Belgium probes murky world of cash, diamonds and banks such as HSBC
Belgium investigates claims that dealers and banks in Antwerp are using the precious stones to launder money and evade taxes
The dealings between gem traders and bankers are coming under new scrutiny as European governments extend crackdowns on tax evasion and money laundering.
The complex ties between Antwerp's bankers and its diamond merchants have investigators especially worried. Government authorities, they warn, are easily outpaced by an industry skilled at moving vast amounts of money through international transfers, backed by diamonds or offshore cash as collateral.
"Our investigative resources are like a Citroen economy car, while our targets are flying and using jets," said Jean-Claude Delepihre, director for the past 20 years of the Belgium Financial Intelligence unit, an agency that sorts through reports of suspicious transactions for prosecutors. "We can't be naive, because the interests are enormous."
In late October, the Brussels prosecutor dispatched a small army of investigators in connection with an inquiry by Judge Michel Claise to stage dawn raids on the Antwerp homes of a number of diamond dealers in a tax-evasion investigation focusing on HSBC and its Swiss branch in Geneva. HSBC, which says it is co-operating with the Belgian authorities, was targeted because of information leaked to various governments by Hervi Falciani, a former bank employee.
"What is important to understand is that it was the biggest diamond network ever," Falciani said.
In November, the Flemish newspaper De Tijd reported that of almost 3,000 secret Swiss accounts at HSBC on a list provided by Falciani, 70 per cent were held by diamond dealers.
Those murky ties have drawn unwanted attention to Omega Diamonds, one of the largest importers of African diamonds, which faces fines of up to US$6.3 billion in a customs-fraud trial that started last month. Omega is accused of a scheme to avoid taxes from 2003 to 2008 by transacting deals for Congolese diamonds through dozens of offshore companies and banks in Dubai and Geneva, before allegedly transferring the money back to Belgium.
The most epic clash, however, pits the century-old diamond cutting and polishing merchants of New York, Lazare Kaplan International, against Antwerp Diamond Bank, an almost 80-year-old institution.
For more than two decades, the two companies were intertwined in business. But they became bitter enemies after Lazare accused the bank of helping a high-living Israeli dealer launder US$135 million from the sales of Lazare's rough diamonds through secret Swiss accounts, claiming he had not repaid the US company for its stones.
The bank denies the allegations, which Lazare made in criminal and civil lawsuits in Antwerp and New York, and accuses Lazare of using the lawsuits to avoid paying debts of almost US$45 million to the bank.
The hunt to recover the US$135 million is now a full-time quest for Leon Tempelsman, 57, Lazare's president. He has become a fixture in court hearings alongside his father, Maurice, 84, chairman of the board and a native of Antwerp who was the last romantic companion of Jacqueline Kennedy Onassis.
"Our objective is recovery and not revenge," said the younger Tempelsman. "We trusted our banks and expected the banks and bankers to conduct themselves in conformity with the law. We were wrong."
The Belgian government investigation of HSBC is looking into a system where bankers offer diamond dealers a variety of complex arrangements to set up accounts and offshore shell companies in places like Panama, to transfer money secretly through Switzerland and then to Belgium.
"Money is passing through accounts very quickly and banks are accepting such behaviour," said Falciani, the former HSBC employee. "The main problem is that once the money is in the bank it becomes white," he added, meaning laundered.
HSBC has called Falciani's data inaccurate and out of date. "We take compliance with the law very seriously and seek to ensure that our services are not misused for illicit purposes, including tax evasion," said its head of media relations, David Brügger.
De Tijd reported that of 369 offshore companies included in information about HSBC provided by Falciani, 193 were connected to diamond dealers.
The newspaper also reported that a manager at the Antwerp Diamond Bank had surfaced on Falciani's lists with US$685,000 in a secret account in Geneva. The Antwerp bank has called the revelation a private matter, not connected to the bank.
In its complaints against the Antwerp Diamond Bank, Lazare depicts the bankers as calculating participants in a criminal enterprise that helped one diamond dealer, Erez Daleyot, launder the profits from the sale of diamonds consigned by Lazare through HSBC to Belgium.
Daleyot, who holds dual Belgian and Israeli nationality, did not respond to messages seeking comment. He has not been charged with a crime, but he is mentioned repeatedly in Lazare's criminal complaint.