14 March 2006
A massive mining scam in Brazil may undermine the Kimberley process to control the flow of diamonds from conflict zones in Africa.
More than half of Brazil's diamond exports over the past three years are suspect in terms of the process and in 2004 alone a quarter of Brazil's diamond exports were fraudulent, according to one of the partners in the intergovernmental Kimberley Process Certification Scheme for rough diamonds.
After an investigation Partnership Africa Canada (PAC) said that Brazil's second largest diamond miner has been arrested, and its supposed fourth largest diamond producer turned out to be a part-time waiter who until recently lived in a homeless shelter. Brazil's sixth largest producer is a man who died five years ago, PAC said in a report this week.
It revealed that while Brazil is one of the oldest diamond-producing countries in the world, nobody can say where half of the diamonds it exports have been mined, and government certificates accompanying a quarter of Brazilian exports are fraudulent. This could open the way for unmarked stones from African conflict zones being laundered through Brazil, PAC officials told SouthScan.
PAC is now calling for Brazil to be suspended from the global Kimberley Process until a full and independent investigation can take place.
Brazilian police say there is an African connection that will be revealed when the cases come to court. Hassan Ahmad, a Lebanese diamond dealer born in Sierra Leone and one of those arrested last month, was responsible for more than half of Brazil's diamond exports in 2004. Diamond exports were undervalued by more than $2 million, according to the report.
PAC was attacked by the government of Brazil last year for its warnings on fraudulent exports; Brazil's National Department of Mineral Production rejected the report but not Brazil's Federal Public Prosecutor and the Brazilian Federal Police, who last month made the arrests.
Following up on cases of fraud identified by PAC, police made simultaneous raids in three Brazilian cities in February 2006, resulting in the arrest of ten people - diamond miners, diamond dealers and money changers - who are now facing charges of fraud, tax evasion and money laundering.
Members of the Kimberley Process Certification Scheme include more than 40 diamond producing, trading and processing countries, plus all members of the European Union. No rough diamonds can be traded among or between these countries unless they are accompanied by a Kimberley certificate stating that the diamonds are clean. The certificate must be backed by a system of internal controls in each country.
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