Reference no: EM131600599

Diamond and Jewelry Industry Crime By KELLY ROSS

The criminal world is changing. Technology, international commerce, and globalization have allowed lawless individuals to broaden the scope of their activities and the sophistication of their operations. Unfettered by internal policy or bureaucracy, they can morph from one criminal enterprise into another faster than law enforcement can keep pace. The activities normally associated with criminals have expanded beyond national borders and-adding to the usual drugs, weapons, contraband, and sex trade-have become modalities to serve the criminal finances generated. In this respect, diamonds and similar commodities, such as gemstones, jewelry, and gold, regularly appear as facilities to gather, store, and move proceeds of crime undetected by authorities. Street-level illegal activity in diamonds and jewelry has increased, and the criminal and terrorist use of diamonds and gemstones has become the subject of many books and intelligence reports.

This growing problem presents new challenges to all law enforcement agencies. Understanding the criminal use of diamonds and jewelry, recognizing the issues facing law enforcement, and seeking proactive countermeasures represent the first steps to finding a solution.
Constable Ross coordinates the Diamond Program, Customs and Excise Unit, Royal Canadian Mounted Police.

Understanding the Criminal Use of Diamonds and Jewelry

No doubt, the relative high values, ease of concealment, and untraceable attributes of diamonds, gemstones, and jewelry prove quite appealing to criminals. Street-level perpetrators involved in residential and retail jewelry store burglaries and robberies favor these items. Moreover, increasing evidence points to the gravitation of the more sophisticated offender, organized crime member, and terrorist toward the use of diamonds, gemstones, and jewelry for criminal financing or as a facility for money laundering, international movement, or storage of crime proceeds.1 The tracking of currency nationally and internationally through government agencies corrals criminals into the use of alternate currencies, such as diamonds, gemstones, and gold. Law enforcement authorities have identified gemstone and jewelry smuggling operations run by organized crime, and jewelry store thefts linked to organized crime are not uncommon.2 Further evidence has shown a strong link between street-level criminal activity regarding diamonds and jewelry and organized crime.

Statistics reflect this criminal use of jewelry and precious metals. From 1999 to 2003, jewelry was among the fastest growing categories of stolen property in the United States and now ranks second only to automobiles by value.3 This is not surprising as the United States, with approximately 5 percent of the world's population, consumes 48 percent of the annual world production of diamond jewelry, totaling approximately 30 billion U.S. dollars.4 Similar per capita spending on diamond jewelry could be expected in Canada. Within this North American "diamond culture," an enormous number of jewelry outlets, manufacturers, and suppliers exist to quench the thirst for diamond jewelry. This results in a greater opportunity for criminals to acquire such items and corresponding occasions to insert them back into the legitimate jewelry market. In terms of criminal exploitation of diamonds and jewelry, no other continent has such favorable conditions for product acquisition and for converting the proceeds of crime.

Recognizing the Issues Facing Law Enforcement

Identifying the stolen products, something the police and the public both have difficulties with, contributes to the problem. Another limiting factor involves the lack of knowledge and awareness of diamonds, gemstones, and the jewelry industry at all levels. This translates into a poor understanding of the criminal activity that surrounds these products, specifically the "what, why, and how" of the criminal use of diamonds and jewelry. Many officers who have purchased diamond jewelry would have difficulty describing it in any detail more than its approximate carat weight. They probably could not relate the characteristics that determine a diamond's value: the four C's of carat, color, clarity, and cut. This would be similar to investigating the theft of a $7,000 motorcycle without a description of its make, color, engine size, or accessories. Lacking accurate identifiable characteristics of the vehicle, officers would have little chance of recovering it. Diamonds and jewelry, even under the best circumstances, are extremely difficult to track and rank among the lowest of police recovery rates.

Additionally, the dearth of diamond-specific laws does not help matters. In Canada, diamonds, gemstones, and jewelry are indirectly controlled by several acts of parliament. The most common of these include the Criminal Code, the Customs Act, the Competition Act, the Export and Import of Rough Diamonds Act, and the Cultural Property Export and Import Act. The only one of these laws specific to diamonds is the Export and Import of Rough Diamonds Act (EIRDA). The remainder control diamonds and gemstones indirectly in the same way they do other material items. For instance, the Criminal Code contains several sections, such as theft, robbery, and fraud, that could be used relative to criminal activity that surrounds diamonds and gemstones. EIRDA controls the export and import of rough diamonds from and to Canada in compliance with the international Kimberley Process protocols.6 Several other countries, including the United States, have joined this endeavor and also have enacted their own similar legislation. The spirit of EIRDA is genuine in its efforts to control international sales of conflict diamonds; however, at present, the basic training and awareness of law enforcement may not be sufficient, nationally or globally, to meet the demands of this worldwide initiative. Further, those criminals who have operated in an unscrupulous manner prior to the 2001 launch of the Kimberley Process would have no reason to change their modus operandi. If they have successfully moved rough diamonds surreptitiously without detection prior to the Kimberley Process initiative, they probably will continue.

Finally, the emergence of the diamond production industry in Canada and the corresponding new opportunities for criminals have become the harbinger of new policing challenges. At present, the annual production of rough diamonds from Canada is valued at 1.24 billion U.S. dollars.7 Yet, even a small percentage of mine-site loss due to criminal activity could translate into large dollar values. If Canadian mines experienced the estimated 12 percent losses per year that occur in South African diamond mining operations, the results would amount to a 180-million Canadian dollar loss to the industry and a 25-million Canadian dollar loss of government royalties.8 Canadian diamond production, estimated as the world's third largest by value, is expected to expand at the production level and at several of the intervening steps from the mine to market.9 Slowly but surely, the Canadian diamond industry will become more stratified, with new cutting and sorting facilities and distribution networks that will afford both new and, perhaps, the greatest opportunities for organized criminal exploitation.10

Question: After reading the Unit 6 reading assignment on diamonds, discuss what specific preventive measures can be taken by both U.S. and international law enforcement agencies to combat this issue