Kimberley Process Certification Scheme WDC’s role in controlling the trade in conflict diamonds

KPCS basics  Negotiations began in 2000, implementation began in 2003 – currently, KP Chair is China, 2015: Chair will be Angola – Vice Chair will be chosen at upcoming Plenary in Guangzhou in November: candidates are Australia and UAE  Currently 81 nations (including the EU countries) (voting privileges)  Observers: Civil Society coalition (PAC and others), WDC, DDI, ADPA (no voting privileges)  Each country passes legislation to implement the minimum standards  Requires the use of government validated KP Certificate on any export (or re-export) of a parcel of rough diamonds  Other requirements:  Minimum requirement for KP certificates: origin, weight, value, exporter, importer, tamper-resistant features  Confirmation of good receipt by ultimate consignee  Internal controls within the country

More requirements  Quarterly statistical reporting: KPC’s used, carats exported, carats imported, countries of import and export, value for imports and export  Annual report - incudes assessments of reports by others  Receipt of a monitoring visits, by each country, at least every five years to check compliance (volunteers make up the RV team: participating country, NGO’s and WDC) – report required to be submitted, including any corrections, follow up also needed  Participation on review visits and missions  Participation on Working Groups  Much more!

KPCS WORKING GROUPS  Working Group on Monitoring – monitors compliance with minimum requirements, organizes review visits and missions, coordinates with UN Panel of Experts. Chair is EU  Working Group on Statistics – gathers data, runs statistical web site, manages quarterly reporting, provides information for review visits. Chair is US  Working Group on Rules and Procedures – examines all working documents and procedures of KPCS – drafts any necessary additions and changes in rules. Chair is Russian Federation  Working Group of Diamond Experts – examines technical production information (foot printing, satellite imaging, characteristics of production, valuation issues, tariff codes, etc. Chair is WDC (Mark Von Bockstael)  Working Group on Artisanal and Alluvial Production – examines compliance challenges for small scale mining, sets standards. Chair is Angola  Working Group on Participation and Chairmanship – reviews application for admission, requests for suspension based non-compliance, examines applications for Chair and Vice Chair – Chair is now So. Africa, will be China (always past Chair)

Other committees  Committee on Reform - created every three years to review KPCS functions, and suggest any reforms (recent committee work led to the creation and appointment of the ASM, review of every working group terms of reference, orderly rotation of WGM Chairs, methods for joining Working Groups)  Friends of Cote d’ Ivoire – helped bring CDI back into compliance, lift UN sanctions, restart their trade  Innovation Committee – new and pending idea to create a space for discussions on “blue sky” thinking, including continuing discussion on changing the definition of conflict diamonds, perceived risks to the diamond supply chain that KPCS can address and how

Working methods  All decisions at every level are made by consensus  Administrative Support Mechanism (hosted by the WDC) handles KP Chair, WG and Committee logistics GJEPC), communications (IDI), requests for technical assistance (DDI) and Knowledge Management and Institutional Memory AWDC). Administers the web site (funded by AWDC) AWDC also functions as focal point for ASM.  Telephone conference calls for each Working Group several times throughout the year, organized by Chairs of Working Groups: where issues and decisions called “Administrative Decisions” (AD) are discussed – in writing, negotiated throughout the year  Intercessional meeting (June): continued work on each WG’s agenda, open issues, applications for admission, countries that are suspended, etc. – no decisions taken (hosted in KP Chair locale)  Plenary meeting (November): all completed AD’s adopted by Plenary, any decision regarding admission, suspension, next Chair nomination, etc. (hosted by KP Chair locale)

KPCS fosters trade in rough diamonds  Success of KP is primarily to control the legitimate trade when rough diamonds are moved across international borders.  KP reporting requirements have the effect of “regularizing” business practices since trade (carats, value, destinations) in rough diamonds must be reported to participating governments quarterly and are checked for anomalies by the KPCS to detect non-compliance  The extension of the KPCS regime into the polished trade is through WDC’s “System of Warranties” specifically recognized by the KPCS  Legally defensible express warranty from seller to buyer (not to the end user) the polished diamonds supplied (loose or set in jewelry) were trade in a manner that is consistent with the KP.  Allows retailers to answer consumer inquiries about whether the diamonds are “conflict free”.

WDC’S role in the KPCS  Support (financial) and expertise: especially Mark Van Bockstael! But also others. Insight on how the industry operates, the conditions on the ground, impact of KPCS requirements on the trade  WDC’s industry perspective is important in every aspect of the discussions within every Working Group and committee – it is the only input that international government regulators get from the entities that are actually impacted by the KPCS  Continuity: Industry representation has been consistent since the beginning– governments’ representatives to the KPCS turn over roughly every four years, and there is very little institutional memory (this is now being addressed by ASM)  Partner to the NGO’s – maintaining a positive relationship often means that the WDC supports their positions at the KPCS and in public.

Current challenges in the KPCS and for WDC  Decision making methods – operates via consensus so one country can block progress (and neither WDC or civil society coalition gets to vote on anything)  Disconnect over the definition of “conflict diamonds”  current definition is “rough diamonds used by rebel movements…to finance conflict aimed at undermining legitimate governments”  Many (retailers, manufacturers and ESPECIALLY consumers understand this term to mean diamonds that have not been used in connection with human right violations or any systematic violence funded by the diamond trade)  WDC is on record that the definition should be expanded: “diamonds that finance systematic violence targeting civilian populations at trading and production centers” - better meets expectations and reflect more accurately the goals of the KPCS – this needs to be progressed in the coming sessions.

More Challenges  FATF report, and letter to the KP Chair dated October 3, 2014 from the President of the FATF  FATF is an international institution that sets standards for the global financial community to prevent money laundering and terrorist financing – garners respect and reaction from the financial community around the world. All members of FATF have committed to implementing the standards, and fulfilling suggested changes that flow from studies and reports that are published (all nations are reviewed)  FATF issued a report in October 2013 that identifies “considerable vulnerabilities and risks” for money laundering and terrorist financing in the diamond trade, with specific recommendations to be addressed by the KPCS  Letter from President has specifically called upon the KPCS to address steps to identify risks to the diamond trade that “fall within the mandate of the KPCS” and has identified specific steps that the KPCS should consider to mitigate these risks.

More challenges  Risks to the supply chain for diamonds (smuggling, instances of non-compliance, counterfeit KPC’s, etc.), risks that impact diamond industry’s financial underpinnings (including transfer pricing and trade practices), need for enforcement and increased government oversight that levels the playing field for all trading centers – these are all important conditions that are impactful on KPCS and its credibility, but I am short on time!  For the WDC – to increase awareness among our members and the industry at large about the importance of the KPCS and its important work  To expand those within the WDC that engage with the KPCS – important for the WDC, but also for the KPCS tri-partite community – to gain knowledge from a wider array and from all sectors and communities in our industry  THANK YOU FOR YOUR ATTENTION AND I CAN ANSWER QUESTIONS AT THE BREAK!