Justice in the Antwerp Diamond District

By now everyone in the diamond business will have read the story about the a criminal court case involving AP Diamonds, an Antwerp diamond trader, where it was found the court has blundered severely regarding a file of diamond fraud. The fraud was reportedly exaggerated. The seizure of goods led to bankruptcy of the diamond company. The detectives allegedly have thwarted the Public Prosecutor's Office. A house search, which should never have taken place, took place with a diamantaire, who died during the house search. What created most publicity was the revelations by the Public Prosecutor that he is filing a complaint with the Attorney General against two top detectives of the federal judicial police from Antwerp who were handling the case.

Reportedly, these detectives tried to hide the fact that the fraud was less extensive than previously thought. They ignored an important credit note and they twisted testimonies, on purpose. They took advantage of the limited expertise of the examining magistrate. When the Public Prosecutor's magistrate, who inherited the file at the end of 2006, wanted to put a stop to the misleading investigations, one of the detectives asked him to leave out the letter from the Public Prosecutor's Office from the file. The complaint of the magistrate against the detectives remained without result.

There are a few aspects of this story that are really infuriating. Some 15 years ago, the Belgian justice ministry and some leading politicians considered it necessary to establish a special police force only for the diamond sector. This, by itself, is an anomaly – but let it be. This special six-member diamond police force is headed by inspectors who are well connected in, and acquainted with, the diamond business. The team members are not “anonymous faces” – they are known; not so long ago photos of the whole team appeared in the Antwerp press. To the diamond industry the only “benefit” of the existence of specialized police force is having the comfort that these officials understand the business, understand business practices and are able to distinguish between “real” and “imaginary” crimes.

The fact that the Public Prosecutor filed a complaint with the Attorney General against the heads of the diamond police evokes many questions. Might there be a need to review all pending diamond cases? Have there been trials in the past few years in which evidence was concealed or where evidence distorted, out of proportion or maybe even false? What motivated these actions by those entrusted with upholding and enforcing the laws in the diamond district to act as they did? Where there personal agendas? Have they become to close to the industry? In many respects AP Diamonds was an “easy target” – because the company had some problematic affiliations from its very beginning. But even “problematic” companies need to be able to trust that they will be dealt with fairly and decently by law enforcement bodies. Maybe the time has come to rethink the needs, benefits and the dangers of having a dedicated police force just for a few hundred companies in the diamond district.

What were the True Motives for the Investigation?

We have covered the AP Diamonds case in our publications from its very beginnings. It started with a Belgian government action to freeze the AP Diamonds bank accounts, apparently based on some suspicious activities reports to the authorities or some other undefined intelligence. Principals of AP Diamonds had bitterly complained that they were never given access to the essence of the complaints, and were denied – because of national intelligence and other secrecy requirements – any real explanations as what triggered the government action.

Who was AP Diamonds? It was the marketing arm of a controversial DRC mine, Sengamines, that was controlled by Oryx Natural Resources, a controversial mining company with roots in Zimbabwe military circles, in the Arab world (including a stake by the Libyan government) which had been accused by the United Nations as being involved in conflict diamonds, smuggling, money laundering, arms dealings and what not. Except for some company-originated libel and defamation suits, Oryx principals – to the best of my knowledge – never stood trial for wrongdoings.

From 2003, Sengamines diamonds were sent to AP Diamonds, a company set up in late 2002. At some point, the Oryx managing director, Geoffrey White, also became manager and director of AP Diamonds. Anti-money laundering laws are pretty straightforward – if the Sengamine ownership (Oryx) is suspect (or actually listed on the US OFAC list of “blocked companies” or “sanctioned companies” because of suspected links to terrorism – and Oryx was and still is on that list), then one cannot legitimately trade in these diamonds. It’s just that simple as that.

When AP Diamonds’ bank accounts were frozen, and some $1.5 million worth of goods, seized it was clear that the company couldn’t operate anymore – and eventually went bankrupt. What I had always wondered is what kind of evidence would be needed, or supplied, to justify the actions – or was the link to Sengamines/Oryx by itself sufficient to warrant the actions by the Belgian government? I had always suspected the latter to be the case – and the new revelations published in the Belgian press actually may strengthen this view.

According to the Belgian press “In June 2005 the detectives knew this [the excessive seizure of goods] was over the top. But even a partial release of the unlawfully held goods, in order to pay personnel and the social security, was denied,” criticizes Fred Erdman, lawyer of the accused. Press reports allude that the court case had to do with some invoices – I don’t know, I find it strange. I had always understood that the very link with a “sanctioned” company, named by the United Nations and listed on the US terrorism lists (lists that go by the name of SPECIALLY DESIGNATED NATIONALS AND BLOCKED PERSONS), was the main reason. A suspicious activity report filed with authorities would ostensibly be related to a flow of money, but not necessarily so. Reports can be triggered for many reasons. By the norms created by Patriot Act, by the FATF, by European Directives and Belgian anti-money laundering legislation, the dealing in Sengamines goods, at that time, may have been viewed as trading in some kind of contraband. Oryx, at the time, was engaged in several restructurings to remove problematic individuals and shareholders, and this apparently wasn’t sufficient for the Belgian authorities.

What represents a Suspicious Activity?

There is a mistaken perception that only banks file suspicious activity reports. The Anti-Money Laundering Law of 1993 (as amended in 2004) obligates diamond dealers to prepare a written report on unusual (suspicious) transactions to the Financial Intelligence Processing Unit. Non-filing is violation of the law! The criminal law imposes a mandatory obligation on all management and staff within the regulated financial sector to report as soon as practicable any knowledge or suspicion of money laundering, or instances where there are reasonable grounds to suspect money laundering by one’s clients or prospective clients. There is an obligation of secrecy; the diamantaire is prohibited from mentioning to any third party or to his client that he has filed such report. How can one protect oneself against becoming the target from a competitor or another party who may file a report without really solid reasons? In the case of AP Diamonds, I was told by principal some years ago that they were denied access to information that was the basis for blocking their bank accounts.

Nobody, however, has ever clearly explained how suspicion can be the basis for “criminal liability” – how can one be charged for not having acted on a “suspicion.” Lawyers explain that this is also the main basis for the actions of law enforcement authorities – they often act only on some very undefined suspicion. I am not aware that in any country any court has ever clarified the meaning of ‘suspicion’ in the context of money laundering – which is the context of the laws applicable on the diamond industry. A dictionary definition of suspicion is “an act of suspecting: state of being suspected: the imagining of something without evidence or on slender evidence: inkling: mistrust.” Let’s face it: these laws put diamantaires in an untenable situation. What AP Diamonds was doomed the moment a suspicious activities report was filed. The court case itself was almost not relevant.

And tomorrow this could happen to anyone of us. As much as we believe that ALM/CFT laws must be adhered to and must be enforced, there is an almost surrealistic reality here: once you are believed to have touched “contraband,” or some of your suppliers think your money is “tainted,” there is really no way to rehabilitate or exonerate yourself. The law leaves little discretion. The last thing we should do is forget what happened in this specific instance. This has nothing to with whether one is guilty of something or not. It has to do with due, honest and fair process. That’s very difficult in an environment when the slightest non-proven suspicion can kill a company’s or a man’s reputation – forever.