Apr 6, 2017 - New York : Ten people have been arrested and two others charged for allegedly duping persons in New York, Las Vegas and Mumbai to the tune of over USD 9 million through fraudulent diamond trade.
The above mentioned news is just one of the several exposed cases of diamond fraud. Instances of diamond investment scams have been rising and the victims have lost hundreds of thousands of pounds already. In the insurance sector, fraudulent claims for lost jewelry have resulted in losses up to billions every year. There have been cases of document tampering where one stone has been claimed across similar timelines with multiple insurers .There are several ways by which a jeweler can rip off a buyer while selling diamonds or “Engagement rings”. The deals might be enticing but what matters is how much you pay for that ring and whether the ring with which you are planning to propose your fiancé, is a 100% authentic, conflict-free gem. Blockchain’s application in Food Supply Chain Management (SCM) finds great advantage in terms of traceability and authentication. Diamond supply chain business is another industry which is embracing blockchain technology.
The diamond industry still relies on paper-certification methodology for authenticating rough diamonds. The process is called Kimberley Process. Adopted by the UN in 2000, this process was used to stamp out the trade of “blood diamonds”; the diamonds mined in a war zone and sold to finance an insurgency or terrorism. The Kimberly Process Certification Scheme (KPCS) imposes extensive requirements on its members, to enable them to certify shipments of rough diamonds as “conflict-free”. Under the terms of the KPCS, participating states must meet ‘minimum requirements’ and must put in place national legislation and institutions; export, import, and internal controls. They must also commit to transparency and the exchange of statistical data. But, despite proper documentation, the industry faces issues like fraudulent claims, document tampering, synthetic gems that are incorrectly identified, and double financing.” This is where blockchain comes to our rescue again. The shared ledger technology would create a single point of truth so that all the stakeholders across the supply chain, from producers, to cutters, to bankers, to insurers, have shared visibility of records. Using the blockchain, each step of the supply chain can be verified, guaranteeing the legitimacy of a diamond.
A London based startup, Everledger, has already put 1.6 million diamonds on the blockchain. Everledger's digital ledger system is underpinned by the IBM blockchain high security business network service, which is accessible via IBM's BlueMix platform-as-a-service. A digital record on the blockchain platform consists of the chronology of a diamond’s ownership and is customized to incorporate the relevant integrity markers, which are calculated from 40 metadata points related to each stone including the four-Cs (Cut, Color, Clarity, and Carat-weight). The attributes of the diamond can be inscribed by laser on the crown or girdle of the stone. The accurate records of each diamond’s transactions are added on the blockchain, thus ensuring security and preventing the tampering of any information. By creating a ‘digital twin’ of the stone the scanning tools can efficiently access the ‘digital vault’ to determine the provenance of the diamond.
Our market makers are viewing diamond as an alternative investment asset. But because many ‘hush-up’ deals are prevalent in this industry, it has not yet been considered as an ideal investment option. The blockchain technology, we believe would help in setting uniform standards for this stone, like gold and it would too trade as a commodity. In fact the industry has already started showing signs of change with the introduction of Singapore's Diamond Investment Exchange (SDiX).
“A diamond is forever”
So, the next time you plan to get a diamond jewelry, you know how to verify its characteristics and attributes.