International financial watchdog FATF has issued a report that raises concerns about the use of diamonds to launder money in five countries that voluntarily disclosed information for the report.
India cited cases of overvaluation of diamonds sold abroad as a means of transferring illicit money back to India. Trade-based money laundering is one of, if not the largest mechanism worldwide for transferring value without being detected.
As John Cassara and Avi Jorisch have noted in their book, On the Trail of Terror Finance, “diamonds are the most condensed form of physical wealth in the world. As a result, they are widely used in global laundering and value transfer schemes.”
Cassara and Jorisch also noted that Dubai, which maintains significant business relationships with diamond dealers in Mumbai, India, “are adept at invoice manipulation,” which Dubai traders can use to transfer significant amounts of value without transferring physical money.