India's diamond trade being used for money laundering: Report

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These instances were also reported from four other countries Israel, Belgium, Canada and the US. Reuters These instances were also reported from four other countries Israel, Belgium, Canada and the US. Reuters
SummaryThe report has identified different issues that require consideration...

India is one of the five countries where instances have been found that trade accounts of diamond business are being used to launder illegal funds to the tune of millions of dollars, according to a report by a global financial crimes combating body.

The report by the Financial Action Task Force (FATF), a Paris-based global body to set standards to combat money laundering and terrorist financing, says that India has reported instances where diamond prices were overvalued for purposes of laundering and suspected financing.

The report said as there were no set standards of diamond pricing in the country, agents were overvaluing the costly and prized gemstones, and even one such big instance is under the scanner of financial enforcement agencies.

The report has been brought out with the aim to provide a general overview of the global diamond industry, the way it works and the characteristics of diamonds as merchandise, "through an anti-money laundering and combating financing terror lens".

"The case presented by India exposes how through over-valuation diamonds were shipped at a value that was tens of millions of USD higher than the real value.

"This kind of over-valuation cannot be done in goods with a fixed or even relatively fixed price," the FATF report on "money laundering and terrorist financing through trade in diamonds" stated.

These instances were also reported from four other countries -- Israel, Belgium, Canada and the US.

China and India are major markets where diamond trade is done on a large scale, the report said.

The report cited an unidentified case where some Indian importers, based in Surat and Mumbai, imported diamonds from Hong Kong and China by "grossly overvaluing these diamonds to USD 544.8631 per carat".

This case shows the level of manipulation which may be conducted through the diamond trade due to its specific characteristics, such as the very high value and the lack of known and stable prices which allow for the manipulation of price, the report stated in the Indian context.

The report states that in a number of suspected cases of diamond smuggling, a majority of funds was transferred to Belgium from accounts in Hong Kong, China, Israel, UAE, the US and India.

In†cases of suspicious money laundering instances of diamond trade, the funds transfer occurred from India, Israel and Switzerland to the UAE.

"India reported a relatively large number of sanitised cases (12) in which suspicious transaction reports were received (in connection with diamond trade). In these specific cases,

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