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The following is an unauthorized version of the Report of the Panel of Experts to the United Nations on Sierra Leone.
This is not the official report. The official report has not yet been released. The report posted here is subject to change by the sanctions committee.

 

 

II. INTERNATIONAL DIAMOND STATISTICS AND TRANSIT COUNTRIES

A. General

113. The Panel sought to determine how illicit diamonds from Sierra Leone find their way into the legitimate trade. One line of enquiry was to compare diamond export statistics of neighbouring producer countries with their known mining production capacity, to see if exports significantly exceed production capacity. Another was to review the import statistics of major trading centres for anomalies. One such anomaly is the 33.6 million carats said to be of Liberian origin that were imported into Belgium in the five years between 1995 and 1999. This volume is far beyond Liberian production capacity, and exceeds official Liberian exports by so much, that investigation was clearly warranted (see also paragraphs 123 to 131 below).

114. A major difficulty in tracking the movement of rough diamonds, however, is the inconsistent manner in which the governments of major trading centres record diamond imports and exports. The first issue has to do with the general availability of statistics. Belgian authorities expressed concern to the Panel that Belgium had been unfairly criticized in the past because it has been so open with its statistics. It was suggested to the Panel that other countries have escaped criticism for importing rough from 'sensitive' countries - either as countries of origin or provenance - simply because they produce no public statistics at all.

115. The Panel went to considerable lengths to obtain rough diamond import statistics from all the major trading centres for the years between 1987 and 1999. With the exceptions of The Gambia, Côte d'Ivoire and UAE, the Panel was largely successful. We found the following:

B. Provenance and Origin

116. Although the Panel received detailed import statistics from each of the major trading centres, there are a number of key differences that make the tracking of rough diamonds extremely difficult. The first has to do with a distinction made between 'country of origin' and 'country of provenance'. Country of provenance refers to the country from which diamonds were last imported; country of origin indicates where they were mined. Statistics on country of provenance are important in the calculation of national trade statistics, and until recently, little serious attention was paid anywhere to the issue of where diamonds were actually mined.

117. This leads to major anomalies. For example in 1999, British imports of rough unsorted diamonds (code 71021000) totalled £107 million (down from £347 million in 1998). Of this, Switzerland was recorded as the 'country of origin' for 41 per cent or £44.2 million. Switzerland, as a non-producer of diamonds, could only have been the country of provenance, importing the diamonds from another country. Switzerland, however, records the importation of virtually no rough, unsorted diamonds. The total in 1999 was valued at only Sfr 1.5 million, up from Sfr 295,000 in 1998.

118. The difference is explained by the fact that Switzerland has not in the past recorded statistics on diamonds passing through its free trade areas, or Freiläger, at Zurich and Geneva airports. The volume of these flows is so great that it would skew national trade statistics, and since no value is added to these diamonds as they pass through Swiss airports, there has, until recently, been no felt need to record the statistics. Those diamonds bound for the UK thus become 'Swiss' simply by virtue of having passed through a Freilager. The country of origin, which might have been recorded in Switzerland, and passed on to British customs authorities, is thus lost.

119. It should be noted that parcels of rough diamonds passing through a Freilager can be opened, mixed with other diamonds, repackaged for a variety of destinations, and exported as mixed diamonds. Private sector firms working in the Freiläger maintain facilities expressly for this purpose, including secure areas with diamond scales and sorting equipment. This sorting and re-invoicing serves to further obscure the origin of diamonds.

120. Origins become even more obscure once diamonds have been sorted and/or partially treated in the U.K. Under this heading (code 71023100), the UK became the origin of 96.7 per cent of all Swiss imports in 1999. Having become 'Swiss' on the way to the UK, a huge proportion then becomes 'British' on the way back to Switzerland. Because 96.4 per cent of Swiss diamond exports in 1999 went to Israel, most of these same diamonds thus became 'Swiss' again as far as Israeli import statistics are concerned.

121. India notes the fact that it does not trade in conflict diamonds because 80 per cent of its rough imports come from Belgium and virtually none come directly from Africa. As with the U.K. and the U.S., however, the operative word is 'directly'. The lack of scrutiny throughout the delivery chain and the stops along the way allow most importing countries to say that they do not import anything from Africa, conflict or otherwise.

122. These examples explain why it is so difficult to determine where diamonds - still in their rough state and moving from one trading or polishing centre to another - are actually mined. It does not explain, however, why the huge volume of diamonds entering Belgium, noted in paragraph 113 above, would have been labelled 'Liberian'. The superficial explanation is that they were of Liberian 'provenance', as clearly they could not have been mined in Liberia. According to this explanation, they would have transited Liberia and became 'Liberian', just as other diamonds transit Switzerland, Belgium or the UK, becoming 'Swiss', 'Belgian' or 'British' in the process.

C. Case Studies: Liberia, The Gambia, Guinea and Côte d'Ivoire

Case Study - Liberia

123. The highest estimates of current Liberian production capacity do not exceed 150,000 carats per year. In 1987, the country exported a record high 295,000 carats, at an average value of $37 per carat. The Liberian Ministry of Lands, Mines and Energy informed the Panel that 1998 official diamond exports totalled only 8,000 carats, valued at $800,000 (i.e. $100 per carat). In the same year, Belgium recorded imports from Liberia by 26 companies, totalling 2.56 million carats, valued at $217 million (i.e. $85 per carat). One company alone, 'Company A', imported 168,456 carats, estimated at $87 million, or $516 per carat.

124. In 1999, official Liberian exports grew slightly, to 8,500 carats, at an average value of $105 per carat. 'Liberian' imports into Belgium declined to 1.75 million carats, but the stated value increased to $247 million, or $140 per carat. Company A's imports declined to 75,000 carats, valued at $57 million. This represented a significantly higher per carat value, however, of $760.

125. Up to mid August 2000, 'Liberian' imports into Belgium were 340,000 carats, valued at $50 million, or $147 per carat. Company A, however, which told the Panel at the end of October that it had not imported anything from Liberia for six months, showed imports of only 6,696 carats. But valued at $12.88 million, this represented a remarkable $1,923 per carat.

126. Belgium has recently changed the data requirements on the import licenses that it requires for each shipment. It now requires that each import shipment state the country of provenance, as well as the country of origin. A review of selected Company A import licenses, however, showed that diamonds far in excess of the quality or quantity available in Liberia had been imported as Liberian in provenance and origin. Invoices from 'Liberian' firms - none on the list of licensees provided by the Liberian government - accompanied the Belgian import license.

127. A physical check of the Monrovia street addresses given by most of these firms revealed that there were no such companies, and no such addresses. Courier firms in Monrovia, however, have in the past been instructed to route correspondence for these addresses to the International Trust Company, (ITC) which in January 2000 changed its name to the International Bank of Liberia Ltd. Since then, mail addressed to the companies in question has been forwarded to the newly-established Liberian International Ship and Corporate Registry (LISCR) which now handles the Liberian maritime registry. This means that if the companies in question are more than shells, they are not physically present in Liberia, and none of the diamonds in question were either mined in, or passed through Liberia. It also means, however, that there is an intimate Liberian connection with these deceptive diamond transactions.

128. The name of retired U.S. Army General Robert A. Yerks occurs frequently in discussions about Liberian diamond transfers. He was involved with ITC and is currently a senior official in LISCR.

129. Companies and individuals in Belgium importing 'Liberian' diamonds in 1999 and/or 2000 include (but may not be limited to) the following: Abadiam, Afrostars Diamonds, Ankur Diamonds, Arslanian, Cukrowicz, Diam 2000, Diambel, Diminco, Fink Diam, Hardwill Diamonds, I.D.H. Diamonds, Korn & Partners, Krishna Dimon, Lewy-Friedrich, Marjan Diamonds, Omega Diamonds, Orion, Samir Gems, Sana Diam, Shainydiam, Shallop Diamonds, Shour, Siddhi Gems, Sima Diamond, Soradiam, Starough, Sunshine Gems, Sygma Diamonds, Symphony Gems, Vijaydimon, Vitraag and Widawski.

130. Companies supposedly exporting diamonds from Liberia, which are not on the Government list of licensees and which do not have a physical presence in Liberia include Alcorta Trading, Barnet Trading Co., Diamond Trading Associates, Fairlib Enterprises Inc., Kamal Daoud S.A., Nybelgo Company, and Pier Enterprises S.A. There are undoubtedly more. While the diamonds listed on the invoices of these companies are not necessarily conflict diamonds, companies with a genuine physical presence in Liberia have also provided invoices to Belgian importers. Without further investigation, it is difficult to say whether they are exporting genuine Liberian diamonds, or smuggled Sierra Leonean diamonds. Whatever the case, they are engaged in illicit behaviour, because they do not have Liberian export licenses and because their exports far exceed official Liberian exports.

131. Much has been made in recent months about the need to make a clearer distinction between 'country of origin' and 'country of provenance'. The volumes in question regarding Liberia, however, taken in conjunction with Liberia's own figures and its limited capacity to act as a trading centre, indicate that a large proportion of the diamonds entering Belgium under the Liberian label represent neither country of origin nor country of provenance. Most are illicit diamonds from other countries, taking advantage of Liberia's own involvement in the illicit diamond trade, its inability or unwillingness to monitor the use of its name internationally, and the improper use of its maritime registry. The larger illicit trade provides Liberia with a convenient cover for the export of conflict diamonds from Sierra Leone.

Case Study - The Gambia

132. The Gambia produces no diamonds, but in recent years it has become a diamond-exporting nation. In 1998, Belgium recorded imports from The Gambia of 449,000 carats valued at $78.3 million, an average value of $174 per carat. The volume declined the following year to 206,000 carats, with an average per carat value of $234. Up to mid August 2000, there was a more significant decline: 82,000 carats valued at $17.6 million ($214/ct).

133. All of the Belgian importers of 'Gambian' rough also import from one or more of the producing countries in the region: Sierra Leone, Guinea and/or Liberia. 'Company B' explains its importation of $50 million in 'Gambian' diamonds between January 1, 1998 and mid August 2000 as follows: There are many traders - 'marakas' - moving up and down the coast with diamonds. The Gambia has become a 'mini-Antwerp', and reputable companies are simply buying what is available on the open market. When pressed, however, Company B acknowledges that these diamonds have entered Gambia for one of two reasons: either to evade taxes in the countries where they have been mined, or to avoid detection as conflict diamonds. Knowledgeable diamantaires say that 90 per cent of 'Gambian' diamonds are from Sierra Leone.

134. The Gambia did not respond to the Panel's repeated requests for information on diamond imports and exports, so the Panel does not know whether exports from The Gambia are consistent in any way with official Gambian imports.

Case Study - Guinea

135. Official Guinean exports were consistent over the 1990s, averaging 380,000 carats per annum, at $96 per carat. The panel examined Belgian, U.S., British, Swiss and Israeli import statistics, and found that the only significant imports were into Belgium. This is consistent with information provided by the Government of Guinea.

136. Belgian trade statistics, however, record average imports over the same period of 687,000 carats per annum, with an average value of $167 per carat (see Table 1). In other words, Belgium appears to import almost double the volume that is exported from Guinea, and the per carat value is almost 75 per cent higher than what leaves Guinea.

Table 1

Comparison of Guinean Exports and Imports into Trading and Polishing Centres

1993-1999

Year

Guinea Exports

Belgian Imports from Guinea

US Imports from Guinea

UK Imports from Guinea

Carats (000)

US$ (000)

Carats (000)

US$ (000)

Carats (000)

US$ (000)

Carats (000)

US$ (000)

1993

374

29,582

1,030

178,020

3

4,400

-

-

1994

381

28,412

876

165,770

1

1,600

-

-

1995

452

34,719

780

26,210

2

3,400

-

-

1996

364

35,471

440

83,670

1

2,700

-

-

1997

380

46,930

533

108,120

3

10,000

-

-

1998

355

40,657

596

116,100

17

11,000

-

-

1999

357

40,207

554

127,120

10

16,400

84

5,098

Total

2,663

255,978

4,809

805,010

37

49,500

84

5,098

137. It is unlikely that the difference between Guinean exports and Belgian imports could be explained by the 'country of provenance' issue, because Guinea does not officially import diamonds, and any official Sierra Leone diamonds in transit through Conakry do not enter Guinean trade statistics.

138. There are three possible explanations. The first is that the difference is made up of diamonds exported unofficially from Guinea. These could be either Guinean diamonds, or diamonds smuggled in from Sierra Leone and elsewhere (as in the Gambian case). Such diamonds could be 'conflict diamonds' or simply 'illicit diamonds'. The second possibility is that Guinea's name is applied to diamonds entering Belgium from another country or countries, as in the Liberian case. A third possibility is that it is a combination of the first two.

139. U.S. statistics show a different problem, if they have been correctly presented to the Panel. They record a very small volume of Guinean imports by weight, but the value is over $1,300 per carat. This is a major anomaly in the sense that it is roughly 14 times higher than the average per carat value exported from Guinea. This statistic requires further investigation if it is to make sense (US officials are currently reviewing the matter).

Côte d'Ivoire

140. A problem similar to that of Guinea exists in relation to Côte d'Ivoire. According to the authoritative U.S. Geological Survey, Côte d'Ivoire exported approximately 75,000 carats per annum in the mid 1990s. Very little rough is imported into the U.K., the U.S. or Israel from Côte d'Ivoire. Belgium, however, imported 6 million carats between 1994 and 1999, about 13 times more than was apparently produced in the country. The average per carat was $92.

141. Export figures for Côte d'Ivoire have been taken from the U.S. Geological Survey because Côte d'Ivoire did not respond to the Panel's request for information.

D. Conclusions on Statistics and Transit Countries

142. The statistical anomalies surrounding the Liberian example demonstrate that the Liberian name, and most likely the names of other countries, has been widely used by individuals and companies wishing to disguise the origin of rough diamonds. These diamonds could include conflict diamonds from Sierra Leone, DRC and/or Angola, but the volumes are such that additional explanations are required. These include the breaking of legally binding commercial contracts, tax evasion and money laundering. Mostly, such diamonds are illicit in nature. Because the volume in illicit diamonds is so high, it is not difficult for the smaller volume of conflict diamonds to become lost in the larger numbers.

143. A country like Liberia, whose name has been used with or without its knowledge by illicit traders, can thus conceal its own trade in illicit or conflict diamonds behind the larger rackets being perpetrated by others.

144. The variations in the way major trading centres record the importation of rough diamonds add to the ease with which illicit and/or conflict diamonds can be laundered.

 

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