The underworld of gemstones

Abstract

In recent decades prices of high-end "colored gemstones" (trade jargon for precious stones other than diamonds), like almost all "collectibles," have risen dramatically. Demand has been spreading to economic classes formerly excluded at the same time the supply of high-quality material from natural sources falls, leading to constant searches for as yet undiscovered sites, which may take on the character of gold-rushes. While no doubt criminogenic factors have always existed within the gemstone business, periods of rapid price rise mean stronger temptation for illegal activities. The potential list of economic offenses, civil, regulatory and criminal, associated with the gemstones business includes: illegal mining, environmental offenses, bribery, gun-running, smuggling, "terrorist"(i.e. insurgent) financing, commercial fraud, mining-share swindles, money laundering and, not least, simple theft along with recycling stolen goods. This paper represents an attempt to understand the criminogenic factors in light of the history and current structures of the business. It fits the gemstone trade into a commercial, geo-strategic and sociological matrix, the three often interacting in mutually reinforcing ways. It asks whether, given the incentives and opportunities for illicit activity, relying primarily on industry self-regulation makes sense. But it questions whether the international regulatory regime now in place for diamonds can be applied to the far more diffuse supply-side of the colored gemstone market. The paper is divided into three parts. The first, "Under the Rainbow," examined the shady side of gemstone mining in a geo-political context. The current one, the second in the series, entitled "In the Eye of the Beholder," looks at fraud in cutting and polishing of rough gemstones into finished gems. The third "Hot Rocks, Cold Cash" will focus on illicit activity in the retail jewelry trade.