‘Blood Diamond’ Smugglers Threaten Canada’s Northern Industry

'Blood Diamond' Smugglers Threaten Canada's Northern Industry

Andrew Mayeda
Canwest News Service
September 4, 2008

OTTAWA – The diamond industry in Canada's Far North is vulnerable to smugglers looking to import “blood diamonds” or launder the proceeds of organized crime syndicates and terrorist organizations, newly released federal documents say.

A boom in diamond mining during the last decade has rapidly turned Canada into the third-biggest producer in the world and created jobs in the North, especially in the Northwest Territories where the country's biggest mines are based.

But Canadian authorities warn the fledgling industry could become a vehicle for money laundering.

“Diamonds have been, and continue to be, a main source of currency for both terrorist organizations and organized crime,” states a briefing note prepared by Citizenship and Immigration Canada in April.

“Conflict/blood diamonds are used to fund rebel operations, purchase arms, and other illicit activities (drugs). They are portable, high value and cannot be detected by any type of screening method,” continues the note, obtained by Canwest News Service under the Access to Information Act.

Blood diamonds, sometimes known as “conflict” diamonds, are typically mined in African countries wracked by civil war and used to finance rebel or government forces.

Last week, Prime Minister Stephen Harper travelled to the Northwest Territories and Yukon to demonstrate his government's commitment to asserting Canada's Arctic sovereignty. In a speech in Inuvik, N.W.T., Harper promised to “encourage responsible development of the North's abundant economic resources.”

In April, the Privy Council Office, the bureaucratic arm of the Prime Minister's Office, convened a meeting with various departments to discuss security and intelligence issues in Canada's Arctic, e-mails obtained by Canwest News Service reveal.

Among other things, PCO officials asked for briefings on illegal immigration and smuggling in the “Arctic region and northern Canada.”

The briefing note suggests that temporary foreign workers hired by the diamond industry could be recruited by smugglers.

“With the rapid growth of the industry, Canada will continue to require a significant amount of foreign skill to develop and sustain the industry. These skilled workers generally earn below poverty-line wages in their country of origin. In Canada, the wages are low compared to the high cost of living in the North. This may be incentive for the workers to conduct illegal activities such as diamond smuggling on behalf of the employer,” states the note, portions of which have been blanked out.

The document notes there has been a “drastic increase” in applications by employers looking to hire foreign workers, with roughly 100 new positions confirmed in the past year.

Pierre Leblanc, a retired colonel who now works as a consultant to the diamond industry, said smuggling has been an ongoing concern for the industry, especially since banks tightened money-laundering controls in the wake of the Sept. 11, 2001, terrorist attacks.

But he said Canada has one of the cleanest diamond sectors in the world, because much of the supply chain is automated and companies here used sophisticated systems to track diamonds.

“Very few people touch the diamonds, because it's all an automated system. And it's automated not only for cost efficiency, but also security,” said Leblanc, former commander of the Canadian Forces' Northern Area.

Diamond miners in Canada adhere to the Kimberley Process, a system implemented by the industry in 2003 to filter out blood diamonds, he added.

Leblanc said there was a significant influx of workers from countries such South Africa and Belgium after the first Canadian mine opened in 1998, but most employees in the industry are now Canadian.

He noted the RCMP, which has established a Diamond Protection Services unit, has been “proactive” in monitoring for smugglers.

The diamond industry isn't the only northern business that has raised concerns among the Mounties. According to separate documents obtained by Canwest News Service, the RCMP is worried the Mackenzie Valley pipeline project could put a strain on policing activities in the region.

“From a contract policing perspective, the immediate and long-term social impacts of the Mackenzie Gas Project will include increased community crime, family disruption, violence and substance abuse,” states an RCMP update prepared in November 2007.

“From a federal perspective, the greatly increased risk of organized criminal activity, including high-level drug trafficking, economic crime, immigration issues, Arctic sovereignty challenges and potential terrorist activity are all believed to be areas of concern.

The oft-delayed project is expected to carry natural gas from the Mackenzie River delta in the Northwest Territories to markets throughout North America. Last week, Harper said the pipeline project and petroleum exploration in the Beaufort Sea will “open the northern frontier as it has never been opened before.”