Blood Diamonds —
Are You Insuring Them?
The movie "Blood Diamond" brought to popular attention a desperate situation in Africa: Insurgents are profiting from diamond mining and masses of people are being maimed, killed and displaced. Do U.S. jewelry buyers and insurers have a role in this?
Long before they reach a jeweler's showcase, diamonds are a form of currency." They back international loans, pay debts, pay bribes, buy arms," remarked a member of the Diamond High Council in Antwerp, the world's diamond trade center. In an underground market diamonds are easier to move around than currency and they can get you anything.
"Blood diamonds" or "conflict diamonds" are those mined in a war zone and sold through illegal channels to finance an insurgent or invading army's war efforts. Sometimes both sides in a civil war finance their battles with diamonds. It's a bloody business, where access to the diamonds motivates atrocities beyond the wars' general terror and slaughter.
The role of illegal diamonds in supporting such wars has been surfacing from time to time since the early 1990s. One New York Post article declared, "That dazzling diamond necklace you buy for that special someone at a swank Fifth Avenue jewelry store may be funding the activities of a cannibal gang in Sierra Leone." Human rights groups work to alert consumers, and some recommend consumers boycott diamonds.
But the Leonardo DiCaprio movie made the biggest splash in public awareness. Though shaped as a love-and-politics story, with a upbeat ending, the film did reveal something of the pattern of illegal diamond trading and did show some of the violence that the black market supports. It also suggested how the complicity — and profits — of the legal diamond industry make it all possible.
The Kimberley Process
The diamond industry, concerned about the victims of the diamond-supported conflicts, as well as about the effect of publicity on its own image and profits, looked for a way to prevent conflict diamonds from entering the mainstream rough diamond market. The Kimberley Process Certification Scheme is the industry's plan to accomplish this.
A country participating in the Kimberly Process ensures that
- any diamond originating in that country does not finance a rebel group or other entity seeking to overthrow a United Nations-recognized government;
- every diamond export is accompanied by a Kimberly Process certificate; and
- no diamond is imported from, or exported to, a non-member of the scheme.
More than 40 countries, including the United States, have signed on as participants.
Since the scheme's implementation in 2003, supporters say, it has cut into the illegal trade significantly. However, it is essentially self-enforced. Critics call it a move in the right direction but say that buying and selling diamond rough is a secretive, highly competitive and highly profitable business. Without impartial monitoring, abuses will continue.
Identifying a Diamond's Origin
Many gems carry characteristics that betray their origin. A valuable Burmese ruby, for example, gets its distinctive color from minerals in the area where it was formed and mined. A trained gemologist can recognize the ruby's origin.
With diamond it's not possible to tell where the gem was mined. Diamonds were formed under extreme heat and pressure deep in the earth's mantel, well beyond the influence of local geology. They were brought to the surface by deep volcanic eruptions that occurred millions of years ago.
There's no way to determine a diamond's country of origin by examining the stone. If it traveled via the diamond black market, if it was smuggled from a conflict zone, if it was traded for arms along the way, a gemologist cannot tell.
The consumer has no way to verify the "clean" origin of a diamond. He must take the word of the retailer, who in turn must rely on the honesty of everyone in the supply chain.
What About Diamond Boycotts?
Are jewelry buyers financing violence and killing? Would boycotting diamonds help? Not really. As abhorrent as the consequences of illicit trade are, the majority of diamonds (99%, according to the World Diamond Council) come through legitimate channels.
More than half the world's diamond supply originates in Africa, and revenues from diamond mining have contributed to improved education and healthcare in several African countries. "If there is a boycott of diamonds," said Nelson Mandela, "the economies of Botswana and Namibia will collapse."
In conclusion, we quote the head of a leading gem lab: "To be sure, there are many truly fine jewelers and scrupulously honest jewelry business people. They're just harder to find. The phony "Sales," the deliberately inflated grading, inflated value reports and inflated appraisals, the lack of product knowledge, the lack of financial opportunity in professional retail sales staff, will continue to erode consumer confidence in diamonds and fine jewelry — not conflict diamonds."
FOR AGENTS & UNDERWRITERS
Canadian diamonds are sometimes advertised as an alternative to conflict diamonds. Although this can be persuasive marketing, it does not make the diamond more valuable. A diamond's value depends on its qualities, which should be detailed on the appraisal.
Ideally, the appraisal on file will contain a complete description of the piece.
If you are not working with a JISO 78/79 appraisal or a JISO 805 sales receipt, use JISO 18 to analyze the data you have from the existing appraisal and other documents. An insurer's expert working on your behalf can help supply more information about valuation.
Brand name information may prove useful, since some companies and sellers are known for the quality of their merchandise.
Always have damaged jewelry examined by an impartial jeweler to verify truth of the appraisal descriptions and valuation.
Rely on your own jewelry expert to estimate cost of repair or replacement. Do not blindly accept the bid of the selling jeweler.
On February 4, federal agents arrested two men on charges of smuggling illicit rough diamond into the country. The tip-off happened when one of the men approached an undercover agent at the American Gem Trade Association’s GemFair, saying he had diamond rough for sale and was expecting another shipment.
At their Tuscon hotel room, the two men sold the undercover agent a seven-carat uncut diamond for $15,000. Agents then searched the hotel room and found 11,000 carats of uncut diamond, apparently brought into the U.S. in violation of the 2003 Clean Diamond Trade Act.
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