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Source Veritas

Mine to Market... Diamond, Gemstone, & Precious Metals Chain of Custody Solutions

Background

Never before has there been such a great need for a sensible, auditable and cost effective series of procedures for tracking and identifying diamonds from rough to polished to jewelry, as right now.

Global transparency has provided a window into the good, bad and ugly of just about every major industry operating in almost every country.  Illuminating a brighter light on despots, dictators and terrorists, is only the beginning.  The internet, 24/7 news cycles and non-governmental organizations like Global Witness and Amnesty International have documented the utter greed and brutality that have become associated with the mining of diamonds in numerous African and South American countries, like Venezuela, Angola, Liberia, Sierra Leone, Cote d’Ivorie and Zimbabwe.

Human Rights and Moral Integrity are the most rare and precious of all assets in most African countries.  Historically, these attributes are especially rare in the African diamond trade.

The brutality of the civil war waged in Sierra Leone in the 1990’s, fueled by trade in diamonds did not escape notice of human rights groups who smeared the bloodstained images on cable networks initially, and later on the worldwide web . . . . children bearing rifles and machetes, maiming and killing their neighbors at the behest of the warlords.

In May of 2000, Global Witness, a human rights, non-governmental organization (NGO) based in London, produced a working document entitled “Conflict Diamonds – Possibilities for the Identification, Certification and Control of Diamonds”.  The scope of the report was summed up in the first paragraph, as stated on page 1 . . . “This report seeks to examine the possibilities for controlling the entry of conflict diamonds into the legitimate diamond industry and to establish a basis of understanding about whether diamonds can be identified by country of origin.”

In the same report, page 1, paragraph 5, “It is clear that there is a need to create a ‘chain of custody’ within the diamond trade – an auditable trail from the mine to the consumer that can work with existing structure and patterns of trade.”

The report goes on to say that “since 1998 there has been a shift in world opinion on the issue of conflict diamonds, which in itself is a new term.  In fact, Hollywood began casting a blockbuster movie starring Leonardo DiCaprio and Jennifer Garner, for the 2006 movie Blood Diamond”.

Midway between the Global Witness report and the opening of the movie Blood Diamond, the diamond industry had scrambled to put together a system of warranties and a government sanctioned plan called the Kimberley Process Certification Scheme.   In short, all rough diamonds were always to be listed on a KP Certificate in order to be exported from their country of origin, and each subsequent country until the rough diamonds reached the factory and were cut and polished.  It should be noted here that India cuts over 90% of the world supply of rough diamonds, by carats.   China, Thailand and Indonesia cut the majority of the balance, by carats, and Belgium, Israel, South Africa, United States and several other location cut the balance. 

In the period of time between 2003 and present day, there have been numerous documented reports by Global Witness and others where diamonds were being smuggled out of producing countries and into other countries by both members of the KP alliance, and elsewhere.

In 2009, Ian Smillie, founding member and director of the NGO, Partnership Africa Canada (PAC), resigned after declaring they could no longer work under the pretense that “failure is success”.

On December 7, 2011, Global Witness withdrew from participation in the KPCS, stating “KP has ultimately failed to stem the flow of blood diamonds”.

As mentioned throughout the “Conflict Diamonds” report, Global Witness studied and reported on, the only existing “chain of custody” process for polished diamonds which was being used by the Government of the Northwest Territories (GNWT) in Canada.  On page 23 of their report, Global Witness detailed a “Case Study: Northwest Territories Programme – The First Chain of Custody For The Diamond Industry”.  The study was for the Ekati Mine which had been in production since October 1998 in NWT.  The largest stakeholder in the Ekati Mine is BHP.  GW further states the “GNWT describes tracking diamonds through an auditing and monitoring system as a relatively simple process”.  To protect the Canadian industry and the market for Canadian-produced diamonds, they developed a program through the collaboration of the GNWT, the Royal Canadian Mounted Police (RCMP), Broken Hill Properties (BHP), Gemprint Corporation®, (then owned by a Canadian company, now located in New York and owned by the Palmieri Group), and the diamond manufacturers in NWT.

Choosing the Technology Procedures 

“The GNWT chose the Gemprint Corporation to design and administer the audit trail for its chain of custody programme.   Gemprint’s optical signature system was chosen as the method by which the finished stones could be identified as NWT stones, and hence, authenticated.  A security-printed certificate of origin also accompanied GNWT diamonds.”

“The GNWT worked with the local RCMP detachment which reviewed technologies and procedures that could be applied to tracking diamonds.  Laser inscription and the optical signature method of Gemprint were both considered, but it was decided to use Gemprint because laser inscription had the weakness of being visible and erasable.  They felt that manufacturers would use laser inscription as well, only for branding purposes.”

Recommendations for a Control System 

Under section number 6, GW attempts to recommend existing and future systems for all sectors of the diamond pipeline all the way through to the consumer.  In all cases, the optical signature (fingerprint) “Gemprint” is the only system recommended for tracking polished diamonds.

The second “Chain of Custody” system (Major Canadian Mine) which was not included in this report also uses Gemprint as the basis for tracking polished diamond throughout the pipeline to the consumer.  This program was designed by Gem Certification & Assurance Lab, Inc. (GCAL), using its Gemprint Technology, and Gemprint instruments in the factories of the select Diamantaires who operate in the program known as “Mine of Origin”, since 2008.

On December 14, 2011, The United States Department of the Treasury’s Office of Foreign Asset Controls (OFAC) updated a list of sanctioned Zimbabwean companies to include two firms recently cleared by KPCS to export rough from the troubled Marange area of the country.

Introduction to Solutions

It is necessary to present a background overview of the KPCS and how it is perceived by the very stakeholders who spent time and treasure developing such a massive scheme, only to watch it be compromised time and again.  There are many reasons for the lapses, but it really could only be successful if every country wanted it to work.  This is not to say that all the work was in vain, and that large segments of the diamond trade didn’t fully embrace the processes and procedures and follow the letter of the law.  No, the illicit trade in diamonds is little different than the illicit trade in drugs, or music, or human trafficking.  Most people wouldn’t think of using drugs, stealing music, or hiring an undocumented slave worker.  If the demand is high enough for all of those ill gotten goods and services, then there are people who will risk their freedom and or fortune to deal in them.  It is the root element of economics…supply and demand.  There are wealthy diamond dealers who run mostly legitimate businesses who, “believing they can beat the system” have, and will continue to buy conflict, non-KP diamonds.  No matter how many laws or restrictions governments place on illicit drugs, music, human trafficking or diamonds, there will always be buyers and therefore, sellers.

The laws that are in place are good.  The fact that so many countries modified their import-export rules and regulations in such a short time, for diamonds, is a major feat.  Of course, the terror that struck Japan, the U.S., the United Kingdom, Indonesia, and Spain, in the early 2000’s spurred quick passage of many laws that were deemed good hedges against more terrorism.

To be sure, no plan will have a 100% lock on success.  People will always work tirelessly to compromise even the best laid plans, however, our company developed a plan in 2007 that we trademarked and filed a patent for that could help identify diamonds from the mine to the consumer, called “Source Veritas” (patent-pending).  It has been used for branded diamonds from Diavik Mine in Canada under one of the partners.  This program is called “Mine of Origin.”  We also developed a program in Botswana under the request from the Diamond Hub Coordinator.  This branded diamond is using the Botswana state logo, under the trade name “Botswana Diamonds.”

Chain of Custody Solution... Source Veritas

Essentially, the diamond pipeline begins at the mine source.  That may be Kimberlite pipe mining, field mining, alluvial mining (near water paths…past or present), or underwater mining, i.e. Namibia.  Mining can be performed by an individual, artisanal miner, a family, a tribe or a major mining operator like BHP Billiton, DeBeers, Alrosa, or Rio Tinto.  If implemented by law, and with the proper independent monitors, and in conjunction with Gemprint,  Source Veritas can work fairly easily with the least additional cost and labor, of any of the methods or devices mentioned in the Global Witness report.

In fact, when we developed Source Veritas in 2007, we were advised by several major manufacturers and officials from one diamond producing country that it would be overkill.  In light of where the KPCS is today, we now understand why an effective solution is not sought by some producer nations, nor their customers. 

The process is relatively simple and we have anticipated many of the objections or negative questions that might be suggested.  

Rough Diamond Identification

In the Source Veritas solution for rough, we use a clear liquid doped with an additive that will react to various wavelengths of ultraviolet light, that will have a distinctive color reaction.  The solution contains not only a unique, designated DNA strain, but also covert additives for further complexity, and complicity of identification by batch, by mine, by country, etc.

These DNA laced liquids can be produced by the tankful and the diamonds, gemstones, or precious metals can be sprayed with a fine mist.  The DNA liquid application can occur in the field or in the cleaning and sorting operation.  Authorized government shipments can be traced, to prevent salting with non KP certified goods.  If a country determined to coat all the legitimate rough diamonds for export they could immediately spot the non-coated materials at various checkpoints, airports or customs inspections.  The coatings do not alter the outer appearance once they are completely dry.  

In the next two photo plates (Image 2 and Image 3), there are six rough diamond crystals of various shapes, qualities and colors.  The 4.02 carats diamond on the left in Image 3 displays faint blue fluorescence.  The purple color on the remaining 5 is just a reflection from the UV lamp.  In Image 2, one can observe the differences in transparency from near colorless in the 4.02 carats, 0.57 ct and 0.33 ct. to yellow in the sawn octahedral 1.82 carats, and the two dark green skin opaque crystals at 2.96 carats and 3.37 carats.  For demonstration purposes, we have specifically used these varieties of rough diamonds to test the reaction of the coatings on various surfaces of rough of vastly different colors and transparencies.  

Uncoated Diamonds

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© GCAL 2011: Uncoated rough diamond crystals under standard fluorescent white light.

Uncoated Diamonds

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© GCAL 2011: Uncoated rough diamond crystals under normal longwave ultra violet light. The 4.02 carats crystal has “medium blue fluorescence”

DNA Coated Diamonds

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© GCAL 2011: DNA coated rough diamond crystals under standard fluorescent white light.

DNA Coated Diamonds

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© GCAL 2011: DNA coated rough diamond crystals under normal longwave ultra violet light.

Recapping Rough Diamond Identification

1. The liquid and DNA agents are cost effective and easy to apply to diamonds, gemstones, and precious metals.  

2. The liquid is non toxic. There are few worker safety concerns outside the normal mining/processing issues.

3. The coatings will not affect sorters to classify higher or lower quality.

4. UV and covert excitation colors can be changed at regular intervals to maintain vigilance and security.

5. Specific DNA and other doping agents are added for additional layer of security, when necessary.  

6. Coating removal is not difficult or expensive.

Transition in Chain of Custody... DNA Marking to Gemprint

Now the diamonds are at the factory.  All rough crystals are parceled with a lot number.  Those crystals that will be cleaved or sawn and will yield two or more polished diamonds become A & B or A, B, & C, etc preceded by the lot number.  Once they are polished and weighed they should be Gemprinted immediately linking the lot number ID with the Gemprint ID.

As described in the background information, Gemprint records the “optical fingerprint” or “optical signature” unique to each faceted transparent diamond or gemstone.  Each Gemprint scanner is internet connected and uploads to the international database.  The Gemprints can be uploaded in real time from any part of the globe.

The new Gemprint scanners, available in January 2012, are gravity-fed, can scan mounted or unmounted diamonds of any faceted shape, sizes up to 28 mm in diameter (can be expanded for larger stones).  Gemprint can be verified in real time 24/7. Rewards are provided for solid Gemprint information that leads to a recovery of a lost or stolen diamond.

The downstream, diamond pipeline benefits are endless. 


The manufacturer benefits are:

1. Chain of Custody Compliance

2. Inventory Control

3. Jewelers Block Insurance Discounts for entire inventory on GP International Database

4. Recovery of lost or stolen inventory



The diamond dealer benefits are:

1. Continued Chain of Custody Compliance

2. Inventory Control

3. Prevent stone switching from returned memos

4. Jewelers Block Insurance Discounts for entire inventory on GP International Database

5. Recovery of lost or stolen inventory


The retail jeweler benefits are:

1. Chain of Custody Compliance Guarantee

2. Inventory Control

3. Prevent inventory mix ups

4. Collateral Bank Audits made affordable

5. Will detect most diamond imitations (simulants like CZ, Moissanite, etc loose or mounted)

6. Register Gemprint in consumers name for a charge

7. Jewelers Block Insurance discounts for entire inventory in International GP Database

8. Avoid repair counter doubts.  Register customer’s diamond at repair take-in.  Verify when customer picks up.  Add a fee additional to the repair.

9. Banks and Auditors ease of auditing inventory.  Reduces the  need for an expensive expert.  Anyone can be trained to operate the instrument without gemological expertise. 

10. Provide peace of mind to your customer.  Help your clients protect one of their most prized assets. 

11. Enhanced Asset Management.  Easy to use, gravity-fed alignment.


The consumer benefits are:

1. Peace of mind.  Their diamond can be positively identified, out of many thousands.

2. Most insurance companies provide a 5% to 10% policy discount on Gemprinted diamonds. 

3. Can manage their own password protected account, transfer ownership, report lost or stolen diamonds.

4. Proven chain of custody – knowing their diamond did not fuel conflict.

Conclusion

Source Veritas™, as described with UV/DNA liquid coatings for rough diamonds and Gemprint® for polished diamonds, integrated into elements of the Kimberley Process Certification Scheme can create “an auditable chain of custody” from mine to market at minimal cost and effort throughout the pipeline.  This system can work for gemstones, diamonds, and precious metals.

Origin Programs

Botswana ‘Source Veritas’ Diamonds

GEMPRINT® is working with MOTIGANZ, a DTC Sightholder, to register diamonds sourced, cut and polished in Botswana. This program assures consumers that the diamonds they are purchasing are compliant, not only with the Kimberley Process, a set of international trading laws that prohibit so-called ‘conflict diamonds’, but also the strict adherence to the Source Veritas™ process of positively identifying and tracing polished diamonds through the use of GEMPRINT® from the factory through the market, and beyond.

GEMPRINT® was chosen primarily for its ability to accomplish this level of transparency through its exclusive GEMPRINT® technology and its commitment to the highest and most transparent industry practices.

Consumers are becoming more and more conscious about whether their diamonds are conflict free, and GEMPRINT® has the process necessary to ensure that the diamonds registered are free of conflict. GEMPRINT® can track the diamonds from rough to end product.

Botswana is one of the world’s most important diamond sources, creating a huge opportunity for the country’s growth through industry. “Botswana is also one of the very few African democracies that actually works,” explains Donald A. Palmieri, GEMPRINT® Chairman. “This is why I am particularly happy to confirm with the written blessing and encouragement of Dr. Tombale, Minister of Mines and Diamond Hub Coordinator for Botswana, we will begin certifying ‘Made in Botswana’ diamonds in a co-branded certificate.”

Canadian 'Source Veritas" Diamonds

Waldman Diamond Company, a Rio Tinto Select Diamantaire, is working with GEMPRINT® and Gem Certification & Assurance Lab (GCAL), North America's only ISO 17025 Accredited Gem Laboratory, to certify diamonds mined in Canada, and specifically from the Diavik Diamond Mine located in the Northwest Territories of Canada. This program assures consumers that the diamonds they are purchasing are compliant with the Kimberley Process and the Canadian Diamond Code of Conduct. The Diavik mine has been consistently praised for adhering to the highest environmental & safety standards, as well as contributing significantly to the social and economic activity of the Northwest Terroritories of Canada.

"For this project, we looked for a lab with very strict grading policies and the ability to audit the trace of the stone from the source," explains Eli Fruchter of Waldman Diamond Company. "We wanted our product to be fairly represented, and not for a lenient lab to upgrade our diamonds. Our commitment is to our customers, and GCAL offers a guarantee that is an automatic value-added component to our product."

GEMPRINT® was chosen for its ability to accomplish the highest level of transparency through its exclusive Source Veritas™ Process and GEMPRINT® technology, the process for finding a diamond's unique optical fingerprint. Presently, the Israeli, New York, Vancouver, and Chinese Waldman factories and offices are equipped with GEMPRINT® instruments.

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Diavik Diamond Mine, Yellowknife NWT Canada | Source: Rio Tinto

According to Donald A. Palmieri, GEMPRINT® Chairman, the time is right for diamond producers to embrace GEMPRINT®'s value-added certificates. "In difficult economic times, customers are looking for assurance on their most important purchases," he says. "We are proud to be able to provide a level of comfort and security for both, diamond sellers and buyers, as well as a cost-effective way to adhere to the Kimberley Process. This partnership with Waldman Diamond Company is another step toward industry transparency."

"We are extremely excited to work with an esteemed diamond company that shares our vision of differentiated products and understands the value of GEMPRINT" says Angelo Palmieri, President of GEMPRINT® Corp.. "This provides an opportunity for the members of the trade to source diamonds that come from mines routinely praised for environmental and safety standards, and contributing to the economic and social activity of the Northwest Territories of Canada."