Investigators: Smuggled diamonds rerouted to evade controls

KINSHASA, Congo - Millions of dollars in smuggled central African diamonds are being routed through Switzerland and the United Arab Emirates to evade controls at the world's main diamond market, investigators say.

In a confidential report obtained by The Associated Press, the investigators called for "urgent corrective action" by the Republic of Congo, the alleged hub of a trade that has been used to fund African conflicts. Republic of Congo's government denied all the allegations.

Investigators accuse Republic of Congo - which mines comparatively few diamonds of its own - of smuggling in diamonds from neighboring central African nations and falsely certifying the gems as mined on its soil.

Republic of Congo then allegedly sends the diamonds into the world market through the United Arab Emirates or Switzerland.

Dealing with the smaller diamond centers allows the country to avoid the rigorous certification process at the world's diamond hub, Antwerp, Belgium, the investigators say.

Republic of Congo officials - apparently seeking to evade taxes and hide revenues - also are formally declaring the gem-quality stones in Switzerland at far less than their market price, investigators concluded: just 98 cents a carat on average, compared to the average market price of $75.90 a carat for uncut, unset stones.

The allegations are the findings of a May 31-June 4 mission to Republic of Congo by a team evaluating compliance for the U.N.-backed Kimberley Process Certification Scheme.

The voluntary tracking and certification program is the industry's response to growing world concern about "blood diamonds," which fueled and funded wars in Liberia, Sierra Leone and Congo in the 1990s.

The illicit trade in gems also is increasingly under international scrutiny as a suspected means of financing terror.

Forty-five countries have signed on since the world's $6 billion diamond industry began the process in late 2002. The effort is named after the diamond center of Kimberley, South Africa.

Republic of Congo, one of the signatories, has been cited for alleged widespread violations from the start.

Industry watchdogs accuse Republic of Congo of trafficking in smuggled diamonds from Congo, its much larger, diamond-rich neighbor across the Congo River.

Victor Kasongo, head of Congo's diamond regulatory body, said Friday that diamonds were "flying out" of his country because of smuggling to Republic of Congo, where taxes on the trade are lower and export controls more lax.

In 2003, according to industry giant De Beers, Congo was the world's fifth-largest diamond producer in terms of value, accounting for 7 percent of the world market, or about $700 million.

Republic of Congo, however, has a comparatively small native diamond production. It would be left out of the global diamond market without the allegedly smuggled gems from surrounding countries.


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