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Natural Resources
Diamonds
Threat Issue
Canada’s resource riches could be attractive to both foreign and domestic organized crime. Canada’s diamond industry exemplifies a sector of Canada’s natural resources where law enforcement is continuing to pro-actively monitor the potential criminal exploitation by organized crime.Although now third by value amongst the 23 diamond-producing countries, and expected to move to second or first place once additional mines begin operating, the diamond industry continues to be a new and expanding area of the Canadian mining sector. Diamond exploration throughout Canada has expanded significantly over the past couple of years with the discovery of diamond-bearing kimberlite pipes in Alberta, Saskatchewan, Ontario and Quebec.The next three mines to open, DeBeer’s Victor Project in Ontario, Snap Lake in the Northwest Territories (NWT) and the Tahera Jericho Project in Nunavut, are still on schedule to begin production in 2007/08, 2007 and 2006 respectively.
The risks presented by organized crime’s potential involvement in the diamond industry are multi-faceted and relate to different aspects of the diamond industry, including markets for rough and polished stones, and diamond exploration companies.
Overview of Criminal Activity
The Kimberley Process Certification Scheme (KPCS) was implemented in 2003 in order to stem the trade of conflict diamonds 13 from certain civil strife ridden southern and west-African countries.This international initiative was designed to establish a system of internal controls to track diamonds from where they were mined to their point of export in order to ensure that no conflict diamonds have been added to the chain of production. Nevertheless, it is possible to smuggle both rough and polished stones into and from Canada, where they can be introduced into the stream of rough, cut and polished and then sold as Canadian diamonds.
Possible threats posed by organized crime’s potential infiltration of the diamond industry are through co-opted or wholly owned mining, exploration, and cutting and polishing firms. Co-option of a firm or a specialized service within could occur if organized crime groups were to place individuals in jobs that could gain access to important industry information or to acquire a supply of rough stones illicitly.
Theft and distortions in the valuation of diamonds that are both imported and exported are also possible through jewelry stores and diamond exploration companies, as is insertion of non-Canadian diamonds into the stream of diamonds labeled as originating from one of the Canadian diamond mines. Organized crime groups are likely to be drawn to the mine sites and their neighboring communities as their populations swell with well paid workers with few outlays for their money. In the past, organized crime has supplied similar resource extraction-based communities with illicit drugs, contraband tobacco and alcohol, illegal gaming and associated loan-sharking, and prostitution.
Additional potential threats from organized crime that could have a direct and indirect impact on the Canadian diamond industry include: misrepresentation of high-quality fake stones for real diamonds; an increasing involvement by organized crime in polished stones as a means to transport currency, as well as investment in jewelry stores; an increase in the smuggling of rough stones in order to avoid the Kimberley Process Certification Scheme; and opportunistic theft at mine sites or while in transit to secondary stages.
Negative Socio-economic Effects
The RCMP-led Diamond Protection Service in concert with the Canadian diamond and diamond exploration industry are helping to monitor and ensure its protection. However, potential criminal threats to the Canadian diamond industry highlight the necessity to uphold the integrity of important economic sectors, particularly those relating to Canada’s natural resources.There could be significant financial loss if there was criminal exploitation of the diamond industry. For instance, smuggled diamonds could not only negatively impact the integrity of diamonds mined in Canada, but governments could also lose potential tax revenues from their sale. Moreover, a loss in confidence of the diamond industry in Canada could have negative repercussions on consumers and investors domestically and in other diamond producing countries. If frauds were to take place via publicly traded companies within the Canadian diamond industry, members of the general public could suffer significant financial loss.
There is the potential for organized crime to become involved with legitimate companies within the diamond industry or other areas of the natural resources sector.The threat would stem from organized crime’s potential use of businesses within this sector to facilitate criminal activities, such as fraud, money laundering and the smuggling of natural resources. Expanding resource sectors, such as the Canadian diamond industry, present many opportunities for organized crime to exploit that could have negative consequences for communities’well-being and public safety.
13 Conflict or blood diamonds refer to diamonds associated to the violent conflict in certain countries in Africa. Diamonds mined in this region have been known to be sold on the black market to raise money to support the continuance of regional conflicts.
