'Illegal funds raised in India through diamond trade'

Report submitted by Paris-based FATF

An international report on money laundering and terrorist financing across the globe has revealed that India is one among five countries where the trade accounts of the diamond business are used to launder illegal funds amounting to millions of dollars.

The report issued on Friday night by the Paris-based Financial Action Task Force (FATF), a global body to set standards to combat money laundering and terrorist financing, said that India has reported instances where diamond prices were over-valued for purposes of laundering and suspect financing.

The report has been brought out with an aim to provide a general overview of the global diamond industry, the way it works and the characteristics of diamonds as merchandise, “through an anti-money laundering and combating financing terror lens”.

“The case presented by India exposes how through over-valuation diamonds were shipped at a value that was tens of millions of dollars higher than the real value. This kind of over-valuation cannot be done in goods with a fixed or even relatively fixed price,” the FATF report on “Money laundering and terrorist financing through trade in diamonds” said.

These instances were also reported from four other countries - Israel, Belgium, Canada and the US. The report delves deeper into the Indian scenario.

“This case shows the level of manipulation which may be conducted through the diamond trade due to the specific characteristics of diamonds such as the very high value of the commodity and the lack of known and stable prices for diamonds which allows for the manipulation of price,” the report stated in the Indian context.

The report has cited an unidentified case where some Indian importers of diamonds, based in Surat and Mumbai, imported from Hong Kong and China by “grossly over-valuing these diamonds to $544.8631 per carat.”

The report states that in a number of suspect cases of diamond trafficking, a majority of funds were transferred internationally to Belgium from accounts of Hong Kong, China, Israel, the UAE, the US and also India.

In cases of suspicious money laundering instances of diamond trade, the funds transfer occured from India, Israel and Switzerland to the UAE.

“India reported a relatively large number of sanitised cases (12) in which suspicious transaction reports were received (in connection with diamond trade). In these specific cases, Hong Kong, China is a destination for illicit cash flows related to the diamond trade,” the report said.