Standard Chartered Plc is demanding more loan protection from clients in the Indian and Belgian diamond trade as the bank seeks to tighten standards, Bloomberg reported, citing sources knowledgeable about the new policy. The London-based bank has lent around $2 billion to the industry and is requiring diamond manufacturing clients to get payment insurance or provide 100 percent collateral.
In the summer of 2013, India-based diamond trading company Winsome Group allegedly defrauded a number of public-sector banks of several billions of rupees and routed most of the money offshore, accumulating defaults upwards of $1 billion on loans from a consortium of 15 banks in India. This made the diamond house the country's second-largest wilful defaulter after Kingfisher Airlines.
What we are seeing is a group of manufacturers buying enormous amounts of rough at very high and unprofitable prices, which will yield less than needed polished, using credit they may have difficulty paying off because the prices they’ll be able to achieve for the polished can only be low… What better definition for the circumstances that lead to a market to peril. Do you feel this is sustainable? Isn’t it our experience that when rough is purchased in (overall) large quantities with high premiums, the miners raise prices?
Singapore-based securities firm and investment bank UOB Kay Hian (the stockbroking arm of United Overseas Bank Ltd) has joined the Singapore Diamond Investment Exchange (SDiX), the world's first and only commodity exchange trading in physically settled diamonds, as its pioneer broker, writes The Business Times. This means UOB Kay Hian will be able to offer its accredited investors the chance to invest in diamonds as an asset class. Its affiliates in Hong Kong, Thailand, Malaysia and Indonesia will have the same access.
Two financial technology players are trying to entice the 1,700 Antwerp diamond companies to leave traditional banks behind and partner with them for making international payments. Some 200 diamantaires – Indian and Jewish traders alike – recently sat down together in the Antwerp Diamond Club for a seminar to introduce Uphold and FX4BIZ, two ‘fintech’ companies that would like to conduct the diamantaires’ international payments.
The World Federation of Diamond Bourses (WFDB) will launch its Know Your Customer initiative in May. The news was announced following the WFDB Asia Summit held in Seoul at the end of last month where the WFDB’s executive committee agreed on internal changes, as well as steps regarding increasing transparency in trading and generic marketing by the global diamond trade. The WFDB-supported Know Your Customer aims to increase transparency between the diamond industry and banks and regulators.
The honeymoon between global regulators and the fast-growing world of financial technology may be ending. The Financial Stability Board (FSB), the international group of regulators, is considering rules to prevent newfangled technologies from destabilizing the financial system.
All India Bank Employees Union (AIBEA), one of the biggest employee unions in India, has decided to publish the list of top 50 corporate defaulters in India. Bank union AIBEA also demands that banks recover bad loans from these willful defaulters. At number two on the list, Winsome Diamond and Jewellery Co now has more than $385 million in unpaid loans. Also in the top ten at number nine, Forever Precious Jewellery & Diamonds has over $180 million in unpaid loans. The third diamond industry firm listed, MBS Jewellers Pvt.
Former Israel Diamond Manufacturers Association President Uri Schwartz, one of Israel's most veteran and well-known diamond dealers, is on the way to bankruptcy, writes Israel business news online publication Globes. A receivership order for his assets was issued last week because of a NIS 8 million ($2 million) unpaid debt. Bank Leumi intends to foreclose Schwartz's home in the Sea and Sun project in Tel Aviv and to seize other assets, including an apartment on Ben Yehuda St.
Israel's Channel 10 has aired a hard-hitting investigative program on the Israel Diamond Exchange, particularly the methods used by a so-called underground bank which operated from 2005 to 2011 until police raided its offices. Although many details of the case had previously been reported, Channel 10's use of CCTV footage from cameras secretly installed by the police before officers carried out the raid and details from a Red Book showing the names of some of the diamantaires said to have used the bank's services are likely to have made a particularly strong impression on viewers.
The National Bank of Fujairah (NBF) has opened a diamond financing office in the Almas Tower, part of the Dubai Multi Commodities Centre. The opening follows the establishment of a specialized diamond financing team in April this year focused on financing manufacturers and traders of rough and polished goods. According to a report in Emirates24/7, the unit brings in industry expert in order to provide a range of trade finance products tailored to client needs.
Sarika Malhotra of Business Today takes an in-depth look at the highly depressed state of the Indian diamond manufacturing industry and analyzes what went wrong. If, as she writes, the global diamond trade does not seem to be collapsing, with global growth more or less stable after record sales in 2014, what landed India in crisis? The short answer is that manufacturers and banks alike greatly misjudged the market.
JCK's "Diamond Dialogues", a series meant to take a wider look at the diamond industry and the forces that shape it, has published a thought-provoking presentation by Erik Jens, head of diamond and jewelry clients for ABN Amro, the largest bank in the industry. Jens discusses how other industries, oil in this case, cope with profitability woes, why bankers are wary of the diamond business, and the disruptive change that is quickly heading our way. Jens' considerations reach far and wide.
"De-risking", according to the Financial Action Task Force (FATF), "refers to the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk in line with the FATF’s risk-based approach." The issue, which the FATF wishes to avoid by means of its risk 'management' approach, is that "de-risking may drive financial transactions underground, which creates financial exclusion and reduces transparency, thereby increasing money laundering and terrorist financing risks." Yet the evidence is growing -
With the serving of charges relating to five diamantaires in Tel Aviv in the case of a so-called 'Underground Bank' at the Israel Diamond Exchange which operated between 2005 and 2011, full details have come to light about the scale of its operations and the dark areas in which much trade takes place away from the eyes of the tax authorities, according to the Globes financial daily.
Banks need to learn a few lessons from small tech companies and major players such as Apple and Google concerning customer services and taking greater commercial advantage of their data resources, says Jurgen Ingels, founder of payment technology company Clear2Pay, in Belgian daily de Standaard. Innovative tech companies are capable of developing new products more quickly and cheaply than ever, and are eager to provide services that typically fall within the provice of the banks.
As reported by Vinod Kuriyan, veteran industry analyst Chaim Even-Zohar writes in his latest issue of the "Diamond Intelligence Briefing" that Belgium's KBC Bank purposefully dismantled the Antwerp Diamond Bank in order to protect its secret history of corruption, money laundering and offshore accounts from prosecutors and U.S. banking regulators.
KBC Bank in Belgium, which decided this year to run down the loan portfolio and activities of Antwerp Diamond Bank (ADB), has inherited a $63 million hangover from its defunct subsidiary. According to De Tijd newspaper, diamantaire Erez D., who lived and did business in Antwerp since 1986, but has now supposedly gone underground in Israel, ran a network of shell companies represented by middlemen across the world, from Antwerp to Switzerland to the Virgin Islands.
Industry analyst Avi Krawitz writes about the Indian diamond industry following this week's India International Jewellery Show (IIJS). "We got a sense this week that liquidity has improved in India’s diamond sector. It’s not that credit taps are flowing once again; they aren’t.
The Russian diamond mining giant repaid in advance an $85 million bank loan to VTB Bank (Austria) AG. The loan was paid on July 29 and was due to be repaid next April. The bank loan was repaid through the company’s cash from operations, and has reduced Alrosa's loans and borrowings to $3.2 billion from $3.3 billion.
IndusInd Bank today (Monday) announced that is has completed its acquisition of the diamond and jewelry financing business of Royal Bank of Scotland N.V. in India. The acquired loan portfolio is approximately Rs.41 billion ($638 million). The deal was first announced in April. Several members of IndusInd Bank’s senior management had been associated with the diamond and jewelry portfolio in Royal Bank of Scotland N.V.
The July Sights of De Beers and Alrosa "represent either a breaking point or a revolution, depending on whom you ask". Clients essentially told the giant producers that the price of the goods was too high and that it was impossible to put up with the situation any longer. Although a certain amount of refusals were allowed, there was a limit to the producers' leniency, and they even raised the prices of some goods.
The Antwerp World Diamond Centre (AWDC) stated that significant progress has been made in transitioning Antwerp Diamond Bank (ADB) clients to new banking services. In April, the AWDC negotiated a two-month extension for ADB clients to transition out before June 30. With that deadline approaching, the AWDC issued a communiqué to the Antwerp diamond community, reiterating that "time is of the essence" since ADB will close all remaining accounts on that day.
In an opinion piece on Rapaport, Amber D. Scott, founder and chief AML "ninja" at Outlier Solutions Inc. takes an in-depth look at the dilemma banks are facing in the derisking debate; regulators are increasingly pressuring banks to be alert for customers who could be engaged in illegal activities and and at the same time, urge them to continue providing banking services to legal but potentially high-risk businesses.
Moti Ganz, Chairman of the Israel Diamond Institute, on the "backward" formula for rough pricing, the plight of diamond manufacturers in the light of reduced bank financing, the marketing of polished, the changing perception of stock and negative profit.
Casting the optimism of 2014 aside, he says that the industry as a whole has reached the moment of truth and must decide how to proceed. His only certainty is that the structure of the companies in the diamond industry will not remain the same.
"The disturbing issue appeared to be, that for the largest lender to the diamond industry to be pulling out of what is the most important market for the diamond business could hardly be deemed positive news or a vote of confidence."
IndusInd Bank has struck a deal with Royal Bank of Scotland N V to acquire its diamond and jewellery financing business in India and related deposit portfolio; subject to approval from Reserve Bank of India. "We like this business and have a deep insight into the industry. We are also happy to reach a Partnership Agreement with ABN AMRO Bank N V, one of the oldest banks in Diamond and Jewellery financing," said Romesh Sobti, MD & CEO, IndusInd Bank.
Hervé Falciani, a former employee of HSBC Private Bank (Suisse) in Geneva, was contacted in 2014 by Indian black-money investigators after telling them he could provide them additional information for their investigations ... for a 5% fee on any tax revenues recovered. Part of this information was disclosed in what is now famously known as Swiss Leaks, but there is more, and India does not have access to it yet.
A confidential letter sent from supervisory body De Nederlandsche Bank (DNB) to ABN Amro chairman Gerrit Zalm criticised ABN Amro for having "insufficient insight" into the ancillary positions and private interests of its own commissioners. The bank has also delayed the adoption of sufficient measures against the risk of conflicts of interest among its own executives and directors. ABN Amro only hopes to meet the demands of DNB for the prevention of insider trading or conflicts of private and bank interest during the course of the year.
Standard Chartered, one of the foreign banks that lent money to Winsome Diamonds against L/Cs (letters of credit) provided by Indian banks, has taken possession of the erring firm's immoveable properties in Karnataka, Rajasthan, Surat, Goa, Kolkata and Mumbai. The bank said in a possession notice published in a financial daily that it was attaching the properties after Winsome Diamonds and its guarantors failed to repay Rs 4321.12 crore plus interest within 60 days of having been issued a demand notice on October 21, 2014.
The CEO of the bank's Diamond & Jewellery Clients Unit, Erik Jens: "I don't believe there is a lack of liquidity. I think there is a challenge in certain areas of the market and in certain locations. But there is liquidity available for good companies."
Barclays Plc has started lending to diamond dealers as the British bank seeks to expand in southern Africa, financing buyers of rough stones in Botswana and South Africa. Barclays' move comes amid a lending drought in the industry after KBC Groep NV wound down its Antwerp Diamond Bank unit. ABN Amro Bank NV and Standard Chartered Plc also curbed funding for gem buying to limit their exposure to the volatile market after double-digit price gains for diamonds in four of the past six years.
Euro zone banks took more than twice the forecast amount of long-term loans from the European Central Bank on Thursday, giving them cheap credit for lending to businesses. The banks took 98 billion euros in loans compared with a Reuters poll that had forecast a 40-billion euro take-up.
According to Dutch newspaper Financieele Dagblad, ABN AMRO fired the entire executive management at its Dubai office after discovering massive malpractice, set up with the help of ABN AMRO staff.
The American cash management and security company has several suitors for its operations in India, including Hitachi’s Prizm Payment Services, Thomas Cook India and Spain’s SIS Prosegur.
On the heels of the Swiss Leaks/HSBC revelations, professor of tax law at the Free University of Brussels, Michel Maus, has appealed in an opinion piece in De Morgen to the diamond sector in Belgium to “play by the rules of tax game”.
Secret documents from HSBC Swiss private bank revealed the accounts of 100,000 private clients and entities -- diamond traders, celebrities, politicians, arm dealers, offshore shell companies and more -- allegedly hiding cash and earnings from tax authorities, according to the International Consortium of Investigative Journalists (ICIJ)
ABN AMRO's Erik Jens in his New Year's speech announces the bank will focus 'your customers' payment behaviour' as part of ABN AMRO's borrowing base verification process, whilst maintaing focus on bankability - profitability and transparency - and sustainability.
Dutch bank ABN Amro has appointed Jagdish Hirani, former managing director of global markets for Asia, as new country executive for the United Arab Emirates as the previous head, Rob Broedelet is to leave