Yesterday, JCK Magazine published an interview with Brad Brooks-Rubin, the United States Department of State Special Advisor on Conflict Diamonds, regarding the Kimberley Process’ decision to allow exports of Marange Diamonds. According to Mr. Brooks-Rubin, U.S. persons dealing in diamonds should continue to exercise due diligence to know whether their diamonds come from Marange. For example, jewelers should examine the OFAC website to determine the extent of the sanctions and against whom those sanctions are imposed. Moreover, Mr. Brooks-Rubin indicated that despite the Kimberley Process’ decision the U.S. government will continue to enforce sanctions and trade restrictions against Zimbabwe.

U.S. persons involved in the diamond trade should be advised that a U.S. person may not procure goods, services or technology, including diamonds, from a blocked person directly or indirectly (including through a third-party intermediary). Such prohibitions on transactions involving blocked property also apply to transactions by a U.S. person located outside of the United States with respect to property in which the U.S. person knows, or has reason to know, a person whose property and interests in property are blocked has or has had an interest since the effective date of the blocking. These prohibitions are codified in the Zimbabwe Sanctions Regulations, 31 C.F.R. §541.406. As such, U.S. persons are generally prohibited from purchasing diamonds from a foreign company if the U.S. person knows, or has reason to know, that a blocked person has or has had an interest in the diamonds since the effective date of the blocking.

Reason to know whether or not a blocked person has or had an interest in a transaction is obviously a subjective standard. While it is unfortunate that U.S. persons are going to be subject to these prohibitions while Marange diamonds will be back on the market, it is very clear that the U.S. government will continue to enforce sanctions relating to those diamonds. As such, Mr. Brooks-Rubin is absolutely right, now more than ever U.S. persons involved in the diamond trade should step up compliance measures to make sure they do not engage in prohibited transactions.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.