Legal, tax, security & crime

Anti-money-laundering (AML) law requires certain businesses to identify customers (know your customer, or KYC), keep records and report suspicions. The Financial Action Task Force (FATF), the intergovernmental body that sets global AML standards, lists dealers in precious metals and dealers in precious stones among its designated non-financial businesses and professions. Under its Recommendations 22 and 23, they must carry out customer due diligence and report suspicious transactions when they handle cash transactions at or above a designated threshold of USD/EUR 15,000. Countries set their own versions. The UK requires high value dealers that accept cash of €10,000 or more to register with HM Revenue & Customs, and the EU’s Anti-Money Laundering Regulation (EU) 2024/1624, applying from July 10, 2027, sets a Union-wide €10,000 limit on cash payments.

In the United States, section 352 of the USA PATRIOT Act led the Treasury’s FinCEN to issue a 2005 rule, now 31 CFR Part 1027, requiring dealers in precious metals, precious stones or jewels to run an AML program from January 1, 2006. A dealer is a business that bought and sold more than US$50,000 of covered goods in the previous year. Retailers are exempt unless they buy more than US$50,000 from non-dealers such as the public. The program needs risk-based policies, a compliance officer, training and independent testing. Suspicious activity reports are voluntary for dealers, but cash receipts over US$10,000 must be reported on Form 8300.

Diamonds and colored stones suit laundering because they are compact, hold value, lose their identity once recut, and have prices that outsiders cannot easily check. A joint study of the diamond trade by the FATF and the Egmont Group of financial-intelligence units found that stones serve criminals as a store of value and a means of payment, and that the long chain of rough traders, cutters, bourses and free zones leaves room to hide transactions.

The main technique is trade-based money laundering (TBML), which moves value by misstating trade rather than moving cash. An importer who pays an inflated invoice sends extra money abroad disguised as a purchase; an exporter who under-invoices shifts value to a partner who resells at full price. Round-tripping sends the same parcel through several countries to create false turnover. A 2020 FATF–Egmont report described these methods across sectors, and mixed parcels of stones are among the hardest goods for customs officers to value.

Sanctions evasion uses the same methods to disguise who owns or mined the goods. Alrosa, Russia’s state diamond miner, has been under US sanctions since 2022 and EU sanctions since January 2024, and Myanmar’s state gem enterprise is also designated, so origin documents have become a compliance focus. Kimberley certificates help only partly: they record the exporting and importing parties, weight and value of rough, but were designed to stop rebel financing, not to expose beneficial owners.

Smuggling moves stones across borders without declaration, usually to avoid export taxes and royalties, currency controls, sanctions or Kimberley Process certification. Undervaluation is its paper counterpart: the goods are declared, but at a fraction of their worth, which cuts duties and royalties in the producing country and moves profit elsewhere.

Alluvial diamonds and colored stones are the easiest to smuggle, because independent diggers mine them over wide areas and sell them for cash. During the wars of the 1990s, diamonds from Sierra Leone crossed into Liberia and left as Liberian exports, which is why the UN embargoed Liberian rough. Producing countries respond with official buying offices, government valuators who check export declarations against market prices, and controlled mining zones. Tanzania walled in the Merelani tanzanite field near Arusha: work on the 24 km barrier began in July 2017 and finished in April 2018, enclosing about 8 km². Merelani is the world's only source of tanzanite, so one fence covers the whole supply.

Importing hubs face the opposite task. Customs officers rarely have gemological training, so they rely on invoices, declared values and certificates. Antwerp routes diamond imports and exports through a dedicated Diamond Office where parcels can be physically inspected, and since 2024 that office has also issued G7 certificates for rough diamonds of verified non-Russian origin.

Gems and jewelry fall under chapter 71 of the Harmonized System, the international customs nomenclature covering pearls, precious and semi-precious stones, precious metals and jewelry. Rates differ by country and product. In the US tariff schedule, loose non-industrial diamonds carry a general duty rate of zero, while most gold jewelry is dutiable at 5.5 percent. Emergency measures can override these rates: US tariffs imposed in 2025 under the International Emergency Economic Powers Act (IEEPA), which fell heavily on imports from India, a major source of cut diamonds, ended after the Supreme Court held, in Learning Resources, Inc. v. Trump on February 20, 2026, that IEEPA does not authorize the President to impose tariffs.

Value-added tax (VAT) or sales tax applies on import and at retail in most countries. The EU exempts investment gold under a special scheme, but gemstones and jewelry bear standard VAT rates, which run from 17 to 27 percent across member states; Switzerland’s standard rate is 8.1 percent. The UK ended VAT-free shopping for overseas visitors on January 1, 2021.

Free ports and bonded warehouses, such as the Geneva Freeport or US foreign-trade zones, let goods be stored with duties and import VAT suspended until they enter the local market. Because such storage can hide ownership for years, the EU’s fifth AML directive of 2018 brought free-port operators storing or trading works of art under AML rules.

Buyers cannot easily judge gems, so most consumer law in the trade concerns honest description. In the United States, the Federal Trade Commission’s Guides for the Jewelry, Precious Metals, and Pewter Industries (16 CFR Part 23), last revised in July 2018, set out what the agency considers deceptive. Sellers must disclose a treatment that is not permanent, creates special care requirements or significantly affects value. Laboratory-grown diamonds must be qualified clearly, for example as “laboratory-grown” or “laboratory-created”, and words such as “real”, “genuine” or “natural” may not describe manufactured products. “Platinum” without qualification means at least 950 parts per thousand, and sterling silver at least 925.

The Guides are interpretations rather than statutes, but the FTC can act against unfair or deceptive practices, and in 2019 it sent warning letters to eight companies over diamond advertising. In the EU, the Unfair Commercial Practices Directive (2005/29/EC) bans misleading statements and omissions. In the UK, the Digital Markets, Competition and Consumers Act 2024 has let the Competition and Markets Authority fine companies directly for consumer-law breaches since April 2025. Industry nomenclature, including CIBJO’s Blue Books and ISO 18323 for diamonds, sets out permitted terms for synthetic and treated stones.

Private law adds remedies. A buyer sold a stone as natural or untreated that proves otherwise may be able to cancel the sale or claim damages for misrepresentation or breach of contract, subject to local rules and time limits.

Personal jewelry is usually insured in one of two ways. A homeowners or contents policy covers it with a low limit for theft, so owners of valuable pieces add a scheduled rider or buy a separate jewelry policy that lists each item and its insured amount, supported by an appraisal. Policies differ in what they pay: a replacement item, cash up to the insured value, or the lower of replacement cost and insured value. Many insurers reserve the right to replace through their own suppliers instead of paying cash. Dealers, manufacturers and retailers buy jewelers’ block insurance, which covers stock on the premises, in transit and on memo with other traders, usually under strict security conditions.

Valuations drive both premiums and fraud. Insurance appraisals generally reflect full retail replacement cost, which can be far above what a piece would fetch if sold, and inflated appraisals raise premiums and payouts alike. Typical frauds include false theft or loss claims, claims for pieces never owned, swapping a stone for a simulant before claiming, and staged robberies. Insurers counter with detailed appraisals, photographs, laboratory reports and laser inscriptions that tie a stone to its documents.

Insured value and cultural value can diverge sharply. Dresden prosecutors put the insured value of the jewels taken from the Green Vault in 2019 at no less than €113.8 million. The museum itself described the pieces by who commissioned them, not by any price.

Large thefts target concentrations of stones: vaults, couriers and museums. Five cases show the range.

Over the weekend of February 15 and 16, 2003, a team opened safe-deposit boxes in the vault beneath the Antwerp Diamond Centre. Criminologists who study the diamond trade count it among the largest European diamond thefts of the century. The loss figures and prison terms repeated in press accounts could not be checked against Belgian court or police records, so they are left out here. Over Easter 2015, a gang drilled through a vault wall at Hatton Garden Safe Deposit in London and took about £13.69 million in gold, jewelry and stones, on the Crown Prosecution Service's figure. Four ringleaders were sentenced in March 2016 and Michael Seed in 2018.

On November 25, 2019, thieves broke into the Green Vault in Dresden. Prosecutors charged six men with taking 21 jewels set with more than 4,300 diamonds, insured for at least €113.8 million. Police recovered 31 parts in Berlin on December 17, 2022, and the Landgericht Dresden convicted several defendants on May 16, 2023. In July 2022 a Brink's truck carrying 24 bags of gems was emptied at a California rest stop; two men were indicted in June 2025. On October 19, 2025, four people used a truck-mounted lift to reach the Louvre's Galerie d'Apollon. The Paris prosecutor timed the raid at 9:34 to 9:38; eight pieces of French crown jewelry left with them.

Stones change hands on trust, which is risky when a party fails. Much of the diamond trade works on memo: one dealer lends goods to another or to a retailer, who either sells them or returns them. Depending on the circumstances, US law can expose consigned goods to the recipient’s creditors unless the owner has perfected its interest, for example by filing under Article 9 of the Uniform Commercial Code. The code’s entrustment rule adds another risk: a merchant who deals in goods of that kind can pass the owner’s rights to a buyer in the ordinary course of business, even without authority to sell.

Gems also serve as collateral. Pawnbrokers take jewelry as a pledge, holding it until a loan is repaid, and banks lend to dealers against registered security interests in stock. Trade credit can be abused: in 2018 India’s Punjab National Bank found fraudulent guarantees worth about ₹14,357 crore (roughly US$2 billion) issued for firms linked to jeweler Nirav Modi, who was arrested in London in 2019.

Stolen stones create ownership conflicts. Common-law systems generally hold that a thief cannot pass good title. Civil-law systems differ: Germany bars good-faith acquisition of stolen goods except at public auction, and Switzerland lets owners reclaim them within five years. Sovereign claims are another category: India, Pakistan, Afghanistan and Iran have all sought the Koh-i-Noor, which the UK says it acquired lawfully under the 1849 Treaty of Lahore.