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AP Exclusive: Smuggled African diamonds entering market through UAE and Switzerland, investigators say

AP Photo COD101


Associated Press Writer

KINSHASA, Congo (AP) – 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.

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.

Another neighbor, Central African Republic, also has rich diamond fields.

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.

In its report, the Kimberley monitoring team concluded that “no guarantee can be provided that the diamonds flowing through the Republic of Congo are conflict-free.”

Declared diamond exports from Republic of Congo are “approximately 100 times greater than its estimated production,” the investigators said.

“It is therefore concluded that almost all its exports are rough diamonds that have entered the country without any official documentation whatsoever,” investigators said.

Republic of Congo officially reported its overall diamond exports from April 2003 to May 2004 at a value of $53.8 million.

The country was quoted by investigators as insisting that all its exported diamonds were mined domestically. Republic of Congo officials did not immediately respond to requests for comment from the AP on Friday.

The London-based independent group Global Witness says Republic of Congo and Kimberley Process officials were discussing the allegations.

Investigators said most of Republic of Congo’s shipments from at least 2003 onward were going through Switzerland or the United Arab Emirates.

Swiss authorities told AP they could not refuse the diamonds if they came with the correct certificates but said they had expressed concern to Kimberley officials.

“We were aware that the diamonds were undervalued and we were uneasy about this,” said Othmar Wyss, spokesman for Switzerland’s State Secretariat for Economic Affairs.

AP-ES-07-09-04 1806EDT

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