January 12, 2004, will go into history as one of those watershed days, a defining moment, for the Antwerp diamond industry. It is the day on which King Albert signed the amended Belgian money laundering law that now imposes on Antwerp diamantaires the same rules and regulations applicable to the banking industry in the country.

 

The reverberations of the law will spread to the global diamond industry as virtually all of the world’s rough and polished diamonds - at one stage or another - pass through this diamond center.

 

The law completely forbids cash transactions that exceed €15,000 and demands that diamond dealers photocopy the identification documents of almost all their clients and preserve these copies for at least five years.

 

As a journalist, I impatiently followed the Antwerp newspapers every day, awaiting reactions from the Diamond High Council and other Belgian media to gauge industry reaction. There was none. It is as if Antwerp was asleep – far removed from the lawmakers in Brussels. A few days earlier Antwerp Facets, the very informative newsletter of the Diamond High Council, had a front-page article on the obligations imposed by the U.S. Patriot Act on U.S. dealers in precious metals, gemstones or jewelry who will have to develop and implement formal anti-money laundering programs. Failure to do so could result in criminal prosecution. Not a word was said, however, in Belgium itself about similar legislation that was moving through both houses of parliament in Brussels.

 

The Antwerp Diamond High Council noted that U.S. retailers, “can seek to be exempted from this obligation if all they do is buy from dealers who themselves have implemented anti-money laundering programs. This will put non-American wholesal­ers, who do not operate U.S. offices, at a severe disadvantage.

 

The potential fallout from the Patriot Act, which has still not been implemented in the U.S. gemstone and jewelry sectors, is setting off alarm bells in the major diamond trading centers which regard the United States as their major export market. “In Belgium, officials at the HRD have begun developing strategies to minimize the possible negative effects on the local diamond trade,” says Antwerp Facets in an excellent article.

 

Facets quotes Mark Van Bockstael, the energetic director of the International Affairs and Trade Department at the HRD, who says he considers it a challenge to “devise a Patriot Act antidote”.

 

He also sees it as a task to “educate Belgian diamond exporters about what will confront them in the near future. This is not an easy task. American anti-money laundering regimes are generally not common knowledge outside of the United States, and even at home the Patriot Act has thus far ruffled few feathers,” said Van Bockstael.

 

The “good news” is that the ‘antidote’ has now become readily available in Brussels - and there is no longer any need for Antwerp to develop a strategy “to minimize the possible negative effects”. If Belgian diamond traders adhere to their own national laws, every U.S. retailer will be proud and happy to deal with Antwerp exporters. The HRD will mainly have to demonstrate to the U.S. government that the new rules, which are now applicable to Antwerp by law, are just as severe as the rules that the U.S. diamond and jewelry trade and retailers have to enforce.

 

Let’s look at the hard facts: on January 24, 2004, the “Official Journal” (Staatsblad) of Belgium officially promulgated an “Amendment to the Law of 11 January 1993 on Preventing Use of the Financial System for Purposes of Laundering Money”. The ‘old’ law identified 19 different bodies - banks, investment companies, credit institutions, mortgage companies, etc - and individuals that are viewed as “financial institutions” for the purpose of the law. Three categories have been added with immediate effect, and one of them is “traders in diamonds who are registered in accordance to Article 169, §3, of the Program Law of August 2, 2002”.

 

The new amendment has a few other interesting changes. Every reference to “terrorism” in the old law has been changed to “terrorism or the financing of terrorism”. This amendment brings Belgium’s anti-money laundering legislation into full compliance with the relevant EC Directive, the Patriot Act and the Financial Action Task Force (FATF) recommendations. The fact that diamond traders are now seen as “financial institutions” makes it mandatory for all diamond traders, without exception, to:

 

• Verify the identity of new clients with a supporting document, a copy of which must be maintained by the seller
• Maintain a copy of an identification document in each transaction involving more than €10,000 including the case of long-term existing clients
• Familiarize themselves with the nature of the clients’ business, to ascertain that the transaction is not “unusual” and that the source of the client’ funds is bona fide
• Ensure that a client is acting for himself and not as an intermediary for an unknown third party
• Not pay in cash, or receive cash, for sales of any goods with a value of more than €15,000
• Immediately inform the authorities of any suspect transaction that may be linked to money laundering and other requirements

           

Essentially, Antwerp diamond companies will have to appoint compliance officers and set internal rules to ensure the continued conduct of business in a legal manner. The laws applicable to Belgian diamond traders are now quite different from those in Israel and other diamond trading and manufacturing centers.

 

It is too early for us to provide an in-depth analysis on the new situation, as we have not been able to discuss it with legal experts, banks and industry representatives in Antwerp. Often there are laws that are ‘only on the books’ and are conveniently forgotten, ignored or simply not enforced. I believe it is inconceivable that a diamond trader who passes on $20,000 in cash to another trader would be arrested for breaking the law. But - and this is the only thing I can say with certainty for the moment – this is the law.

 

If the industry leadership acts wisely it now has the tools and the opportunity to take the moral high road. In recent years, there has been much negative publicity about Belgium regarding money laundering and the financing of terrorist activity. Much of this may well have been exaggerated, but that is not relevant today.

 

What is relevant is that Antwerp now - by fully embracing the letter and the spirit of the new legislation without compromise - will place itself at the forefront of the international battle against the financing of terrorism and money laundering.

 

This is not only good for Antwerp – it is an excellent development for the worldwide diamond industry. And Antwerp doesn’t have to worry that it will be “alone” since pressure is mounting at the other diamond centers to adopt similar legislation. HRD’s Mark Van Bockstael is absolutely right in his observation that to educate the industry is a daunting but very important challenge. It is vital, however, that we don’t lose perspective. Until now, diamond traders have been looking at the Patriot Act to see how they can make sure that they can continue to do business with U.S. diamond dealers and jewelry retailers.

 

The time has come to look at it differently: The battle against money laundering and terrorism is a worldwide battle. America is not alone in this. The diamond industry should demonstrate that it is an active, committed and highly motivated partner in this fight. Not simply to preserve relationships with clients, but purely because the fight is just. If legislators and law enforcement officials around the globe are concerned that our industry is vulnerable - the industry should feel privileged to be able to lead the fight - as a good corporate world citizen.

 

January 12, 2004 can go down in history as the day that the world’s largest diamond center took the lead that everybody should copy. Laws can be implemented and interpreted in many ways but there should be complete commitment to an overall strategy of zero tolerance regarding the cutting of corners.