Diamond KYC: "Blood Diamonds" and Sanctions Compliance in Supply Chains

For more than two decades, the diamond industry has been working to establish a global framework for verifying the origin of precious stones. Today, multiple certification and compliance systems operate in parallel across international trade. Yet despite these efforts, so-called “blood diamonds” continue to reach jewelry retailers worldwide.

Bureau TriTrace Investigations examines the core KYC/AML mechanisms used in the diamond sector – and highlights their structural weaknesses, which remain highly relevant for supply chain analysis, sanctions compliance, and compliance audits.

The Kimberley Process (KP)

The most widely used certification framework is the Kimberley Process (KP), launched in 2003 with UN backing. Under KP, shipments of rough diamonds must be accompanied by a certificate of origin; without it, cross-border trade is prohibited. However, the system does not apply to polished diamonds or finished jewelry.

Today, KP includes 60 participants representing 86 countries and accounts for over 99% of global rough diamond production.

Human rights organizations have long and consistently criticized this system – citing weak origin verification mechanisms, regulatory loopholes, and limited transparency.

According to analysts at Human Rights Watch, the Kimberley Process relies on an overly narrow definition of “blood diamonds.” Under KP rules, “conflict diamonds” are defined solely as those used to finance rebel groups. As a result, the framework overlooks abuses linked to state actors and private military companies – including entities associated with Wagner Group that reportedly control diamond mines in the Central African Republic.

System of Warranties (SoW)

Another international diamond origin control system is the System of Warranties (SoW). This is an internal regulatory framework created in 2002 by the World Diamond Council (WDC) without government involvement. SoW covers both rough and polished diamonds, as well as finished jewelry. Participation in SoW is voluntary.

The SoW has also faced substantial criticism from human rights groups. In particular, Human Rights Watch noted that the system “relies on written or verbal assurances from diamond suppliers rather than independent and transparent monitoring,” raising concerns for compliance audits and supplier verification.

In response to criticism, the World Diamond Council formally expanded SoW by incorporating criteria related to human rights, labor rights, anti-corruption measures, and AML.

Case Study: Alrosa Diamonds in Australia

A practical example of the limitations of existing diamond origin certification systems can be found in the Australian market. Diamonds from Alrosa may still be entering the country. While this Russian company is subject to Australian sanctions, diamonds themselves are not included in the sanctions list – creating a compliance gap relevant to sanctions audits and export compliance checks.

This was highlighted in a February report by Transparency International. The study, conducted with the participation of Ilia Shumanov, found that Russian diamonds may reach Australia via the Indian company Mohit Diamonds, which purchases stones from a shell company linked to Alrosa.