FORMER DUBAI DIAMOND EXCHANGE CEO ALLEGES SLACK CONTROLS ON

S E C R E T SECTION 01 OF 03 DUBAI 000394 SIPDIS NOFORN SIPDIS STATE FOR EB/FO PSIMONS, EB/EXC SSAARNIO, NEA/ARP, NEA/IR, S/CT TREASURY FOR OFAC AMORGNER E.O. 12958: DECL: 6/20/2017 TAGS: EFIN EMIN PTER ETTC KCRM VE IR AE SUBJECT: FORMER DUBAI DIAMOND EXCHANGE CEO ALLEGES SLACK CONTROLS ON CONFLICT DIAMONDS DUBAI 00000394 001.2 OF 003 CLASSIFIED BY: Paul R Sutphin, Consul General, Dubai, UAE. REASON: 1.4 (b),(d) ¶1. This is an action request for EB/ESC, see paragraph 14. ¶2. (S) SUMMARY: The former Chief Executive Officer (CEO) of the Dubai Diamond Exchange (DDE),Noora Jamsheer, expressed concern to ConGenoff about the integrity of the UAE's adherence to the Kimberly Process (KP) to stem the trade in conflict diamonds. Jamsheer resigned her position with the DDE rather than ignore suspicious diamond shipments. She also alleged that she was offered "commissions" to overlook shipments that otherwise might be of KP concern. Separate from her discussion of the DDE, she voiced her suspicion that Venezuelan diamonds were being used to finance Iran's support of insurgents in Iraq and Hizballah in Lebanon. Finally, Jamsheer speculated that the new diamond cutting and polishing facility now being built in Ras al-Khaimah could be a destination for conflict diamonds. End Summary. ¶3. (C) Polecon officer met with Noora Jamsheer on 12 June to discuss the diamond trade and her recent resignation from the DDE. Jamsheer, the former CEO of the DDE and a Bahraini national, said she resigned because she was unwilling to overlook what she termed as suspicious diamond shipments, including two 2006 shipments (see para 5) and she would not compromise her beliefs and integrity. Dubai Diamond Exchange -------------- ¶4. (SBU) The DDE was established to create a major hub for the rough diamond trade in the UAE. The UAE designated the DDE as the Kimberly Process authority to oversee the diamond trade in the UAE. The DDE is a subsidiary of the Dubai Multi Commodities Exchange (DMCC),which is wholly owned by Dubai World. Dubai World is a parastatal with 50,000 employees owned by the government of Dubai; its chairman is Sultan bin Sulayem (SbS),a principal aide to UAE Vice President, Prime Minister, and Dubai Ruler Mohammed bin Rashid al Maktoum. The DMCC is a free zone which permits the trading of precious metals, precious stones, and other goods outside of the UAE customs regime, but transactions are subject to UAE Federal Laws. Suspect Shipments approved -------------- ¶5. (S) Jamsheer joined the DDE in October 2002, around the time the UAE joined the Kimberly Process (KP). Shortly thereafter, Jamsheer was put in charge of overseeing compliance with the KP for the UAE; she was subsequently appointed CEO of the DDE. She resigned from the DDE in February 2007 because she was "unwilling to make compromises and overlook suspicious shipments of diamonds." In her letter of resignation to the DMCC, she cited two cases of suspicious shipments of rough diamonds that were released by DMCC executives while she was away from work, over her objections. She believes the cases merited further investigation according to UAE federal law. ¶6. (S/NF) The first suspicious shipment of rough diamonds was shipped from Ghana to the UAE in July 2006. The shipment was held while the authenticity of the KP certificate was investigated and the origin of the diamonds was verified. An initial scientific examination indicated that the rough diamonds were not of Ghanaian origin. In September 2006, according to Jamsheer, Ahmed bin Sulayem (AbS),DDE Chief Operating Officer and son of SbS, authorized the release of this shipment in September 2006. Jamsheer claims the release was improper since the suspicious KP certificate had not been properly authenticated. The decision to release the diamonds was based on assurances received from Ghana deemed sufficient by AbS, who was reportedly concerned that holding shipments for such a long period would damage the DDE's reputation. Jamsheer claims the release was improper since the suspicious KP certificate had not been "properly" authenticated. DUBAI 00000394 002.2 OF 003 ¶7. (S/NF) The UN Group of Experts on Cote D'Ivoire (UNSCR 1708) ("the Group") was not notified through the UAE mission to the UN about the initial blocking of the diamonds and the Group sent letters in August and October 2006 requesting additional information why the shipment was released (see Security Council report S/2006/964). Seven months later on May 13, 2007 in a letter to the Kimberly Process Secretariat, the UAE Kimberly Process Office confirmed that the assurances from the Ghanaian authorities outweighed the concerns of the KP Experts' concerns over the origins of the diamonds. ¶8. (S/NF) A second suspicious shipment was held up by the UAE KP office in September 2006. The origin of many of the diamonds in the shipment could not be accounted for and were suspected of being laundered. Even though the UAE Ministry of Economy, the Dubai Public Prosecutor, and the chairman of the KP were informed, the shipment was released by DDE. In an October 2006 e-mail to David Rutledge, Chief Executive Officer of the DMCC, and AbS, Jamsheer told them that "the KP and the UN's Special Teams are surprised and stunned about the release of both shipments." "Commissions" -------------- ¶9. (S/NF) After complaining about the release of suspicious shipments, Jamsheer alleged that AbS offered to pay her a two percent "commission" of the value of any suspicious diamond shipment she approved. She refused the offer and shortly thereafter tendered her resignation. Comment: The allegation of the proffered commission was not/not in the resignation letter. The DDE earns between two and ten percent of every transaction passing through the exchange. (NOTE: AbS is the son of Chairman of Dubai World Sultan bin Sulayem. END NOTE.) End Comment. ¶10. (C) Jamsheer believes that Dubai and the UAE are being very short-sighted by not stringently abiding by the KP protocols. She thinks that the desire to make Dubai a hub of the diamond trade is the motivation for a willingness to gloss over some suspicious transactions. ¶11. (U) According to the May 13, 2007 letter, Youri Steverlynck has been appointed the new CEO of the DDE. Mr. Steverlynck was previously the Director of Marketing and Public Relations at the Belgian Diamond High Council. Additionally the letter reports that the DDE will be restructured with the Kimberly Process Office no longer reporting to the DDE but enjoying "full autonomy". It is not clear who the KP Office now answers to. Worries re upcoming Ras Al-Khaimah Diamond Center -------------- -------------- ¶12. (C) Jamsheer discussed her concerns about the new diamond cutting and polishing factory now being built in Ras al-Khaimah emirate RAK). She and Mark Van Bockstael of the World Diamond Council visited the new facility in May, where they toured the facility and spoke with some of the technical experts working on the facility. The new facility, still under construction, will be one of the largest in the world. It is owned by RAK's de facto ruler, Crown Prince Sheikh Saud bin Saqr al-Qassimi and the Kuwaiti company KGL. Jamsheer said that some of the technical experts who were working with Sheikh Saud and KGL had expressed concerns that conflict diamonds might be cut and polished there. They indicated to Jamsheer and Van Boekstael that they were uncomfortable with the level of commitment expressed by the owners to implement the KP and other controls. Comment: Given the center is still a partially-finished building, this comment is second-hand speculation. We will try to get a direct read from these experts and others as the project moves forward. We note that while the DDE is responsible for KP compliance for the whole UAE, it might be difficult for the DDE to extend its authority beyond the Emirate of Dubai. End Comment. Venezuelan Diamonds to Iran DUBAI 00000394 003.2 OF 003 -------------- ¶13. (C) As a means of illustrating ways to circumvent the KP, Jamsheer spoke about suspected Venezuelan diamonds going to Iran. She believes these are conflict diamonds shipped by Venezuela to finance Iranian support for insurgents in Iraq and possibly Hizballah. The other explanation for Venezuelan diamonds being exported this way is for government officials to sell diamonds for personal profit without a paper trail. Apparently, diamonds of Venezuelan origin are being claimed as part of Guyana's production in order to obtain KP certificates. Van Boekstael said in May that he believed Venezuelan diamonds were being sent through Guyana. The diamonds are being shipped to Iran with no known corresponding payments or counter-trade from Iran. As a footnote, Jamsheer added that Iran has not signed onto the KP. ¶14. (S/NF) COMMENT AND ACTION REQUEST FOR EB/ESC: Jamsheer is well and favorably known by US colleagues familiar with the diamond trade and the Kimberly Process, and has a good reputation locally. Dubai has big ambitions for the DDE; we believe her allegations are sufficiently serious to merit action, despite the exchange of letters between the DDE and KP on the two noted transactions. The allegation against AbS is a serious one, but needs to be handled carefully. If true, offering a commission on certain transactions may not break any local law, but is both unethical and clearly intended to subvert the KP. We do not, however, believe given the local culture that it would be wise to confront AbS directly on this issue; this sort of a personal accusation will provoke anger, denial, and undermine further engagement on KP compliance. Rather, a US approach about concerns re problems in KP enforcement will send a clear and useful message (to AbS as well) that the DDE is drawing the wrong kind of attention - the kind that will hurt business and the DDE's reputation. Post requests guidance on approaching the UAEG and the DDE to encourage full compliance with the KP. SUTPHIN