Such an improvement was given with great difficulty, and it has not yet ended. Branches still have much to do in order to completely abandon the tradition, for example, making deals by simply shaking hands and wishing good luck.
But industry leaders believe that in the long term it is important to make the industry meet the criteria for bank financing and profitable.
"Ultimately, this is a survival strategy," said Howard Davies, vice president of commercial development for De Beers. "The market may remain turbulent, but companies that work in accordance with the requirements will be better able to cope with volatility."
Global laws have influenced the demand for transparency, improved governance and accountability, and the diamond industry must move in accordance with the demands of the times, added Ernie Blom, president of the World Federation of Diamond Bourses (WFDB).
Toughening requirements for the use of cash
The banking sector tightened its lending requirements, as compliance issues came to the fore after the financial crisis of 2008 and since Basel standards were introduced even earlier, explained Erik Jens, head of the ABN Amro customer service department for diamond And the jewelry industry.
In addition, the diamond sector is subject to even more scrutiny, taking into account the stringent measures for using cash.
The sudden withdrawal of high-value banknotes in India in November drew attention to trade, even if it was not specifically aimed at the diamond market. Although the demonetization policy pursued by the government, aimed at eradicating money laundering and other types of "subversive activities" in India, it actually froze the activity of small family jewelry firms and diamond dealers.
Other countries have taken similar measures in the past, although less resolute. Italy banned cash payments for purchases in excess of EUR 1,000 in 2011, affecting the purchase of luxury goods, even though the amount was raised to EUR 3,000 that year. Germany's proposal in February to prohibit the payment of cash in excess of EUR 5000 was postponed indefinitely after a drastically negative reaction, but many believe that it will actually pass.
Theoretically, the reduction in the use of cash had to sharply spur demand for diamonds, which, unlike cash, did not lose their ability to save value. But as banks and regulators tightened their control measures, the industry is less willing to deal with cash or accept payment by undeclared money.
Trading on the black market may have determined the diamond industry in the past, but Blom stressed that her use of cash was drastically reduced by laws against money laundering. "There is no possibility of using cash in such transactions with large lots at the present time," he said.
Roadmap for achieving compliance
Still, a suspicious attitude to the industry persists, and regulators have long accused trade participants of undeclared taxable incomes, especially in Belgium and Israel. This increased transaction-related risks, as the cash-using business and undeclared transactions "arouse fears" among banks, taking into account the opportunities associated with violating anti-money laundering laws, Davis explained.
Therefore, a platform was needed to ensure a higher level of accountability and transparency. The banks exerted pressure, and the diamond sector and the retail sector also demanded higher compliance with requirements from their partners in the middle part of the diamond pipeline, Jens noted.
De Beers made compliance with financial requirements its top priority when it established its requirements for contracts with new sightholders as early as 2014, and sightholders expressed their commitment to the road map that will operate in 2017. To do this, they will need to compile consolidated financial statements that comply with international financial reporting standards and are subjected to an independent audit performed by an approved auditor. Since 2017, they also have to respect the ratio of their own and borrowed funds at a rate of 70:30, which De Beers requires.
Modifying paths
Three years ago, only a handful of openly registered sightholders had proper reporting, Davis said. Now about half of the 85 sightholders carry out a road map, which is required of them, he said. If they do not yet fulfill it, they need to achieve this goal in the reporting year beginning on 1 January.
The transition to greater legitimacy and transparency gradually influenced the rest of the trade that followed.
Davis observed that the confirmation of this is the number of companies to which De Beers granted the status of "accredited buyer" - the second level of customers who are entitled to a superplan product in addition to the volume offered to them as sightholders. Accredited buyers, who are usually small and medium-sized diamond companies, need to comply with a full set of legal documents. Eight new meetings have already been scheduled during the current contract period, and much more is still available in the diamond pipeline, Davis said.
Blom noted similar actions among members of the exchange, and WFDB made compliance with the requirements a major part of its agenda. Thus, the theme of the World Diamond Congress, held this year in Dubai, was compliance, and the trade authority plans to hold a relevant "diamond financing seminar" in Mumbai on 5-8 February. Jens appreciated this work and noted that medium-sized and medium-sized companies are moving in the right direction, as they understand that "it's simply impossible to conduct business in the old way".
Ultimately, the banks refused, first of all, precisely from traditional methods of doing business, which, mainly, forced them to withdraw from lending to diamonds and diamonds. This prompted banks like Antwerp Diamond Bank (ADB) and Israeli Bank Leumi to close their doors, while other banks, for example, First International Bank of Israel (FIBI) and Standard Chartered Bank, are winding down their operations. This forced the non-sectoral banks to be cautious about diamantaires.
Preservation of liquidity problems
In Belgium, it is not even possible to open a bank account for your personal needs if you are involved in diamond trading, said Shashin Choksi, whose Swati Gems company, based in Antwerp, deals with diamonds and diamonds.
At the end of 2015, the Belgian state bank Belfius somewhat unsuccessfully stated in its "policy of determining the acceptability of customers" that "[he] will not allow client relations with individuals or organizations ... if commercial activities were related to the trade in arms or diamonds and diamonds."
Choxy said his personal account, which he had for 40 years in Belfius, and another account owned by his wife for 20 years, were subsequently closed down for "ethical reasons", which had nothing to do with the company's commercial activities His wife. Hundreds of other people associated with the diamond industry have faced the same, he said, stressing that it became difficult to get an account in Belgium since ADB decided to withdraw from this trade.
"The problem is that banks are closing the doors for the whole industry, instead of considering individual customers," said a member of the Belgian diamond industry who understands the problem and notes that political lobbying was conducted to mitigate the situation.
Belfius did not respond to Rapaport's request to comment on this case.
Finding new ways of financing
Such cautious and declining lines of credit have highlighted the need for greater compliance over the years. And, taking into account the progress made in 2016, trade begins to see the benefits of having a "base that more satisfies the criteria for bank financing," Davis said.
"Specialization reduces risk and gives existing banks greater confidence in transactions," he said. "It also opens the doors to other banks, as well as nonbank financing, which has appeared in the last few months, because this is now considered normal business financing."
The Belgian industry is looking for new ways of financing, for example, Fin-Tech or blocking technology (chain of transaction blocks). She also held a seminar on financing in London last month to familiarize the financial industry with the diamond market.
"They do not know us and therefore are afraid of the diamond industry," the official said. - The reality of the industry's compliance with requirements has changed, but the view of noncompliance still exists. Therefore, we are trying to fill this gap. "
Creating a Normal Market
Major successes are being made, and other risk factors are also reducing.
The introduction of the "carat tax" in Belgium was largely positive and would allow companies to "focus on their business, rather than on documentation," Jens said. "The tax reduces the risks of the industry and the view of tax evasion, which puts Belgium in a favorable position."
Similarly, it is said that the Israeli Diamond Exchange (IDE) is close to concluding an agreement with the tax authorities, which will put an end to the four-year investigation on the stock exchange. Yoram Dvash, president of IDE, said the deal, which also clarifies how diamond companies report and pay undeclared taxes over the past period, will free trade so that it focuses on developing its business in a market environment still experiencing Difficulties.
In fact, industry experts who spoke with Rapaport News warned that since the diamond market still has volatility and is expected to tighten rules on compliance in all business segments, weaker companies that can not meet them will inevitably undergo consolidation .
But Jens says that there are money for good companies. And it seems that the industry is in a much more stable state than a year ago, as more and more companies are ready to confirm their legitimacy by ensuring compliance with the standards that are required of them.
http://www.diamonds.net/News/NewsItem.aspx?ArticleID=58324&ArticleTitle=Diamond%2bIndustry%2bNow%2bBanking%2bon%2bLegitimacy
No comments:
Post a Comment