Enemies of Traceability: The Hard Path to Provenance!

Dear Beloved Readers,

If you hadn't read my previous write-up, "Kimberly Process Certification Scheme: Regulation that Balanced Diamond Smuggling!" under "Gleaming Gems Gazette" then you missed knowing the approach that the first traceability in the gems and jewelry trade took. You also missed why traceability is now much more important than ever before. These topics might work as a background for this write-up.

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Additionally, only tracing diamonds is in no way a sufficient solution for the chronic problem that most of us commonly talk about — issues related to environment, social, and governance (ESG) in the gems and Jewelry trade.

In this write-up, I will try to show you the horrible truth that traceability will disrupt and introduce you to the three enemies who don't want the world to know the footprint of gems and jewelry.

The CIBJO President noted that among the most vulnerable sectors in the jewellery pipeline are those involved in artisanal mining, or sometimes what is referred to as the informal mining sector. "The percentage of artisanal mining input varies according to product type, accounting for about 20 percent of both the global gold and diamond supply, but 80 percent of the supply of coloured gemstones," he stated.

Mr. Gaetano Cavalieri , President of the World Jewellery Confederation - CIBJO , recently delivered a speech at the United Nations . Click here to read in full

A few years back, the people in the gems and jewelry trade started talking about traceability in mission mode. The conversation was fuelled by the fascinating rise in the crypto-currency industry and the value of Bitcoin. The reason was the method that is used to maintain the ledger for transactions: Blockchain.

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After Ms. Leanne Kemp (Everledger) , founder of Everledger , came into the field with her dramatic explanation of the advantages of blockchain in the diamond trade, it seemed soon the trade would enjoy a clean environment.

Similarly, a few other tech startups came into focus. They used the same method, blockchain, to register and provide the details of the diamonds and valuable-colored gemstones.

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Mr. Chamath Palihapitiya explains how the pressure to raise funds deteriorates the importance of Product Market Fit.

In my last write-up, I mentioned Mr. Robert Fowler's role in convincing the United Nations and governments of several countries of the ineffectiveness of sanctions on UNITA. Try to envision his abilities and the position he holds. He was officially a very important person for several countries and the United Nations.

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From mid-2008 to 2009, he served as UN Secretary-General Ban Ki-moon 's special envoy to Niger to find a solution to the crisis in the Agadez region. He went missing on December 14, 2008, and was last seen around 45 kilometers (28 miles) northwest of the city, of Niamey. On April 21, 2009, Fowler and many other Westerners were released. - Wikipedia

Note: The commodity associated with the crisis in the Agadez region wasn't Diamond or any other gemstones, rather was Uranium.

He was popular, so we had the chance to read about him. It's difficult to deny that several people, both international envoys and local, are either dead or missing for raising alarm or tracing irregularities in the gems and jewelry trade; both mining and trading.

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There are people who don't like the world knowing about the source of gems and jewelry. And since the commercial entities in this trade are interlaced as like threads in a spider web, even though they are independent, the interdependence greatly manipulates their regular business.

The kind of business relationships third-degree connections maintain among themselves significantly affects the far-associated person and entity.

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You may be surprised to know if you don't know: you cannot just walk into any office dealing in diamonds and colored gemstones unless you have a proper, warm introduction. But with time and reduced business, this culture has too started vanishing.

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While I was on an interview mission where I questioned several jewelers about the idea of traceability. Among several other concerns, the concern of customers knowing their suppliers and then reaching out directly to purchase was a common one. Though each of them was aware of " 谷歌 ” which has factories and wholesalers' contact details and addresses on its map, all of them were still hesitant about the idea that customers should know the footprints.

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In fact, several jewelers, who were only storing mountings and maintaining a list of solitaire diamonds provided by their suppliers, were angry with the idea of complete traceability.

But whatsoever, these aren't the people who would think of killing you for getting a competent solution for tracing the entire journey; they are businesses with a traditional approach. A compelling value proposition can lead them to change sides.

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The second kind of people is likely to be a concern: the Hawala — the informal currency transfer system — traders, or say parallel banks. The gems and jewelry trade are two of the biggest consumers and an important part of the Hawala Network.

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To evade taxes, traders transport rough diamonds, polished diamonds, colored gemstones, gold, and jewelry inside and outside the country undocumented. And, to settle the payments for this transaction, they ask their known hawala trader who receives the sum of money either in cash or in a bank account from their partner situated in the receiver's location.

If the transaction is made in total cash, then it's quite easy to hide from governments compared to one where the payment is wire-transferred. The wire-transfer cases are complicated and require large attention for paperwork.

The hawala traders ask for or provide invoices that are documented, but the transaction never happened in real life.

Hawala traders also supply their services to other industries, for example, to traders from another industry who import goods or services and present under-valved invoices to evade duties, and in extreme to drugs, human traffickers, arms, ammunition smugglers, etc.

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Either they use a distributed balance settlement mechanism, or they make international sales of polished diamonds where the diamonds are exported in real but later smuggled back to the owner.

By using the second method, the importer enjoys the facility of international wire transfers with real documents. And later, both importers and exporters manage their books with pseudo-fake purchases and sales.

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Hawala traders, those providing services to tax evaders, are a silent threat to traceability but not to the life of any human. In fact, they are more cautious than a regular individual when making new relationships and opening up in public. They are businesspeople operating without following the law.

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But, as I mentioned earlier, the affairs among third-degree connections can bring misfortune, and any fragile hawala trader can fall into a trap. The danger is from the hawala trader supplying services to corrupt politicians, mafias, and criminals. You may get killed if you disrupt their business.

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Finally, the most dangerous are the leaders of the organizations mining against local laws, international rules, and humanity. Their mining process is brutal. They use fear to make local people dig and collect gems for them. They often offer drugs and women in place of money as a wage to miners for their miserable hard work.

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These leaders will surely follow you if you succeed in disrupting their business with your gemstone tracing technique.

The real depth that traceability will bring forth will be full of brutal deeds. Rape, murders, extortion, child abuse, drug, trafficking, laundering, arms... whatever worse one can think of, is a part of gems and jewelry.

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Solving traceability does require a technological breakthrough that is way beyond blockchain, but on the other hand, it is an extraordinary challenge to penetrate the nexus that does include people disguised as white-collar.

For decades, global organizations and leaders having super authority and abundant resources have failed to resolve the issue of traceability. Whereas, with the present approach in the trade, the practice of "traceability" is limited to brand building and selling a piece of jewelry.

Thank you!

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