On Guard Against Fraud
Being Certain about that Cert
Diamond certificates and lab reports are easy to come by—and that could be the problem. Retailers depend more and more on diamond reports to drive sales, and in the flurry of certs, some are just doing a con job.
What good is a Diamond Certificate?
A good diamond certificate verifies the quality of the stone by describing it in detail. The analysis is done by trained gemologists using state-of-the-art equipment. A reliable certifying lab is one that has built a reputation for accuracy and impartiality.
Unfortunately, there are two kinds of fraudulent lab reports that can con you: the outright imposter and the sales tool.
Imposter: Counterfeit Certificate
Counterfeiting diamond certificates is a growing scam that reaches around the world. Last fall the jewelry industry was abuzz over two forged diamond reports from the U.S. that turned up in Europe.
The certificates appeared to be from the Gemological Institute of America, the premier diamond-grading lab, but they turned out to be forgeries. Two valid GIA reports had been altered to match similar, but lower quality, stones. The fraud was only discovered because Gübelin, a prominent European lab, examined the diamonds and found they did not match the description on their “GIA” diamond reports.
These stones, one over 2 carats and the other more than 4 carats, had undergone treatments, but the treatments were not mentioned on the forged reports. As discussed in our last issue, color and clarity treatments greatly lower the value of the stone, and the larger the stone, the greater the value discrepancy.
Certificate forgeries are done primarily to cheat the buyer, but of course they can ultimately cheat the insurer. GIA is such a recognized and respected name that its reports are often accepted without question, making them popular targets for forgery. AGS, GCAL and Gübelin also produce reliable diamond reports.
You can—and should!—verify the authenticity of a diamond report through the appropriate Web site:
Sales Tool: It Comes with the Stone
There’s nothing so convincing as a piece of paper that says, What you are buying is really valuable! That’s the psychology, anyway. So, any certificate offered by the seller to verify a gem’s quality or value is immediately suspect.
Lab reports with valuations
Be wary of an official-looking lab report (or “gem report” or “diamond description” or “summary of appraisal” or whatever it is called) that carries a valuation. A lab report attests to the quality of the stone, not its value in the marketplace. Valuation is not a lab’s business, but an appraiser’s job. Valuation may change over time, but an accurate description of the stone does not.
Experience shows that lab reports supplied by the retailer often exaggerate the quality of the jewelry (as well as overstate the value). Labs (or appraisers) that inflate a gem’s qualities by a few grades sometimes assert that they are within an acceptable margin of error, but this is not true. Exaggerating by even one grade in color or clarity significantly inflates the valuation, and the larger the stone, the greater the discrepancy.
Bulk purchases of Certificates
Retailers can buy diamond reports in bulk to accompany stones that were never examined by a gemologist. The reports may carry descriptions based only on the supplier’s description. Some retailers never question the description or examine the stones themselves.
“Certified Diamonds” from bogus labs
Disreputable or non-existent labs can say anything on a “report” and never be called to account. You may wind up paying a settlement based on the diamond report, so you want to be sure the report comes from a reliable source.
A chain of victims
Sometimes gem suppliers include lab reports with the gems they sell to retailers. In such cases, the retailers—as well as the subsequent consumers and, potentially, the insurers—are taken in.
Too little information
Be especially careful insuring purchases from shopping networks and internet sites, especially eBay. As we’ve discussed in other issues of JII, these sellers rely a lot on hype and rarely disclose all information about the jewelry (such as treatments). Consumers often buy on impulse or assume they are getting a bargain, rather than carefully comparison shop.
Also be cautious about insuring jewelry purchased while the client is traveling. Scams aimed at vacationers are widespread, and any certificates may be as phony as the “bargains.”
Save your client from a scam
Unless you, the agent, point out the potential for fraud, your client may not see the need to have such purchases appraised by a disinterested appraiser or examined by a reputable lab. You can do your client a good turn by passing on the above links so the client can educate him/herself about the dangers of unreliable lab reports.
GIA (Gemological Institute of America) GIA Report Check
FOR AGENTS & UNDERWRITERS
Don’t take at face value just any document that calls itself a diamond report. Consider the source. Any certificate you accept may be the basis for a future settlement, so you want to be sure the certificate is reliable. Trust only the labs recommended above.
Be wary of a diamond report if:
- It comes from a lab other than one of the reliable labs noted above.
Ask for a report from a reliable lab.
- It is supplied by the retailer.
If it’s from a reliable lab, be sure to verify. If from some other lab, ask for report from one of the respected labs.
- It carries a valuation.
This certificate is a sales tool, since respected labs only describe the stone, they don’t give market value. Get a report from a reliable lab.
- The valuation on the report is significantly higher than the selling price.
This discrepancy is a strong indication that the report is inflated. Get a diamond report from a reliable lab.
- The jewelry was bought on the internet, from a shopping network, or while traveling abroad, and it came with a diamond report.
These sources are notorious for supplying inflated lab reports. Be sure to get a report from a reliable lab.
If a client submits a report from one of the reliable labs listed above, check the report’s authenticity.
And finally, remember that even a good lab report is not a substitute for an appraisal. The lab report describes only the stone; an appraisal describes the jewelry as a whole, including metal type, karatage, weight, trademark, etc. Ideally the appraisal should be on JISO 78/79, prepared by Graduate Gemologist who is a Certified Insurance Appraiser™.
If you have a report from one of the reliable labs, hopefully it was authenticated and you can trust it.
If there is a only a report from a lab not listed above, compare the report’s description with the description on the appraisal. Compare the valuation with the purchase price, if available. When a large settlement is at issue, it could be worthwhile to consult a jewelry insurance professional to help determine the true quality and value of the jewelry and avoid a large overpayment
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