The Growing Importance of Compliance in the Diamond Industry
The global diamond industry may have become stagnant in the recent years, but it remains a big industry estimated to be worth $80 billion per year according to De Beers. Despite this apparent stagnancy, the industry appears to be oozing with liquidity as more banks lend to the industry, from $4 billion some 15 years ago to $15 billion in recent years. Also, there have been major changes in the industry including the shift in manufacturing centres and the reduced involvement of middlemen in the pipeline.
Emphasis on compliance
Amidst all the developments in the diamond industry, compliance is seen to be taking a greater role. This is at least according to veteran diamantaire, Patrick Saada. Saada is convinced that the increased importance of compliance is the biggest change in the diamond industry. He asserts that all players in the diamond industry are affected, from those involved in sourcing to those engaged in purchasing, manufacturing, and the sale of polished or rough diamonds. The growing importance of compliance is having the effect of more stringent and more expensive requirements particularly with regards to international rules on regulation and compliance.
Patrick Saada, by the way, has nearly two decades of experience in the diamond industry. He runs a company that is engaged in the sourcing and distribution of diamonds. Prior to running his own diamond business, he worked as a company director for Steinmetz Diamond Group in Belgium and as vice chairman for Octea Ltd, one of Sierra Leone’s most important diamond mining companies. Saada knows the industry so it makes sense giving weight to his words.
What compliance is doing to diamond companies
The increasing importance of compliance is not a small matter diamond companies can shrug off. This entails higher costs and more complicated obligations to maintain financial reports that are compliant with international standards. It’s also becoming costlier making sure that a company complies with banking regulations, audit measures, and standards for stock valuations and anti-money-laundering policies.
The higher costs and increased sophistication in processes are believed to be major factors that compel small companies engaged in the diamond business to merge with larger companies or to consolidate. Merger or consolidation appears to be the only solution for many of these companies to remain competitive and to be able to handle the rising costs of compliance.
Nevertheless, even though compliance can be largely viewed as a burden, many in the diamond industry are supporting or advocating for its imposition. Many agree that transparency is needed in the industry to rightfully earn consumer confidence and to properly address attacks from the media.
Compliance in the diamond industry benefits the industry for a number of reasons. For one, it ensures that the rights of workers are adequately protected and that the environment does not become overexploited. Also, compliance is necessary to prevent the diamond industry from becoming an unwitting source of funding for terror or criminal groups.