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Fraudulent facets

Shining a light through diamond fraud



Diamond fraudsters dupe consumers of all types, including savvy investors and collectors. The global diamond trade, like many other collectable markets, is at the mercy of the absence of transparency. Buyers must cautiously scrutinize gemstones and other low-utility/high-value objects. Here are practical ways for fraud examiners to avoid rip-offs.

Thanks to a brilliant 1940s marketing campaign by diamond conglomerate De Beers, buying a diamond engagement ring has become the symbol of love betrothed. Maybe you know something about the “4 Cs” of diamond shopping (clarity, cut, color and carat) so you can carry on a conversation with sales people at the jewelry counter. Maybe you saw the Leonardo DiCaprio movie, “Blood Diamond,” and you want to purchase a “conflict-free” stone. But what if you’re asked about shape and symmetry? Do you know about inclusion density and brilliance grades and how carat weight affects these parameters?

As your eyes glaze over, you realize you’re in over your head when it comes to such a large investment. There’s a lot to consider when buying diamonds (a $73 billion-a-year industry, according to the World Diamond Council) — not to mention how easy it is to be duped into purchasing an inferior stone, or a “cultured” (or lab-grown) diamond or worse: glass (especially if you shop for diamonds online from sketchy diamond houses). You worry about investing that “two months’ salary,” as the ads suggest, into something you just don’t know enough about.

And fraudsters in the global diamond trade want to keep it that way. It’s not just gemstone-quality diamonds that are subject to fraud. In 2004, De Beers was charged with colluding with General Electric to fix the price of industrial diamonds, which are used in a variety of applications. In the settlement, De Beers pleaded guilty and paid a $10 million fine to the U.S. Department of Justice. General Electric was acquitted of all charges. (See De Beers Agrees to Guilty Plea To Re-enter the U.S. Market, by Stephen Lebaton, The New York Times, July 10, 2004.)

The global diamond market faces many methods of large-scale fraud before the stones ever reach jewelry cases. This article briefly looks at three major types: conflict diamonds, diamond grading certificate fraud and color-enhanced diamond fraud. Also, I cover practical tips for fraud examiners to avoid diamond scams.

 


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