The Kimberley Process Certification Scheme (KPCS) is the process established in 2003 to prevent "conflict diamonds" from entering the mainstream rough diamond market by United Nations General Assembly Resolution 55/56 following recommendations in the Fowler Report. The process was set up "to ensure that diamond purchases were not financing violence by rebel movements and their allies seeking to undermine legitimate governments".[1]
The effectiveness of the process has been brought into question by organizations such as Global Witness (pulled out of the scheme on 5 December 2011) and IMPACT (pulled out on 14 December 2017), claiming it has failed in its purpose and does not provide markets with assurance that the diamonds are not conflict diamonds.[2][3][4][5]
Organizations such as Human Rights Watch have also argued that the Kimberley Process is too narrow in scope and does not adequately serve to eliminate other human rights concerns from the diamond production chain.[6]
History
A man and two children sifting for diamonds in Sierra Leone.
The United Nations imposed sanctions against UNITA in 1998 through United Nations Security Council Resolution 1173, however investigators led by Robert Fowler presented the Fowler Report to the UN in March 2000, which detailed how the movement was able to continue financing its war efforts through the sale of diamonds on the international market.[7] The UN wished to clamp down on this sanctions-breaking trade, but had limited powers of enforcement; the Fowler report therefore set out to name the countries, companies, government and individuals involved.[8][9] This led to a meeting of diamond-producing and trading states from around the world in Kimberley, Northern Cape in May 2000.[10][11] A culminating ministerial meeting followed during September in Pretoria, from which the KPCS originated.[12]
In December 2000, the United Nations General Assembly adopted Resolution A/RES/55/56, supporting the creation of an international certification scheme for rough diamonds,[13] and this was followed by support from the United Nations Security Council in its Resolution 1459 passed in January 2003. Every year since, the General Assembly has renewed its support for the KP – most recently in March 2018.[14]
In order for a country to be a participant, it must ensure that any diamond originating from the country does not finance a rebel group or other entity seeking to overthrow a UN-recognized government, that every diamond export be accompanied by a Kimberley Process certificate and that no diamond is imported from, or exported to, a non-member of the scheme.[15] This three-step plan is a simple description of the steps taken to ensure a chain of countries that deal exclusively with non-conflict diamonds. By restricting diamond revenues to government-approved sources, the Kimberley Process is neutral towards different governments.
Compliance
System of warranties
The World Diamond Council created a System of Warranties for diamonds that has been endorsed by all KPCS participants. Under this system, all buyers and sellers of both rough and polished diamonds must make the following affirmative statement on all invoices:
"The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations resolutions. The seller hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds."
It is considered a violation of the KPCS to issue a warranty declaration on a sales invoice unless it can be corroborated by warranty invoices received for purchases. Each company trading in diamonds must also keep records of the warranty invoices received and the warranty invoices issued when buying or selling diamonds. This flow of warranties in and out must be audited and reconciled on an annual basis by the company's auditors.
In addition, the diamond industry organizations and their members have adopted the following principles of self-regulation:
to trade only with companies that include warranty declarations on their invoices;
to not buy diamonds from suspect sources or unknown suppliers, or which originate in countries that have not implemented the Kimberley Process Certification Scheme;
to not buy diamonds from any sources that, after a legally binding due process system, have been found to have violated government regulations restricting the trade in conflict diamonds;
to not buy diamonds in or from any region that is subject to an advisory by a governmental authority indicating that conflict diamonds are emanating from or available for sale in such region, unless diamonds have been exported from such region in compliance with the Kimberley Process Certification Scheme;
to not knowingly buy or sell or assist others to buy or sell conflict diamonds;
to ensure that all company employees that buy or sell diamonds within the diamond trade are well informed regarding trade resolutions and government regulations restricting the trade in conflict diamonds.
Failure to abide by these principles exposes the member to expulsion from industry organizations.
Working procedure
The working procedure of the KPCS is done by the chair, elected on an annual basis at a plenary meeting. A working group on monitoring, works to ensure that each participant is implementing the scheme correctly. The working group reports to the chair. Other working groups include the technical working group (or working group of diamond experts) which reports on difficulties in implementation and proposes solutions, and the statistics working group, which reports diamond trading data.
While the process has been broadly welcomed by groups aiming to improve human rights in countries previously affected by conflict diamonds, such as Angola, some say it does not go far enough. For instance, Amnesty International says "[We] welcome the Kimberley Process as an important step to dealing with the problem of conflict diamonds. But until the diamond trade is subject to mandatory, impartial monitoring, there is still no effective guarantee that all conflict diamonds will be identified and removed from the market." Canadian aid group One Sky (funded in part by the Canadian government) concurs with Amnesty's view saying "If effectively implemented, the Kimberley Process will ensure that diamonds cannot be used to finance war and atrocities... However, without a system of expert, independent and periodic reviews of all countries, the overall process remains open to abuse." Fatal Transactions campaign's (started in 1998) founder Anne Jung in 2008 criticized KPCS for not being a legally binding agreement and suggested a revision of the scheme.[16]
Another form of criticism by the African Diamond Council (ADC) is whether the Kimberley Process is realistically enforceable. There are many factors that can jeopardize the "Officialdom of certificates and paperwork"[17][18] from lack of enforcement on the ground to the secrecy in the diamond trading centers such as Antwerp. Human Rights Watch has also found that there is little independent monitoring of compliance with the Kimberley Process, and few penalties for violations.[6]
Working groups
KPCS has established a number of working groups for carrying out its programs. As of 2019, it had seven working groups: Working Group of Diamond Experts (WGDE), Working Group on Monitoring (WGM), Working Group on Statistics (WGS), Working Group on Artisanal & Alluvial Production (WGAAP), Committee on Participation and Chairmanship (CPC), Committee on Rules and Procedures (CRP) and Ad Hoc Committee on Reform and Review (AHCRR).[19]
Current membership
As of 1 July 2013, there were 54 participants in the KPCS representing 81 countries, with the European Union counting as a single participant. The participants include all major rough diamond producing, exporting and importing countries.[20]Cameroon, Kazakhstan, Panama, and Cambodia were admitted as participants in 2012. The following is a list of participant countries with their year of entry (and re-entry, as appropriate) in brackets.
The World Trade Organization (WTO) in December 2006 approved a waiver for the KPCS while recognizing the importance and effectiveness of the KPCS.[23]
Chairs
The following is a list of the Kimberly Process Certification Scheme's chairs and vice chairs.[24] The chair oversees the implementation of the program, the operations of the working groups and committees, and general administration. The chair rotates annually. The current chair of KPCS is the nation that held the position of vice chair the previous year.
The DRC's position as the 2011 KPCS chair is notable, in that it had been a known source of conflict diamonds and other minerals in recent years.[29][30]
Statistics
KPCS emphasizes collecting and publishing data relating to actual mining and international trade in diamonds. Member countries are required to officially submit statistics that can be verified through audit.[31] Also, all member countries are required to produce and submit an Annual Report on the trade in diamonds.[32] According to the Working Group on Statistics (WGS) of KPCS, in 2006, the KPCS monitored $35.7 billion in rough diamond exports representing more than 480 million carats. The number of Certificates issued by KPCS members was 55,000.
In 2014, 100 Reporters published an article showing how the use of KP certificates had allowed for the publication to identify transfer pricing manipulation in South Africa's trade of rough diamond exports,[33] detailing "Most imported diamonds appear to be re-exported uncut and unpolished. While imports make up relatively small volume, or carats, they drastically increase the value of rough diamond exports. Subtracting the values and volume of imported diamonds shown on South Africa's K.P. certificates from corresponding exports, the actual price per carat of rough diamonds being exported for the first time falls dramatically."
The article revealed that when, "asked about the anomalies in reported trade figures for diamonds under the Kimberley Process (K.P.) in South Africa, where De Beers is a dominant player, [Lynette] Gould, [head of media relations for De Beers], responded, "The primary purpose of the K.P. process (or the issuing of the certificates at least) is for Governments to certify the origin of diamonds, not to keep track of the volume and value of diamonds imported or exported."[33]
Annual report
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Annual report by all KPCS members is a component of peer review mechanism established by KPCS. In the United States, for example, all companies that buy, sell, and ship rough diamonds must submit an annual report via email to the State Department, deadline April 1.[34] The report[35] must include the company's contact information and a detailed breakdown of the total carat weight and value in U.S. dollars of rough diamonds imported, exported, and stockpiled (still in inventory) for the previous calendar year. These are also sorted by HTS codes for unsorted (gem and industrial) rough diamonds, sorted rough industrial diamonds, and sorted rough gem diamonds – the latter of which is most likely to be polished into finished stones and jewelry for retail sale, while industrial diamonds are most likely to be used in cutting and drilling tools. Failure to submit this annual report in a timely fashion could result in a fine up to $10,000. If found to be in willful violation, the convicted offender could be fined up to $50,000 and sentenced to up to ten years in prison.[36]
Expulsion
In 2004, Republic of the Congo was removed from the scheme because it was found unable to prove the origin of its gems, most of which were believed to have come from the neighbouring Democratic Republic of the Congo. For countries economically dependent on diamond exports, this can be a substantial punishment, as it disallows trade with much of the rest of the world. Republic of the Congo's membership in the KPCS was reinstated in the Plenary of 2007.
In 2005, trade in diamonds from Côte d'Ivoire was prohibited. Ivorian diamonds and cocoa are considered conflict resources.[37][38]
In 2008, Venezuela voluntarily removed itself from the KPCS, after it had been in non-compliance for several years. The nation ignored several attempts to communicate from Kimberley working groups, finally responding to an Angolan ambassador in 2007. Venezuela invited Kimberley officials to visit the nation, but this required authorization, and the deadline expired without further correspondence. Finally, Venezuela agreed to remove itself from the KPCS and work toward strengthening its infrastructure.[39][40][41][42]
Côte d'Ivoire and Venezuela are still considered Kimberley Process members, but not Kimberley Process participants. As explained in the FAQ section of the Kimberley Process website,[43] "Participants in the Kimberley Process (KP) are states or regional economic integration organisations (currently the European Community) that have met the minimum requirements of the Kimberley Process Certification Scheme (KPCS) and are, therefore, eligible to trade in rough diamonds with one another. The KPCS prohibits participants from trading with non-participants. Therefore, while the aforementioned countries still retain membership in the KPCS, they do not fulfill the requirements for participation, and thus cannot be called "participants".
Global Witness
Global Witness is a London-based NGO, a key member of the KPCS and was one of the first organizations to bring the issue of 'conflict diamonds' to international attention.[44] They state that a report they wrote, "A Rough Trade", was partial inspiration for the film Blood Diamond.[45]
According to Global Witness, the Kimberley Process has ultimately failed to stem the flow of conflict diamonds, leading them to abandon the scheme in 2011.[46]
Criticism
In December 2013, the World Policy Journal published an investigative report by journalists Khadija Sharife and John Grobler.[47] This showed that a minimum of $3.5 billion in KP-certified diamonds from Angola and Democratic Republic of Congo (DRC) had been moved through KP-certified tax havens such as Dubai and Switzerland. This was in collaboration with self-regulating 'KP-approved' governments including Angola; arms dealers such as Arkadi Gaydamak, diamond magnateLev Leviev and certain international banks.
The authors concluded that tax havens should not be allowed to handle resource revenues because they provide "the legal and financial-secrecy infrastructure enabling illicit activities, while the former struggle to generate revenue for citizens' needs". Under-invoicing and other illicit manipulation of reported income or tax avoidance were excluded from the definition of "conflict diamond" used by the KP, they note, and this "has enabled a 99 percent clean diamond industry to exist largely because the real violence of the industry is whitewashed, ignored, or excluded entirely from the framework–the criminal portion of which continues to exist entirely on the periphery."[47]
In 2013, US investigative platform 100 Reporters released another Khadija Sharife investigate through Central Intelligence Organization (CIO) documents, showing $3 billion in diamond revenues used to rig the Zimbabwean elections.[48]
In June 2009, Ian Smillie of the Canadian-based NGO, Partnership Africa Canada[49] (PAC), one of the founder members of the Kimberley Process resigned his position accusing the regulator of failing to regulate and saying he could no longer contribute to the "pretense that failure is success".[50]
Another founding member of the process, UK-based NGO Global Witness said, "Despite having all tools in place, the Scheme was failing effectively to address issues of non-compliance, smuggling, money laundering and human rights abuses in the world's... diamond fields".[50] The scheme came under further criticism from Global Witness and Partnership Africa Canada[49] in June 2010 after the Kimberley Monitor appointed to review diamond mining conditions in Zimbabwe recommended that the country be allowed to sell diamonds as conflict-free[51] from its contested Marange diamond fields in Chiadzwa.[52][53][54] For the first time the two NGOs jointly called for a redefined classification for conflict diamonds.[53]
In August 2010, another key draftsman of the KP, and also Africa's highest-ranking diamond official, African Diamond Council (ADC) and ADPA chairman Dr. André A. Jackson, demoralized KP supporters by persuading African diamond-producing nations to renounce their support for the scheme.[55] Jackson blasted the KP for its ongoing ineffectiveness, stating that "the system has failed to thwart trading of diamonds mined as a result of human suffering."[56]
Ahead of this denunciation, the ADC unleashed a distressing TV infomercial[57] that exposed internal problems at the front end of the African diamond industry. The broadcast was not only a huge boost for the ADC, it proved to be an enormous setback for the Kimberley Process and ultimately ended De Beers’ ascendancy on the African continent.[58]
In December 2010 Time Magazine published a piece discussing the newly established rough diamond trade in Zimbabwe. The article questioned the legitimacy of the Kimberley Process, stating that it was unable to prevent Zimbabwean conflict diamonds from entering the market.[59]
On 11 August 2011, a BBC radio documentary titled "Zimbabwe's Diamond Fields"[60] repeated an interview with representatives of the Kimberley Process claiming officials were unaware of the tortures and killings exposed in the documentary. Official stated they were only aware of incidents uncovered by their brief visits to the field, implying that they were not staffed to do in-depth investigations.
Global Witness walked out on KP in December 2011.[61] The human rights watchdog group has stated that in recent times, the governments of Zimbabwe, Côte d'Ivoire and Venezuela have all dishonored, breached and exploited the system without bearing any consequential penalties for their infringements.[62]
The De Beers Diamond Consortium is a South African-British corporation that specializes in diamond mining, diamond exploitation, diamond retail, diamond trading and industrial diamond manufacturing sectors. The company is active in open-pit, large-scale alluvial and coastal mining. It operates in 35 countries and mining takes place in Botswana, Namibia, South Africa, Canada and Australia.
Blood diamonds are diamonds mined in a war zone and sold to finance an insurgency, an invading army's war efforts, terrorism, or a warlord's activity. The term is used to highlight the negative consequences of the diamond trade in certain areas, or to label an individual diamond as having come from such an area. Diamonds mined during the 20th–21st century civil wars in Angola, Ivory Coast, Sierra Leone, Liberia, Guinea, and Guinea-Bissau have been given the label. The term conflict resource refers to analogous situations involving other natural resources. Blood diamonds can also be smuggled by organized crime syndicates so that they could be sold on the black market.
The World Diamond Council is an organization representing the entire diamond value chain including representatives from diamond mining, manufacturing, trading and retail. The council was established in July 2000. The purpose was to create a system to keep the supply chain of diamonds as free as possible from conflict diamonds.
The Diamond Trading Company (DTC) is the rough diamond sales and distribution arm of the De Beers Family of Companies. The DTC sorts, values and sells about 35% of the world’s rough diamonds by value. The DTC has a combination of wholly owned and joint venture operations in South Africa (DTCSA), Botswana (DTCB), Namibia (NDTC) and the United Kingdom (DTC).
Global Witness is an international NGO established in 1993 that works to break the links between natural resource exploitation, conflict, poverty, corruption, and human rights abuses worldwide. The organisation has offices in London and Washington, D.C.
Alrosa is a Russian group of diamond mining companies that specialize in exploration, mining, manufacture, and sale of diamonds. The company leads the world in diamond mining by volume. Mining takes place in Western Yakutia, the Arkhangelsk region, and Africa. Alrosa is Russia's leading diamond mining and distribution company, accounting for 95% of Russian diamond production and 27% of global diamond extraction.
The Diamond industry of Israel is an important world player in producing cut diamonds for wholesale. In 2010, Israel became the chair of the Kimberley Process Certification Scheme. As of 2016, cut diamonds constituted 23.2% of Israel's total exports and they were the country's biggest export product, amounting to 12% of the world's production.
The Clean Diamond Trade Act (CDTA), signed by United States President George W. Bush on 25 April 2003, implemented the Kimberley Process Certification Scheme (KPCS) to regulate the commercial sale of diamonds. On July 29, 2003, Bush signed Executive Order 13312, which described the implementation of the Clean Diamond Trade act. The act requires that all diamonds imported to the United States or exported from the United States have a Kimberley Process Certificate. The act aims to prohibit the importation of diamonds whose mining fuels conflict in the country of origin.
Lazare Kaplan International Inc. (LKI) is a diamond manufacturing and distribution company based in New York City. The Chairman of the Board of Directors is Maurice Tempelsman. The first LKI was located in Ponce, Puerto Rico, at el Barrio de los Diamantes, a community named after the factory was located there. LKI was founded in 1903 where it operated until it was moved to Caguas, Puerto Rico in the 1970s.
Israel–Zimbabwe relations refers to foreign relations between Israel and Zimbabwe. Neither country has a resident ambassador.
The Fowler Report, released on March 14, 2000, is a United Nations report detailing how various companies, African and European governments, including that of Angola and the political wing of UNITA, violated the Lusaka Protocol as well as UN-imposed sanctions. Robert Fowler, Canada's ambassador to the United Nations, headed the commission that compiled the report, which raised widespread international concern by highlighting the strong link between the illicit diamond trade and third world conflicts.
The second-largest mineral industry in the world is the mineral industry of Africa, which implies large quantities of resources due to Africa being the second largest continent, with 30.37 million square kilometres of land.With a population of 1.4 billion living there, mineral exploration and production constitute significant parts of their economies for many African countries and remain keys to economic growth. Africa is richly endowed with mineral reserves and ranks first in quantity of world reserves for bauxite, cobalt, industrial diamond, phosphate rock, platinum-group metals (PGM), vermiculite, and zirconium.
The Marange diamond fields are an area of widespread small-scale diamond production in Chiadzwa, Mutare District, Zimbabwe. 'Although estimates of the reserves contained in this area vary wildly, some have suggested that it could be home to one of the world's richest diamond deposits'. The hugely prolific fields are regarded by some experts as the world's biggest diamond find in more than a century. Production from Marange is controversial due to ongoing legal wrangles and government crackdowns on illegal miners and allegations of forced labour. In terms of carats produced, the Marange field is the largest diamond-producing project in the world, estimated to have produced 16.9 million carats in 2013, or 13% of global rough diamond supply. Marange is estimated to have produced 12 million carats in 2012, 8.7 million carats in 2011, and 8.2 million carats in 2010. While some diamond mines produce rough valued at over $1000 per carat, average production at Marange is estimated at under $50 per carat.
United Nations Security Council resolution 1306, adopted on 5 July 2000, after recalling all previous resolutions on the situation in Sierra Leone, particularly resolutions 1132 (1997), 1171 (1998) and 1299 (2000), the Council decided to prohibit the direct or indirect import of rough diamonds from the country. The rebel Revolutionary United Front controlled 90% of the diamond-producing areas in Sierra Leone and was using diamonds to finance its operations.
United Nations Security Council resolution 1385, adopted unanimously on 19 December 2001, after recalling all resolutions on the situation in Sierra Leone, particularly resolutions 1132 (1997), 1171 (1998), 1299 (2000) and 1306 (2000), the Council extended sanctions against the import of rough diamonds except those controlled by the government from the country for a further 11 months, beginning on 5 January 2002.
United Nations Security Council resolution 1459, adopted unanimously on 28 January 2003, after recalling resolutions 1173 (1998), 1295 (2000), 1306 (2000), 1343 (2001), 1385 (2001) and 1408 (2002) concerning the illicit trade in diamonds, the Council expressed support for the Kimberley Process Certification Scheme (KPCS).
United Nations Security Council Resolution 1753 was unanimously adopted on 27 April 2007.
United Nations Security Council Resolution 1819 was unanimously adopted on 18 June 2008.
Charmian Penelope Gooch is a British anti-corruption campaigner and activist. She is a co-founder and board member of the NGO Global Witness, where she works to uncover and fight corruption in the developing world.
Eli Izhakoff is an American businessman in the international diamond and jewelry industry, filling a variety of public positions since 1979.
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