193 (26.04.18)


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HISTORY

$13bn Diamond Market Opens Backdoor to Black Market

A new app that blurs the lines between fair trade and the black market has parallels to an initiative launched by British intelligence officials in Sierra Leone in the 1950s

In 1954, Britain's former head of intelligence Sir Percy Sillitoe boarded a flight to Cape Town, where he was met by a chauffeur and driven to a house overlooking the Indian Ocean.
   Sillitoe had recently retired and was being recruited by Sir Ernest Oppenheimer, the erstwhile chairman of diamond company De Beers, to tighten up its global monopoly. 65 years later and De Beers is using an app and solar panels to launch a modern day version of the same plan that Sillitoe and Oppenheimer hatched together.
   Then, De Beers was at the height of its powers. It held treaties with the colonial administrations of South Africa, the Congo and Sierra Leone, and enjoyed the full backing of Britain, Belgium and France. But up to 20 per cent of all gemstones found in jewellery shops, Oppenheimer believed, were smuggled out of the diamond fields it mined in Sierra Leone, too big to properly police.
   Today, its marketshare has dwindled to a third of the market, and its mines in southern Africa and Canada have been eclipsed by vast new discoveries in Russia. But black market diamonds still stubbornly account for an estimated 10 to 20 per cent of all gems bought and sold.
   With Oppenheimer's backing, Sillitoe hired a handful of former intelligence officers, who used radioactive paint to invisibly label diamonds that would set off a Geiger counter. Sillitoe had led Britain's counter-espionage campaign in the Second World War, turning German spies into double-agents, and planned to turn anyone carrying diamonds into an informer. Before long, the entire trading network was under De Beers' pay and control.
   Having made exports close to impossible,

Sillitoe setup a network of buying offices in Sierra Leone's jungle. British officers sitting in corrugated iron huts with a strongbox of currency would do business through a barred slit, radioing into Freetown whenever they ran out of money.
   De Beers' 21st-century equivalent is a digital “toolkit”, including a tablet computer that can work offline, solar charging panels, digitally-coded bags and GPS equipment. Working with the DDI, a non-government organisation led by academics, diamantaires, ambassadors and anti-corruption specialists, it plans to give the toolkits to small, unregulated diamond miners in Sierra Leone, it announced last week, buying their output via a new app, GemFair.
   De Beers says it will offer “fair prices” and will only deal with artisanal miners that meet “demonstrable ethical standards”, but risks opening a backdoor to the black market, undermining consumer confidence in the $13bn diamond industry, long tainted by money-laundering, drug trafficking and armed rebels.
   An estimated 120,000 people are employed in unregulated diamond mines in Sierra Leone, using dams to divert rivers and shovels to dig pits, whilst artisanal operations produce 18 million carats across Africa each year, according to analyst Paul Zimnisky, equal to more than half of De Beers' own production in 2017.
   At its peak, Sillitoe's intelligence network is said to have spent £5m buying up stones via subsidiaries in Switzerland and Antwerp, which became known as the Outside Buying Office. His campaign proved so successful that in 1957, Sillitoe declared it game over. He flew back to the British seaside town of Eastbourne to run a small chocolate shop.

 

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