Diamonds Still Linked to Terrorism, Says Report

December 15, 2003

Diamonds Still Linked to Terrorism, Says Report

Diamond trading to terrorist groups continues, even in places like Sierra Leone, where the Kimberley Process Certification Scheme is in force, says the General Accounting Office, the investigative arm of the U.S. Congress, in a terrorist financing report on Dec. 12. Diamonds are one of many alternative financing mechanisms used by terrorists, says GAO, and it chides the U.S. Treasury Department and U.S. Justice Department for not yet releasing a report due in March 2003 on up-to-date law enforcement investigations on links between precious stones and commodities and the funding of terrorist groups.

The report's comprehensive look at alternative financing mechanisms shows diamonds are used in earning, moving and storing terrorist assets. Other commodities, such as illicit drugs, weapons and cigarettes are mostly used to earn money for terrorism; while gold, diamonds, charitable organizations and informal money networks such as the international hawala system are implicated in moving terrorist money. Terrorist assets are most often stored in diamonds, gold and bulk cash, says the report.

Despite U.S. law enforcement's inability to substantiate a link between the al Qaeda terrorist network and diamonds, GAO investigators say they believe the link is there, due to ongoing investigations by the U.N. Special Court for Sierra Leone and other U.S. and international experts on the subject. U.S. officials within and among agencies reportedly remain divided over whether there is sufficient evidence to establish a current link between al Qaeda and the diamond trade. The link between another terrorist group, Hizballah, and a part of a Lebanese diamond-trading network in West Africa is definitely current, according to the U.N. Special Court Chief Prosecutor and Chief Investigator in Sierra Leone.

GAO also says it continues to see weaknesses in the Kimberley Process,which it previously examined. It specifically cites the need for better controls, including internal controls and monitoring. In late October, as the GAO report was being prepared, however, Kimberley Process Certification Scheme participants unanimously agreed to a voluntary peer review mechanism to monitor nations accused of skirting the closed diamond trading system, which went into effect in January. The new peer review monitoring will begin in 2004.

Industry experts working to exclude criminals of all kinds from the diamond trade may take comfort from one fact revealed by the GAO report: according to the Federal Bureau of Investigation, once terrorists know an industry they use to earn or move assets is being watched, they may switch to an alternative commodity or industry. The report cites the pending enactment of the USA Patriot Act's national antimoney-laundering system for dealers in precious metals, gemstones or jewels as one way the government can collect better data on how terrorist money is being moved. It urged that this information and other data be systematically collected and analyzed on a regular basis by various government agencies.

by Peggy Jo Donahue

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