howeffectivearetheseactions?

What key issues needed tobe addressed,andwhatpossiblesolutionsmightbestad

dressthem?

West

Africa

was

chosen

as

the

focus

for

this

projectbecausetheKimberleyProcesshashig

hlightedCtedIvoireasapriorityareaforat

tention.7

5 See Annex I for short descriptions of the civil society

partnersin

each

country.

6 Priortoholdingtheironedayworkshop,GreenAdvo

cates(thecivilsocietypartnerinLiberia)conductedex

tensive consultations in Liberias diamondmining

communities, as well as oneonone interviews with

keystakeholders.

7 The KPCS provided a briefing to the UN Security

CouncilinJune2005,andadoptedtheMoscowResolu

tiononCtedIvoireinNovember2005.TheKPCSalso

addressedirregularitiesinGhanaiandiamondstatistics

thatsuggestedIvoriandiamondswerebeingsmuggled

throughGhana.CtedIvoirewas the focusofspecial

attentionattheBrusselsPlenaryin2007,whichledtoa

numberof

initiatives

by

the

KPCS

Working

Group

of

DiamondExpertstosupportcustomsofficialstoidenti

fyIvorianstones.

C

Country Profiles: Diamond Smuggling and theKimberley Process Certification Scheme


14/28


Summary

hallengesthatwereidentifiedinatleast

threeofthefourworkshops(notingthe

uniqueness of the situation in Cte

dIvoire)

included:

Limited ProductionData. Although mining officials are often tasked with docu

mentingproductionlevels,productiondata

remainsquestionable,makingitdifficultto

getaclearpictureofsmuggling.

UnfairPricing.Manyartisanalminers feeltheydonotreceiveafairpricefortheirdi

amonds, which encourages them to go to

the black market. Some diamond dealers

feelthe

same

way

about

exporters.

Porous Borders and Illegal (Alien) Miners. Extensive crossborder trading net

works, often involving closeknit kin net

works, are difficult to monitor due to the

largenumberofbordercrossingpointsand

inadequatestatemonitoringresources.

Limited Capacity/Resources. Mine Monitoring Officers often lack sufficient re

sources(mobilephones,transportationand

fuelallowances)

to

play

ameaningful

mon

itoringrole.

Insufficient Collaboration. Stakeholdershighlightedtheneedforbettercommunica

tion and cooperationbetween various en

forcement units (police, customs and na

tionalsecurity)atthenationalandregional

levels.

LimitedKPCS Expertise. More educationand training is required for all actors in

volved in monitoring KPCS implementa

tion,fromminerstoenforcementofficials.

Stakeholders were asked to generate ideas on

how thesechallengescouldbeovercome.Rec

ommendationssuggestedinatleasttwoofthe

workshops, or that were particularly innova

tive,arelistedhere:

Development Solutions: prevent smugglingfromoccurringbydealingwithissues

of

fairness

and

security

from

the

perspec

tiveofartisanalminers.Forexample:

Collect information about the fairnessof the prices receivedby different ac

tors in the diamond supply chain. Ex

plore ways to ensure artisanal miners

areabletonegotiatefairpricesfortheir

diamonds.

Monitorcontractsbetweendiggersandother actors in the supply chain and

createmechanismstomediatedisputes

fairly.

Develop and promote communityreinvestmentinitiativestohighlightthe

socialvalueofparticipating in the for

malsystem.

Governance

Solutions:

improve

systems

of

oversight and accountability in the di

amondsupplychainthatmakeitmoredif

ficult for individuals to smuggle without

beingcaught.Forexample:

Introduce more random audits andspotchecksintotheoversightsystems

set up at the national level, to cross

reference data collected at different

pointsinthesupplychain.

Integrate the collection of productiondata into existing internal control sys

tems.

Requiredealersandexporterstoplayamoreactiveroleinverifyingtheorigin

ofthediamondstheybuy.

Examinemodelsforregisteringdiggers(e.g.,Guyanesemodel).

Continuetoholdmultistakeholderdialogues

on

KPCS

issues.

EnforcementSolutions:improvetheeffectiveness of those institutions designed to

intercept diamond smugglers and bring

themtojustice.Forexample:

Improve collaboration between enforcementagenciesat thenationaland

regionallevels.

Provide education/training on KPCSforallenforcementrelatedbodies.

C


15/28


Seek support from specialized enforcementbodies in diamond trading

centers to crack down on diamond

smuggling.

Involvemembersofminingcommunitiesincommunitybasedmonitoringof

borders and smuggling to compensate

forlimitedstateresources.

Improve judicial oversight over diamondsmugglingcases.

National Profiles

A CTE DIVOIRE

Civil society partner:Groupede Recherche et de

Plaidoyersur

les

Industries

Extractives

Overview

The export of rough diamonds from Cte

dIvoire is subject to a voluntary self

suspensiondecisionmadebyministerialdecree

inNovember2002.In2005,attherequestofthe

GovernmentofCte dIvoire, theUNSecurity

Councilimposedafurtherembargoontheim

portofallroughdiamondsfromCtedIvoire

(Resolution 1643) to prevent diamonds from

beingused

as

asource

of

finance

by

the

domi

nant rebel movement (les Forces Nouvelles, or

FN).

Although armed conflictbetween the FN and

theGovernmentofCtedIvoirehasceased,a

defactodivisionofthecountrycontinues,with

theFNmaintainingeffectivecontrolof thedi

amondiferousareasinthenorthofthecountry.

Ivorian diamond production, which totaled

around300,000carats/yearpriortotheconflict

(US$25

million),

is

concentrated

in

two

areas:

around SgulaBobiDiarabana (covering ap

proximately 100 km) and Tortiya (approx

imately30km).8

While production levelsdropped slightly dur

ing the first few years of the conflict,9 recent

8 JointUN/KPCSMissionFinalReport,April2008,page

6.

9

2007

production

was

estimated

at

between

114,000

188,500 caratsby theJoint UN/KPCS mission in April

2008(page3).

reports suggest that diamond mining in

Sgula has not only continued, but has ex

panded.Forexample,variousreportshavere

vealedtheexploitationofthreenewkimberlite

pipesinDiarabalaaswellasnewpitsatDualla

and

Siana.10

Production

in

2009

may

actually

have reached preembargo levels,11 although

thisisdebated.12

Existing Actions to Address to Diamond

Smuggling

Prior to the conflict, the Ivorian Ministry of

Mines granted mining cards linked to specific

parcelsof land.Holdersofminingcards (who

were registered in a Departmental database)

subcontracted the actual act of mining to

groups of artisanal miners or diggers, who

were also identified, registered and provided

with a labor card. Artisanal miners were pre

dominantlyorganizedatthevillagelevel,with

everydiamondproducingvillageorganizedin

acouncilcalledGroupementVocationCoopera

tive(GVC).

The GVC has traditionallybeen the organiza

tion responsible forboth collecting and distri

buting taxesfromdiamondsales.Whenadig

gersold

adiamond

to

abuyer,

12%

of

the

price

paidtothediggerwaskeptbytheGVC.Afur

ther 8% went to a governmentbodySociet

pourleDeveloppementMinir(SODEMI).

Anetworkof traders (subcollecteurs,collecteurs

andacheteurs)werelicensedoncetheyaffiliated

with a registeredbuying office. This network

moved thediamonds from theproductionsite

throughtothebuyingoffice.Diamondsforex

port had tobe submitted to the ministry for

appraisal

prior

to

export

(except

for

those

mined by SODEMI), and customs officials

wouldcheckwhether there wasaspecific cer

10 UNGroupofExpertsReport,April2009,page18plus

AnnexVI.SeealsoUNGroupofExpertsReport,Octo

ber2009,pages6162.

11 UNOCIdiamondexpert,workshoppresentation,May

29, 2010. See also Annex III of UN Group of Experts

Report,April2010.

12 Personal correspondence with Leon Boksenbojm, spe

cialadvisor

to

the

Government

of

Cte

dIvoire.

Bok

senbojmsuggeststhatcurrentproductionlevelsarebe

tween80100,000carats.


16/28


tificate (expert attestation) for the precious

stones. Expert attestations were provided by

trained experts working for the Ministry of

Mines.StaffoftheMinistryofMinesalsomoni

toredthischainattheregionalanddepartmen

tallevels.13

Althoughthissystem isno longer inplace,di

amondminingandtradingcontinues.TheMin

istryofMinesestimates thatcurrently5,000to

10,000 miners couldbe active in the Sgula

area, where 17 of the 25 cooperatives that ex

istedbefore the conflict are said to remain in

operation.14 In Tortiya,by contrast, it appears

thattheminingsitesarenotbeingdevelopedas

intensively or in as organized a fashion as in

Sgula.

The

UN

Group

of

Experts

estimates

thattherearelessthan5,000minersinTortiya,

andnotesthatthereisnoGVCofficethere(al

thoughtherearefiveinformalbuyingoffices

active in Tortiya).15 According to the FN, all

actorsinvolvedinsmallscalemininghadbeen

previously authorized by the Ministry of

Mines.16

In recent years, the Ministry of Mines hasbe

guntotakestepstowardreassertingitscontrol.

At

the

May

29

workshop

on

diamond

smug

gling in Cte dIvoire, the government indi

catedthatithadmadethefollowingefforts:

Ministerial decree halting diamond exports;

Outreach and awarenessraising sessions(conducted in the diamondproducing re

gions) on the negative impacts of smug

glingandtheimportanceofalegalmarket

system;

A halt to renewals of exploration licensesandallocationsoftherightstoexplorenew

parcelsofland;and

13 As described in the Joint UN/KPCS Review Mission

Report,April2008,page13.

14 TheGVCwastheorganizationresponsibleforkeeping

recordsofdiamondproduction,andcollectingtaxeson

diamondproduction.

15 UNGroupofExpertsReport,October2008,page33.

16 JointUN/KPCSReport,April2008,page10.

Developmentofanewsystemofcontroltomanage the production, collection and

stockpilingofdiamonds.

Challenges RemainingNeighbouring

States,

specifically

Burkina

Faso,

Guinea,LiberiaandMali,likewiseareeitherunable

orunwillingtomonitorandenforcetheembargoon

the import of Ivorian rough diamonds. Cte

dIvoiresneighboursjustifytheirinabilitytocomp

ly with resolution 1893 (2009) by citing a lack of

resources.TheGroupacknowledgestheseproblems,

butnotesalackofpoliticalwillinmostcases.

UNGroupofExpertsReport,

April2010,pages1314

Reestablishing Central Authority. TheGovernmentofCtedIvoirehaslittletono

capacitytoregulatediamondproductionor

monitor borders in FN territory. Cte

dIvoiresharesborderswithfivecountries:

Liberia and Guinea in the west, Mali and

BurkinaFasointhenorthandGhanainthe

east. Of theseborders, roughly 60 percent

arecontrolledbytheFN.17

Securing Enforcement Cooperation fromOther

States.

Burkina Faso has no controls throughwhich to detect the possible import of

roughdiamondsfromCtedIvoire.18

Statistical anomalies related to Guineas 2008 production and export fig

ureswerethefirstflagthatIvoriandi

amondswerebeinglaunderedthrough

Guineasdiamondindustry.Arangeof

actors in Guineas diamond industry

informedtheUNGroupofExpertsthat

they were easily able to insert di

amondsintothemarketinGuineaand

export them legally with a Guinean

Kimberley Process certificate.19 Gui

nean officials also informed the UN

Group of Experts that the country

lacks an effective system of warran


18 Ibid.,page65.



17/28


tiesdoesnothaveinspectorsatmin

ingsitesandhasporousborders.20

In addition to documenting the intimate involvement of Malians in the

trade of Ivorian diamonds (as miners,

financiers and facilitators of the

trade),21 the UN Group of Experts has

alsoreceivedcredible information that

has flagged Mali as a major transit

point for the export of Ivorian di

amonds.22

As of October 2009, the UN Group ofExpertshadnotreceived fullandade

quate responses from the trading cen

ters to which Ivorian diamonds are

smuggled,

including

Israel

and

the

UnitedArabEmirates.23

Recommendations for Action

Whetherornotelectionstakeplace,oracentra

lizedpublicadministrationisestablished,there

arespecificsteps thatcanbe taken to improve

transparencyoverthediamondindustryandto

lay a foundation for improved internal con

trols:

Collecting Information on the DiamondTrade,including:

Levels of Production. In 2009, representatives of the GVCs, the Govern

mentofCtedIvoireandtheFNeach

agreed on the need ofbringingback

SODEMI [the Ivoirian mining authori

ty]torebuildstatistics.24

IndustryStructure,including: shiftsintheorganizationofdiggers(e.g.,influxofforeigndiggerswho

arenotconnectedtoGVCstructure

conflicts over who has title or

accesstospecificparcelsofland);

20 UNGroupofExpertsReport,April2010,page15.




24

Report

on

the

Joint

Ministry

of

Mines,

Forces

Nou

velles,GroupofExpertsandUNOCIMissiontoSegue

la,August2009,page2.

opportunities to improvethewaysin which diggers are registered/

monitored;and

buyingandtradingnetworks:whoisbuying diamonds,how are they

beingmoved

out

of

the

country.

Beneficiation: whatpricesdiggersarereceiving; what percentage of this price goes

totheGVC;

what percentage goes to the FN;and

howtheGVCandtheFNareusingthesefunds(i.e.,whetheranyoneis

making investments in social or

economic

development,

or

environmentalintegrity/rehabilitation).

Cooperation: Developing a national, tripartite Kim

berleyProcesstaskforcetofacilitatein

formation sharing between govern

ment agenciesand between govern

ment, civilsociety, labor,mining com

munitiesandindustry;

Developing investigative and analytical

units

that

can

monitor

the

rough

di

amondtrade;

Developingamodelforreinvestingdiamond revenues accruing to the state

backintolocalcommunities;and

Improving relationships with INTERPOL, and encouraging INTERPOL to

develop a special bureau focused on

preciousmetalsandgems.

Reasserting

Central

Authority:

TheMinistryofMinesshouldcontinueto support effortsby the customs ad

ministrationtocreateasinglecustoms

territory,inwhichlawsareappliedun

iformly and [to redeploy] Ivorian

customsthroughoutthecountry.25

At theMay29enforcementworkshop,the government indicated that they



18/28


were elaborating a new system of in

ternalcontrols.

TheGovernmentofCtedIvoireisalso exploring the possibility of having

governmentofficersbuyupandstock

pile diamonds producedby the GVC

throughthecreationofabuyingoffice.

The purpose of this scheme wouldbe

tokeepIvoriandiamondsofftheblack

market without undermining the live

lihoods of artisanal miners in Cte

dIvoire.26 The government would re

quire substantial resources to make

thesepurchases,however.Tothisend,

thegovernmenthasrequested that the

KPCS

allow

periodic

supervised

ex

ports.27

RenewedAttention from theKPCS. TheKimberley Process Certification Scheme

was put in place to address precisely the

scenariopresentedbyCtedIvoire.While

ithastakenmanyactionstodate,morecan

bedone.TheUNGroupofExperts,forex

ample,hascalledfortheKPCSto:

Buildthecapacityofcountriestoidentify

diamonds

from

sanctioned

areas

andpreventtheirreintegrationintothe

legitimatediamondtrade,through:

standardizingorigindeterminationmethodologies across member

states (e.g., use of the footprint of

CtedIvoiresdiamonds);

encouraging the adoption of morphological photographic technical

analysis, as used in Ghana, as a

permanent

procedure

within

the

KPCS;and

coordinating and comprehensivelyfunding technical assistance pro

grams to support those countries

26 The UN Group of Experts has expressed concerns

aboutthisproposal.UNGroupofExpertsReport,Oc

tober2009,pages6263.

27 Note, a precedent for such a model hasbeen set in

Zimbabwe,where

the

KPCS

has

approved

periodic

ex

ports of diamonds produced from certain parts of the

Marangediamondfields.

willing tostrengthen their internal

controls.

Sanction KPCSmemberstates that failto cooperate with UN bodies tasked

withmonitoringand investigatingUN

embargos (e.g., the lackofcooperation

notedby theUN GroupofExpertson

thepartoftheUnitedArabEmirates28).

For neighbors of Cte dIvoire, makeentry into the KPCS contingent upon

thesubmissionofclearevidenceofse

rious efforts to control the movement

of Ivorian diamonds into and through

theircountries.

B SIERRA LEONEWithoutadoubt,thekeyproblemsareillegalmin

ingandsmuggling,butespeciallysmuggling.

SLMinisterforMineralResources(2005)

It must be acknowledged that Sierra Leones rec

orded diamond exports have risen substantially in

recent years indicating increasing levels of legal

compliance.

KPCS

Review

Visit

(2009)

Civil society partner: Network Movement for

JusticeandDevelopment

Overview

While challengesremain, statisticswould sug

gestthatSierraLeonehasmanagedtoincrease

dramaticallythepercentageofdiamondsbeing

exported through the formalsystem.Legalex

portsin1999amountedtoaroundUS$1.3mil

lion, while exports 10 years later came to al

mostUS$80million.

The Government of Sierra Leone has invested

substantial resources into developing institu

tions to provide oversight over the diamond

sector,witha leadroleplayedbytheMinistry

of Mineral Resources (MMR). The Director of

Mines,basedinFreetown,issupportedbyfour

main regional offices, each one managedby a

28 UNGroupofExpertsReport,April2008,page19;Oc

tober2009,page59.


19/28


RegionalMineEngineerwhoactsasthesenior

ministry representative in each of these four

regions. Mine Engineers are supportedby Su

perintendentsandSeniorMineMonitoringOf

ficers.Superintendentsoverseetheworkofthe

Mine

Wardens

(who

demarcate

areas

of

land

for mining, issue licenses and maintain cada

stral records)andSeniorMineMonitoringOf

ficersoverseetheworkoftheMineMonitoring

Officers(MMOs).

Themonitoringworkof theMinesMinistry is

complementedbytheworkoftheGovernment

GoldandDiamondOffice(GGDO),which:

Monitors and values diamond exports(witnessesclosingofpacketsforexport);

IssuesKPCScertificates; Conductsevaluations; Ensuresthatdiamondexportscomplywith

theKPCS;and

Levies and then allocates the mandatedthreepercentexportdutyintodifferentac

countsofthenationalconsolidatedfund.

At the enforcement level, different organiza

tionsare

involved,

including

the

police,

Office

of National Security (ONS), National Revenue

Authority (Customs and Excise) and Anti

Corruption Commission. Within the police,

two separate units work on diamond smug

gling issues: the Precious Minerals Investiga

tions and Intelligence Unit (PMIIU) and the

EconomicCrimesSyndicate.

Existing Actions to Address Diamond

Smuggling

Actions

taken

by

the

Government

of

Sierra

Leonetodateinclude:

Licensingkeyactorsfromminingtoexport:mineoperators,dealersandexporters;

Documentingalldiamondsthatareboughtand sold, including transactions between

(a) mine operators and dealers, and (b)

dealersandexporters;

Undertakingchecksonthisdocumentationby

government

agencies,

particularly

by

MMOs;

Creating enforcement units to address diamond smuggling issues, including the

Border Guard Security Unit within the

ONSandthePMIIU;

Setting up an AntiFraud Committee toclampdownonforgeriesofSierraLeonean

KPCSCertificates(asnotedinthe2009An

nual Report submittedby Sierra Leone to

theKPCS);and

Providing 25 percent of the officially accrued revenue from diamond exports to

the Diamond Area Community Develop

ment Fund (DACDF), to encourage di

amondminersanddealerstoproduceand

exportlegally.

Challenges (over and above those men-

tioned in the Executive Summary)

Thesystem[ofinternalcontrols]isunderminedby

inadequatedocumentationofwinningsnoproduc

tiondataisgatheredandhenceageneralabsence

ofpaperworkdemonstratingtheexactprovenanceof

the rough diamonds entering the legitimate trade.

Thisweakness iscompoundedbya strongdisincli

nation on thepart ofdiamond buyers toask ques

tionsof

the

vendors

regarding

the

stones

source.

All of the dealers and exporters whom the review

teamquestionedonthissubjectsaidthattheydonot

askwouldbe sellerswhere their stonesaresourced

from.

ReportoftheKPCSReviewVisittoSierra

Leone(2009)

Key challenges identified in the workshops

included:

Loopholes

in

the

System.

Due

to

weak

oversight over the paper trails developed

by the MMR, exporters are able to avoid

paying taxes on highvalue stones (of

more than11carats)bypurchasing lower

valuedstonesandaddingthemuppriorto

submittingthistotheGGDOforexport.

WeakJudicialOversight. According to the KPCS Review Visit

Reportfrom2009,MMOsinKonoDis

trict

were

not

aware

of

any

prosecu

tions for any kind of diamondrelated


20/28


offences having occurred in recent

times.

Enforcement staff at the airport reportaroundthreetofourcasesofattempted

smuggling or diamondassociated

fraudattheairporteachmonthbutare

notawareofanyoneeverbeingprose

cutedfortheseactivities.

Police lack the capacity to distinguishfakecertificatesoforiginfromgenuine

ones.


DevelopmentSolutions

TheMinistry

of

Mines

and

Mineral

Resources

shouldexploreways tosupportartisanalmin

ers to get a fair price for the stones they find.

Forexample:

Opening government diamondbuyingcentersclosertotheactualartisanalmining

areasthatpayfairprices;

TrainingMMRstaffondiamondvaluationandstationingtheminregionalofficesasa

resource to artisanal miners during their

negotiationswith

buyers;

Providingminersthemselveswithtrainingondiamondvaluation;and

Collectinginformationonthepricespaidtoartisanalminersascomparedtothevalua

tion of diamonds submitted for export, to

assesswhetherdiamonddealersarepaying

fairprices.

GovernanceSolutions

TheMMR

should:

Require mine license holders to recordwinningsandtheirlocationinthelogbooks

issuedbytheministry,andensurethatthis

data is checked and recorded by the

MMOs,inordertoenhancetraceability(as

suggested in the 2009 KPCS Review Visit

Report).

Require dealers and exporters to obtainwrittenproof fromvendorsof the identity

of the particular mining site from which

the diamonds are sourced. This written

proof could take the form of copies of the

completedentries

in

the

mine

license

hold

ers log of winnings, where this states the

location at which the diamond was ex

tracted. MMOs should carry out regular

checkstoensurethatdealersandexporters

havecopiesofthisdocumentation(assug

gested in the 2009 KPCS Review Visit Re

port).

Examine models for registering diggers(e.g., the Guyanese production model, as

notedin

Sierra

Leones

2009

Annual

Report

totheKPCS,ortheGhanaianmodel).

Ensure updated records of export licenseholders are providedby the MMR to the

GGDO.

Monitor more rigorously the ability ofagentstoexportonbehalfofanexporter.

Improve methods for screening applicantsfordealerandexporterlicenses.

Carry out periodic spotchecks and fullaudits on chains of diamond transactions

between mine license holders and dealers,

andbetweendealersandexporters.

EnforcementSolutions

TheMMRshould:

Improve information gathering, analysisandsharingbetweengovernmentagencies.

Increasethesalaries,logisticalsupportandtraining

provided

to

MMOs

and

actively

seek support from international donors to

coversomeofthecostsofthesemeasures.

FormalizethepositionofMMOsandinstitute standard recruitment procedures

aimed at assessing applicants qualifica

tionsandcapacitytodothejob.

Promote existing incentive schemes to reward MMOs for catching smugglers.


21/28


C LIBERIA

[There are] strong indications that a substantial

proportionof thediamondsextracted inLiberiaare

notbeingexportedwithintheCertificationScheme

2009KPCSReviewVisitReport

Civilsocietypartner:GreenAdvocates

Overview

Havingjoined the Kimberley Process in 2007,

Liberiahashadonlyafewyearstoputinplace

theinternalcontrolstobecompliantwithKPCS

minimum requirements. As a result, it is not

surprisingthatthelasttwoKPCSreviewvisits

to Liberia (in 2008 and 2009) concluded that

Liberia

required

substantial

work

to

improve

governmentoversightofitsdiamondsector.

Primary responsibility for the implementation

of the KPCS falls to the Ministry of Lands,

Mines and Energy (MLME). The MLME over

seestheworkoftheGovernmentDiamondOf

fice (GDO), which is responsible for issuing

importandexportcertificates,includingverify

ing that all internal requirements have been

met prior to the issue of such certificates. The

GDOis

also

responsible

for

preparing

statistic

alinformationfortheKPCS.

The GDO is assistedby a network of 10 Re

gional Diamond Offices (RDOs) located in the

areasofLiberiawithactivemining.TheRDOs

are primarily responsible for issuing vouchers

whendiamondsarediscovered.Separate from

the GDO, the Operations Division in the

MLMEhandles the issuanceof licenses forex

plorationandmining.

Recognizing the need for a wholeof

government approach to managing the di

amond sector, a Diamond Task Force was set

up in 2006 to bring together all government

and external agencies required to achieve a

KPCScompliantdiamondregulatorysystemin

Liberia (although the Task Force has met irre

gularlysinceinception).


Smuggling

ImportantstepstheGovernmentofLiberiahas

takentodateinclude:

Requiring

that

all

actors

from

production

to export be licensed, including miners

(Classes A, B and C) as well asbrokers,

dealersandexporters;

Requiring documentation of every diamond transaction in the chain from pro

ductiontoexport:

Mineral vouchersare issued to minersby regional offices in diamond

producing areas, copies of which are

retainedby

the

regional

office,

sent

to

theGDOandprovidedtothepurchas

er(listing, interalia,detailsofthemin

ersregistrationnumberand theclaim

number, as well as the weight of the

stones);

Copiesoftheoriginalmineralvouchersare compared to those presented for

exports;and

Receipts are issued by brokers anddealers

to

those

they

buy

from,

and

brokersanddealersareaskedtomain

tain records and submit monthly re

ports of all transactions to the GDO,

uponpenaltyofafineand/orcancella

tionoftheirlicense;

Increasing salaries of Regional DevelopmentOfficers;

Supporting community consultations inmining communities tobetter understand

smugglingandillegalmining;and

TrainingstaffintheGDO,withthesupportoftwoconsultantsfromtheEC.

Challenges (over and above those men-

tioned in the Executive Summary)

SomeoftheissuesLiberiawillneedtoaddress

goingforward:

Weak Judicial Oversight. Participants inthe

Liberian

workshops

noted

that

there

were inadequate penalties for criminalbe


22/28


havior, as well as political interference in

enforcement proceedings when smugglers

acting on behalf of powerful elites were

broughttotrial.

BarrierstoParticipatingintheFormalDiamond Market. Participants in the com

munity consultations organized by Libe

rian NGO Green Advocates noted that

miners were often reluctant to travel long

distancestoregistertheirdiamondsdueto

concernsabout:

Security (being robbed on the way tothegovernmentoffices),

Corruption(beingcheatedwhileinthegovernment

offices),

Delays (offices are not always closeenoughtominesites),and

Legality (the miners are often unlicensedduetoconcernsaboutthecosts

as well as the related delays and ex

penses).

Recommendations for Actions

Anumberofstakeholdershighlighted theval

ue

of

having

regular

multistakeholder

dialo

guestofacilitatetheidentificationofchallenges

andthecollaborativedevelopmentofsolutions.

In thisregard, thereestablishmentandstreng

thening of a multistakeholder platform (e.g.,

the Diamond Task Force) for managing issues

related to the diamond sector is critical. The

importance of engaging diamondmining

communities in diamond sector management

andpolicydevelopmentwasalsoemphasized.

DevelopmentSolutions

Support miners to organize into cooperativestoimprovetheirbargainingpower.

Allowminerstosecurefinancingandtoolsfromthegovernmentinsteadofbrokers.

Provide training for miners to understandthevalueofthestonestheyfind,aswellas

uptodateinformationondiamondprices.

Better promote how resources from diamond

exports

are

reinvested

back

into

di

amondminingcommunities.

GovernanceSolutions

Obtain accurate diamond production figuresbyhavingtheGDOrequireminersto

submit a monthly production report with

the name of the miner, the location of

his/herclaimandhis/herlicensenumber.

Decentralize the issuance of Class C (artisanal)licenses.

Reduce the costs of Class C mining licenses.

Weve sixteenborder crossingpoints inour com

munity with no security [stationed] at any of

them securitypersonnel stay in the town while

diamondboysstayinthebush.

DiamondboyfromCampAlpha

EnforcementSolutions

Strengtheningpenaltiesforfailingtocomplywithdiamondregulations;

AskingRDOstoconductmorespotchecks/randomvisitstominesites;

Developing incentives to reward MLMEofficials who improve the flow of di

amonds

through

the

legal

system

and

in

creaserevenuesforthepublictreasury;

Exploring community policing/communitymonitoring models tobolster limited gov

ernmentmonitoringcapacity;and

Holding workshops with Sierra Leone,CteDIvoireandGuineatostrengthenre

gionalcollaboration.

D GUINEA

Civilsocietypartner:CentreduCommerceInter

nationalpourleDveloppement

Overview

Guinea was a founding member of the KPCS,

participating in all the meetingsbetween 2000

and2003duringwhichtheinstitutionalformof

the KPCS was negotiated. Guineas diamond

sectorismanagedbytheMinistryofMinesand

Geology, which includes the National Bureau

ofExpertise

(NBE)responsible

for

evaluating

diamondsprior toexportaswellas theArti


23/28


sanalMiningDivision(AMD)andthePrecious

MetalsAntiFraudBrigade.

TherearefourkeystakeholdersintheGuinean

diamond sector: the diggers, known as creu

seurs; themasters,whofinancethediggers;

collectors, whobuy stones from the masters;

and the comptoirs in Conakry, who canbuy

stonesfromanyoftheotherthreegroups.After

having theirstonesvaluedby theNBE,comp

toirspayanexporttaxamountingtothreeper

cent of the estimated value of the stones. All

four groups are expected to register for a li

cense.


SmugglingDue to financial constraints, the operation of

theAMD isessentiallyconfinedtoBanankoro,

which is only one of several diamondiferous

districts.Guinearecentlyliberalizeditsartisan

al mining sector (Arrete A/2009/4136MMEH/

SGG),openingupseveralareas tominingthat

hadpreviouslybeenofflimits.

Challenges

Capacity.Insufficientmaterial,humanandfinancial resources are in place to monitor

artisanal diamond mining effectively from

pointofproductiontopointofexport.

Labor Relations. Participants identifiedtensions in the relationship between dig

gers and their financiers, with some per

ceivingdiggersasbeingexploitedandoth

ers perceiving diggers as prone to smug

gling(attheexpenseoftheirfinanciers).

Monitoring Miners. Participants flaggedthestates inabilitytoregisterdiggers,and

thustotrackdiamondproductionlevels.

Porous Borders and Flows of IllegalAliens. All participants noted the chal

lenges involved with monitoring flows of

migrants and diamonds across Guineas

borders.

KPCS Expertise. All stakeholders notedthat therewasageneral lackofawareness

of the implications of Guineas commit

ment to implementing KPCS internal con

trols.


Participantssuggestedthatthegovernment:

Regulate the relationshipbetween diggersandtheirfinancierstomanageconflicts.

Finance diggers directly, to give them analternativetotheirfinanciers.

Focuslimitedmonitoringresourcesatsiteswhere diamonds are washed (there are

fewerwashingsitesthandiggingsites).

Disseminate public information about theKPCSandtheGuineandiamondindustry.

Conduct more rigorous training on KPCSinternal controls for all stakeholders, in

cludingcivilsocietyorganizations.

Continue to hold multistakeholder dialoguesandcreateaspace forcivilsociety to

supporttheimplementationoftheKPCSin

Guinea.

Relaunch the Property Rights and Artisanal

Diamond

Development

project.


24/28


SECTION IV: NEXT STEPS

hanksto

Israels

leadership

as

Kimber

leyProcessChairin2010,theKPCShas

made some important progress inbet

ter understanding the issue of enforcement,

andbuilding up its capacity to address chal

lenges at the multilateral level. Initial steps

thathavebeentakenincludeapromisingnew

partnership with the World Customs Organi

zation (WCO), which was proposed at the

2010KPCSIntercessionalinTelAviv.

Goingforward,

the

KPCS

has

an

opportunity

to build on the momentum created by the

Chairtoinstitutionalizeeffortstoimproveen

forcementcooperationattheinternationaland

regional levels. Priority actions for the KPCS

couldincludethefollowing:

1. Set up a KPCS Working Group on Enforcement to steward the development

andimplementationofaKPCSWorkPlan

onenforcement.

2. Support initiatives that lead to increasedinteragencycooperation,informationshar

ingand trustbuilding (e.g., theWCO, In

terpol, the IMF AntiMoney Laundering

Initiative,etc.).

3. Facilitate the funding of enforcementrelatedcooperationandactivity.

KPCSparticipantscould:

1. Closely examine the prices artisanal miners receive, and explore ways to ensure

theyreceivefairprices.

2. Reinvest a portion of diamondrelatedrevenues back into mining communities

andreportonthe impactsofthese invest

ments.

3. Approach thedesignand implementationof internal controls from a systemic risk

management perspective by conducting

morerandomauditsandspotchecks.

4. Explore models for collecting meaningfulproductiondata.

5. Improve logistical supports for enforcementagencies.

6. Involvecommunitiesincommunitybasedmonitoringofdiamondproducingareas.

7. Continue to involve diverse stakeholdersin the design and implementation of

KPCSrelatedpoliciesandprograms.

T

Next Steps


25/28


ANNEX I: CIVIL SOCIETY PARTNERS

Cte dIvoireFoundedby a group of university graduates

committed to the sustainable development of

naturalresources,theGroupedeRechercheetde

Plaidoyer sur les Industries Extractives (GRPIE)

participates actively in natural resource man

agementdebatesandpolicydialogues.Arela

tivelynewmemberof theKPCSCivilSociety

Coalition, GRPIE has playedanactive role in

several KPCS meetings at the international

level,drawing

on

its

participation

in

extensive

natural resourcerelated policy dialogues at

thenationallevel.

Sierra Leone

The Network Movement forJustice and De

velopment(NMJD)iscommittedtopromoting

good governance, participatory democratic

practices,publicaccountability,humanrights,

genderequityandjustice,socialandeconomic

justice, and a culture of peace, among others.

NMJDmonitors

anumber

of

natural

resource

managementissuesinSierraLeone,fromcon

tractmonitoring to the implementationof the

KPCS.Mostrecently,NMJDconductedanau

dit of KPCS implementation in Sierra Leone

whichidentifiedtheissueofporousbordersas

amajorissueofconcern.

Liberia

TheAssociationofEnvironmentalLawyersof

Liberia (Green Advocates) was founded in

2001 by a group of progressive law school

graduates. Green Advocates is Liberias first

and only public interest environmental law

organizationdedicatedto:

Protectingtheenvironment; Advancinghumanrightsprotectionand

advocacythroughsoundenvironmental

practices;and

Givingvoicetorural, indigenous,andtribalpeople,whohistoricallyhavebeende

nied access tobenefits accruing from the

extraction of timber and other natural re

sources from their tribal and ancestral

lands.

Throughadvocating

for

strong

environmental

laws, working to enforce existing laws and

empowering citizens to participate in envi

ronmental decision making, Green Advocates

ishelping tobuildasustainablefutureforLi

beria.

Guinea

The Centre du Commerce International pour le

Dveloppement(CECIDE,orCentreforInterna

tional Commerce for Development) manages

severalprograms

which

contribute

to

sustain

abledevelopment inGuinea,and thecreation

of a dynamic and democratic country. CE

CIDE is a professional organization with ex

pertise in the Guinean mining sector, which

haslent itsexpertisetothe implementationof

KPCS internal controls in Guinea since 2005.

This work has included an analysis of the

ways in which diamonds from neighboring

countries mightbe transiting through Guinea

illegally, as well as a national outreach cam

paigntoraiseawarenessamongartisanalmin

ersabouttheKPCS.

Civil Society Partners


26/28


ANNEX II: KPCS ENFORCEMENT SEMINAR AGENDA

JUNE 24, 2010 (TEL AVIV, ISRAEL)Introduction(8:459:00)

BoazHirsch,ChairoftheKimberleyProcess

PanelI:TheBigPictureWhataretheproblemsattheinternationallevel?(9:0010:15)

Moderator:ColinBrown,DeBeersPresentations(30min):

AgimDebruycker,Belgium(Diamondsmuggling/crime) EphremLuteteMaketama,MinistryofFinance,DemocraticRepublicofCongo,(Diamond

smuggling,crossborderissues)

BenotDjahaKonan,CENTIF,CtedIvoire(GeneralproblemswiththeimplementationoftheKPCS)

DorotheGizenga,DiamondDevelopmentInitiative(Developmentaspectsofenforcement)Discussionperiodwiththeaudience(45min)

Break(10:1510:30)

PanelII:Customs/Border Issues(10:3012:00)

Moderator:NorbertSteilen,WorldCustomsOrganizationPresentations

(45

min):

JonnyCappelle,Belgium(EnforcementcooperationandproceduresinBelgium) AkoiGawola,SeniorCollectorattheGantaCustomsCollectorate,Liberia(Problemsatthebor

dersofAfrica)

ShriGurdeepSingh,MinistryofFinance,India TamiAvisar,IsraeliCustomsDiscussionperiodwiththeaudience(45Min)

Lunch(12:0013:00)

SmallGroupDiscussions:Whatdowemakeofthesolutionspresentedpreviously?Arethere

moresolutions

we

can

think

of?

What

are

the

best

and

most

practical

next

steps?

(13:00

14:00)

GroupDiscussions(1hour):

Customsgroup FIUgroup Mining/DiamondOffice ForeignAffairs,joinedbyindustryandcivilsocietyPanelIII:TheWayForward(14:0015:00)

Moderator:TBDPresentations(30min):

Summaryofsmallgroupdiscussionsbyeachofthesmallgroups

KPCS Enforcement Seminar AgendaJune 24, 2010

Tel Aviv


27/28


DiscussionwithCurrentWorkingGroupChairs(Howcurrentworkinggroupstructurescanbeusedtofurtherenforcementefforts)

Discussionofnationalworkshops/nationalKPCSforums(CivilsocietyandBrazil)Discussionperiodwiththeaudience(30min)

Break

(15:00

15:15)

SpecialSession:WestAfrica(15:1517:15)29

Moderator:DeputyMinisterA.KpandelFayia,LiberiaPresentations(1hour):

PresentationbyregionalcivilsocietygroupsonnationalworkshopsfacilitatedbyPartnershipAfricaCanada

PresentationbyUNGroupofExpertsonLiberia Presentationsbyregionalgovernmentofficialsonworkshops,trends,andnextstepsDiscussionperiodwiththeaudience(1hour)

29 Theorganizationoftheafternoonsessionwasamendedtoallowforanearlierconclusionofworkshopsessionsatthere

questoftheWestAfricandelegations.


28/28

For Further Information

Mr. Boaz HirschKPCS Chair for 2010

KP Secretariat - IsraelMinistry of Industry, Trade and Labor

5 Bank Israel St.Jerusalem 91036

Israel

Tel: +972-2-666-2667/71Fax: +972-2-666-2941Email: [email protected]

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