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