Those outlaw diamond mines in Amazon, plus how to launder money

One of the stories that most impressed me before I went to Venezuela was this, by Jens Gould, now with Time in California. He went and looked into the supply chain of diamonds out of Venezuela, and how there was evidence that their origin was being falsified.

Now, Reuters goes where very few reporters from any medium ever bother to go. I posted the photos the other day; now the text is available. Really good solid reporting at this nexus of so many issues: environment, social life, public health, luxury goods, travel, diplomacy, international trade, home economics. It’s a fascinating situation, and it’s good that Reuters is using the resources available to it to pursue stories like this. Would that more moneyed media outlets did the same. Check it out.

“I have diamonds in my blood!” mused one buyer while macaws patrolled the jungle canopy near the village of Parkupik.

The diamonds he and others purchase will likely end up in trading centers like Tel Aviv, Antwerp, London and New York after being smuggled into neighboring Guyana to obtain falsified papers.

More here, including the “European buyer” saying he may die with a gun to the head or hung from a tree.

My one gripe with the story: There is a story here that has yet to be told. Look at this part:

It is a route that flouts the so-called Kimberley Process, an international pact set up in 2003 to curtail the diamond smuggling that was fueling civil wars in Africa – popularized as “blood diamonds.”

While Venezuela’s stones are not “blood diamonds” as such, the pact’s founders fear their existence may give other diamond-producing nations, like Zimbabwe, an excuse to turn a blind eye to other violations of the Kimberley pact.

The issue is not just some vague “excuse” of turning a blind eye. The issue with Guyana offering certification without justification is that it really does open a hole for blood diamonds to enter the world market. There is a well known, though not huge, cocaine trafficking route between South America and West Africa. A plane that goes east with cocaine can return with whatever the occupants please. Cash is fine, but diamonds could be far more lucrative, since producers in the blood diamond regions can’t get market price for their stones. Offer them a crap price, take them back to South America, launder them through Guyana, and you have a nice arbitrage on a voyage that you have to make anyway. That is, instead of getting $1 million cash, you can get $1.2 million (or whatever) worth of diamonds from the same schmuck in Africa. I know this is all just my imagination — I have little evidence of it having really happened — but if I can think of it, I can’t imagine that coke smugglers never thought of it.

One thing I do know is that cocaine producers buy illegally produced gold in South America as a way of laundering their US dollars. They buy it below market price out in the jungle, take it back to “ghost mines” that they own but that don’t really produce much if any metal, and then put it on the market at a higher price. Again, nice way to arbitrage something that you have to do anyway.

As long as I’m scribbling about how to profit from money laundering, my favourite method is this, which I got from a just-out-of-prison pot trafficker who sat next to me on a Greyhound bus and was really eager to chat with someone who wasn’t involved in the prison system. He said he laundered all his winnings through real estate flipping. Would buy a broken-down Brooklyn, New York building for cash (literally cash), and then pay contractors cash to fix it up. The laborers and contractors were used to getting paid in c-notes, and in the end he got a nice building in New York — something worth even more than the money he put into it. Sell to a legit buyer, move on to the next one.