An internal Canadian police report forecasts the country’s diamond industry could lose $180 million ($147 million) annually due to fraud and theft if organized crime succeeds in infiltrating the business.

 

The federal government would lose, as a result, $25 million a year in taxes from the revenues siphoned off by criminal groups, according to the report obtained by The Canadian Press.

 

The police fear that if cutting and polishing facilities in the Northwest Territories fail to properly screen new employees, criminals could "take advantage" of Canada's inexperience with the growing industry. "The Canadian diamond industry is not and will not be immune to organized crime penetration," the report states bluntly.

 

In the past decade, Canada has leapt into third place in the world pecking order of diamond producers with 15 percent of global supply following the discovery of deposits in its Northwest Territories.

 

With production set to rise further, the country could become a top target for crime groups.

 

"Over the next two to three decades, it is estimated that Canada will become the world's leading supplier of rough diamonds, with approximately seven to 10 diamond mines operating across the country," the report says.

 

The report notes that diamond-producing countries lose a certain percentage of rough stones to thieves and smugglers - ranging from 12 percent of total production value in South Africa to 30 percent in Russia.

 

There are no figures yet for the amount of “leakage” taking place in the Canadian diamond industry, the report says, but if Canada were to lose 12 percent of production value that would translate to more than $180 million annually.

 

“The royalty loss to the federal government, which receives 14 percent on Canadian rough diamond production, would be $25 million," the report says. “Losses of this magnitude are a definite possibility as Canada's rough diamond production grows."

 

Around 20 cutting and polishing operations, including four in Yellowknife, have been established in recent years, but labor shortages in the North and a lack of expertise have forced factories to bring in experienced diamond cutters from Europe, Israel and Africa, the report notes.

 

"Should employers fail to conduct adequate due diligence during the hiring process, both domestic and foreign criminal elements can take advantage of Canada's inexperience with the diamond industry."

 

The intelligence report says diamond firms have lobbied the federal government to ease immigration and work permit restrictions, which the companies view as "overly cumbersome", to recruit more experienced workers to the Northwest Territories.

 

In a secret report released in July, the Canadian Security Intelligence Service warned that eastern European crime groups might try to smuggle conflict diamonds into the country and offer them as Canadian mined stones.