Intelligence agencies in India have alerted the central bank that diamond trade financing is being used as a cover for money laundering.

India is considered amongst the world’s top ten nations in terms of illicit outflows.

Intelligence warnings
The Directorate of Revenue Intelligence (DRI) and customs authorities have alerted the Reserve Bank of India (RBI) that official remittance channels are being used for illegitimate transfers.

“Some instances have come to light where the diamond trade has been used as a front to take money out,” according to an official at DRI, India’s agency for monitoring trade frauds.

Over-invoicing
The official said the method is very simple, with the importer showing a higher value for the goods on the invoice than their actual value.

The surplus amount over the goods’ real worth is then credited to a foreign bank account.

Valuation difficulties
The diamond trade is particularly susceptible to over- and under-invoicing because of the difficulties valuing the raw stones.

“Valuation of diamonds is a huge issue…there can be vast differences of opinion over valuation,” according to a customs official.

Poor communications
Analysts say that a lack of communication between banks and customs systems make the diamond trade vulnerable to money laundering.

Global Financial Integrity has said that India was among the top ten nations in terms of illicit outflows with US$123 billion exiting the country in the ten years to 2010.

Categories: Trade Based Financial crimes News