The Right To Know

The DTC has imposed two important procedures on its customers, the sightholders.  The first is Best Practice Principles – BPP - which emulates the approach of the ISO 14001 environmental management system standard developed by ISO (International Organization for Standardization).  The DTC has retained SGS to review the compliance of the sightholders.  Some of the other rough mining companies have also imposed standards and principles on their customers. What is unique here is that it is the supplier requiring such compliance of its customer, rather than customer demanding standards of its suppliers.

Roger Frost, Communication Manager of ISO in Geneva commented, “in the US motor industry, the big three manufacturers gave all of their suppliers four years to be certified to  a sector specific version of the ISO 9001 quality management system standard  and in some countries, medical device suppliers must by law be certified with a sector specific ISO 9001.  We do not know of another case where suppliers require accreditation of their customers, but we are not surprised due to the nature of the diamond industry.”

The sightholders have now gone through two BPP processes but there has been little detailed feedback of these processes.  How many sightholders had major breaches of money laundering or employment law?  How many were threatened with the cancellation of their contracts for low compliance?  What were the sanctions taken against sightholders who publicly abrogated some of the most important standards?

A second important procedure has been the DTC’s involvement of forensic accountants to verify the content of sightholders’ and applicants’ profiles.  The name of the firm, Kroll Associates, strikes fear into many sightholders, sometimes justifiably so.  The pressure to artificially enhance a profile is great; after all, the future of the company is at stake, and the competition between the sightholders and applicants for a dwindling supply is intense.  Ensuring the truthfulness of the profiles and financials is no less important than any other standards compliance and is an integral part of professional ethics.  Nobody wants the pain of a Kroll visit, but the DTC can make the process more worthwhile if the full report is made available to the investigated companies.

A clean bill of health form Kroll could be something you ‘can take to the bank’ as Loet Kniphorst, global head of ABN-Amro’s diamond banking comments:  "A second independent and objective opinion on a company would give a bank a greater degree of comfort.” 

Unfortunately, neither Kroll nor DTC make the content’s of Kroll’s findings available to sightholders, unless there are major restatements to be made to their profiles.  This is a pity, and in my opinion this is wrong.  Even tax inspectors make their findings known to taxpayers.  More than 30 years ago, auditors added value to their audits with recommendations to their clients.

In order to make the Kroll investigations more worthwhile for the sightholders, a clean certificate from Kroll should be something sightholders should definitely receive.  And it is inconceivable that Kroll passes on its negative findings to the DTC without the sightholders benefiting from the basic right to respond.  Furthermore, a report published of the overall findings of the forensic accountants showing how many sightholders were deficient, how many were clean, etc. would show that it is not a mere box ticking exercise.

Accountability takes many guises, and the publication of reviews and investigations is one which should be promoted

editor@diamondfinance.info