.

1. 27TH
JULY
–
03RD
AUGUST
2013
Russia
Federation
KP
Review
Report
–27
July
-­‐
03
August
2013
Page
1
KIMBERLEY
PROCESS
REVIEW
VISIT
REPORT
TO
THE
RUSSIAN
FEDERATION

2. Members
of
the
Review
Visit
Team
Team
Leader:
1. South
Africa
represented
by
Mr.
Levy
Rapoo
Mr.
Michael
Muirhead
Ms.
Jacobeth
Moloisane
South
African
Diamond
and
Precious
Metals
Regulator
Members:
2. Angola
represented
by
Mr.
Estanislau
Buio
Mr.
Jose
C
Malanga
Ministry
of
Geology
and
Mine
3. Botswana
represented
by
Ms.
Tebogo
Selaelo,
Ministry
of
Minerals,
Energy
and
Water
Resources
4. European
Union
represented
by
Ms.
Marianna
Kondas
European
Commission
5. World
Diamond
Council
represented
by
Mr.
Mark
Van
Bockstael
Antwerp
World
Diamond
Centre
(AWDC)
Russia
Federation
KP
Review
Report
–27
July
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03
August
2013
Page
2

3.
1. Introduction
2. Context
of
the
visit
3. Main
findings
3.1. Key
role
players
involved
in
the
implementation
of
the
KPCS
in
the
Russian
Federation
3.2. .
Institutional
Framework
3.3. Legal
Framework
/
Laws
and
Regulations
in
place
3.4. Production
3.5. Controls
3.5.1. Procedures
in
place
at
industry
level
3.5.1.1. Verification
of
the
movement
of
goods
from
the
Source
to
Export
(Processing
Plants,
Diamond
Sorting
Centre,
United
Selling
Organisation)
3.5.2. Import
and
Export
procedures
and
regime
-­‐ 3.5.2.1.
Outgoing
Rough
diamond
shipments
(Control
of
KP
Certificates,
Point
of
export)
-­‐ 3.5.2.2.Incoming
Rough
diamond
shipments
(Controls
on
non-­‐
Compliant
Imports)
3.5.3. Concerns
raised
by
the
Russian
Federation
3.6. System
on
Internal
Controls
and
Industry
Self-­‐Regulation
3.7. Statistics
4. Best
Practices
5. Conclusion
6. Annexures
6.1. Review
Visit
Programme
6.2. List
of
documents
provided
Russia
Federation
KP
Review
Report
–27
July
-­‐
03
August
2013
Page
3
Table
of
contents

4. 1. Introduction
The
Russian
Federation
(RF)
is
the
largest
diamond
producing
country
in
the
world
by
carats
with
production
estimated
to
be
over
33
million
carats
in
2013.
Joint
Stock
Company
ALROSA
accounts
for
approximately
99%
of
all
Russian
production.
Russia
mined
16.08
million
carats
of
rough
diamonds
worth
$1360
million
in
the
first
half
of
2012
with
annual
production
reaching
some
34.92
million
carats
worth
over
$2
billion.
The
Russian
Federation
accounts
for
approximately
21%
of
the
world’s
global
diamond
production.
The
majority
of
all
mining
activities
are
done
in
the
Sakha
Republic
(Yakutia)
in
Siberia,
just
below
the
Arctic
Circle.
These
mines
are
located
in
some
the
most
inaccessible
and
inhospitable
places
on
planet
earth.
Sub-­‐freezing
temperatures
and
near-­‐total
darkness
during
winter
months
are
common.
2 Context
of
the
visit
The
review
visit
was
conducted
during
the
period
of
27th
July
2013
to
03rd
August
2013
and
the
purpose
was
to
witness,
test
and
verify
that
the
RF
is
still
in
compliance
with
the
minimum
standards
of
the
KPCS.
This
review
visit
was
based
on
the
standard
terms
of
reference
for
review
visits
contained
in
Annex
II
of
the
Administrative
Decision
on
KPCS
Peer
Review
System,
taking
also
into
consideration
the
provisions
of
section
VI,
paragraph
14
of
the
KPCS.
At
the
start
of
the
review
visit
in
Moscow,
the
team
was
met
by
representatives
from
Ministry
of
Finance,
Gokhran
of
Russia
and
ALROSA
who
accompanied
the
team
on
a
visit
to
Mirny,
a
mining
town
in
the
Sakha
Republic
(Yakutia).
This
was
an
opportunity
for
the
team
to
visit
the
Internatsionalny
underground
mine
and
the
Nyurba
mine
in
the
Nakyn
field
(open
cast
mining).
The
team
also
viewed
the
Diamond
Sorting
Centre
(DSC)
in
Mirny
which
is
the
central
gathering
point
of
all
diamonds
for
ALROSA
and
subsidiary
companies.
A
presentation
Russia
Federation
KP
Review
Report
–27
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Page
4

5. from
one
of
the
state
controllers
from
Gokhran
allowed
the
team
to
follow
the
diamond
handling
route
through
from
mining,
sorting
and
preliminary
valuation
stages
to
export
to
Moscow.
ALROSA
and
Gokhran
are
the
only
two
organisations
certified
to
sort
diamonds
in
the
RF.
The
state
control
is
exercised
by
Gokhran
whose
role
is
to
control
the
movement
of
diamonds
by
certifying
the
diamonds
received
for
acceptance.
This
includes
the
physical
verification
and
checking
of
parcels
and
a
certificate
is
issued
at
the
stage
of
acceptance
and
upon
export.
Visitation
to
two
processing
facilities
was
arranged
(Plant
16
at
Nakyn
field
and
Plant
3
in
Mirny)
which
is
fully
automated
and
has
been
in
operation
since
the
year
2003.
The
visit
gave
insight
from
the
starting
point
of
ore
processing
through
to
final
extraction
of
diamonds
for
transportation
to
Mirny
DSC.
The
team
also
visited
the
ALROSA
United
Selling
Organisation
(USO)
and
had
a
detailed
walk
through
of
all
diamond
handling,
sorting
and
sales
departments.
The
USO
is
the
key
role
player
in
the
receiving
of
goods
from
the
DSC
in
Mirny
after
they
have
undergone
the
process
of
preliminary
sorting
by
size,
classifications
into
assortment
and
getting
the
insurance
value
through
and
packaging
these
goods
into
sales
boxes
for
export
to
respective
clients.
The
sorting
and
the
preliminary
classification
and
valuation
used
is
in
line
with
the
valuation
of
the
Ministry
of
Finance.
The
team
engaged
with
representatives
from
all
ministries
involved
in
the
implementation
of
the
KPCS
regarding
the
legislation
pertaining
to
the
governing
and
administration
of
diamond
movement
within
the
RF.
There
were
also
consultations
with
customs
authorities.
All
key
players
involved
in
the
KPCS
were
met
with
and
physical
inspection
and
verification
was
conducted
at
all
parts
of
the
process.
The
team
requested
electronic
Russia
Federation
KP
Review
Report
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5

6. and
hard
copies
of
relevant
documents
or
other
forms
of
records
where
deemed
necessary.
3 Main
Findings:
The
Team
has
been
able
to
conclude
the
following
main
findings
as
to
the
compliance
of
the
Russian
Federation
with
the
minimum
requirements
of
the
Kimberley
Process
Certification
Scheme.
3.1. Key
role
players
involved
in
the
implementation
of
the
KPCS
in
the
Russian
Federation
• Designated
implementing
authority
3.2. Institutional
Framework
! Status
and
function
of
the
designated
implementing
authority
Russia
Federation
KP
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7. In
accordance
with
the
Russian
Federation
Government
Regulation
No.329
approving
the
Statute
on
the
Ministry
of
Finance
of
the
Russian
Federation,
the
Ministry
of
Finance
of
the
Russian
Federation
is
the
mandated
authority
for
the
implementation
of
the
Kimberley
Process
Certification
Scheme.
The
KPCS
requirements
are
fulfilled
in
coordination
with
the
Ministry
of
Foreign
Affairs
of
the
Russian
Federation,
the
Ministry
of
Industry
and
Trade
of
the
Russian
Federation
and
the
Federal
Customs
Service
of
the
Russian
Federation.
The
Administrative
Department
of
the
Ministry
of
Finance
and
Gokhran
of
Russia
are
the
executive,
organisational
and
technical
structures.
! Implementation
of
the
Certification
Scheme
and
KP
certificate
Gokhran,
the
State
Precious
Metals
and
Gems
Repository,
is
a
state
institution
under
the
Ministry
of
Finance.
It
is
responsible
for
the
purchase,
storage,
sale,
and
use
of
precious
metals,
precious
stones,
jewellery,
rocks
and
minerals
by
the
State
Fund.
It
is
also
responsible
for
all
issues
which
concern
preparation
of
statistical
data
of
the
Russian
Federation
for
the
Kimberley
Process
and
ensuring
that
the
requirements
of
the
KPCS
at
rough
diamonds
exports
and
imports
are
met.
The
KP
certificates
of
the
RF
are
safely
kept
at
Gokhran
and
are
only
released
in
small
batches
to
the
issuing
office
at
the
centralised
import
and
export
point.
The
Gokhran
of
Russia
is
also
responsible
for
the
checking
of
compliance
of
all
imports
and
exports
in
the
process
of
conducting
a
state
quality
control
on
all
sorting,
valuation
and
sale
of
diamonds.
The
review
team
received
detailed
documentation
outlying
how
state
control
is
executed
and
enforced
in
the
form
of
hard
and
soft
copies.
These
documents
explain
the
stages
of
state
control
from
mining
through
to
sales.
All
information
received
was
aligned
and
corresponded
to
the
oral
presentations
and
communication.
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Federation
KP
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8. 3.3. Legal
Framework
/
Laws
and
Regulations
in
place
The
review
team
met
with
representatives
from
the
Ministry
of
Finance,
the
Ministry
of
Industry
and
Trade
of
the
Russian
Federation
(Minpromtorg
of
Russia),
the
Ministry
of
Foreign
Affairs,
and
the
State
Depository
for
Precious
Metals
and
gems
(Gokhran).
A
review
of
the
legislation
of
the
Russian
federation
was
presented
by
means
of
presentations
by
representatives
of
each
department
regarding
the
implementation
of
the
KPCS
and
procedures
for
the
approval
and
certification
of
rough
diamond
exports.
The
team
was
informed
that
hard
copies
of
the
detailed
data
on
rough
diamond
imports
and
exports
are
kept
for
a
period
of
five
years.
Electronic
data
has
been
stored
since
the
inception
of
the
KPCS.
The
team
was
presented
with
hard
copies
of
the
regulations
which
all
correspond
with
the
presentations
given.
The
Russian
legislation
applicable
to
rough
diamond
production
and
trade
is
a
complex
body
of
legal
texts,
most
of
which
existed
prior
to
the
inception
of
the
KPCS;
the
Russian
Federation
being
a
major
diamond
producer
already
in
pre-­‐KP
times,
it
enacted
various
pieces
of
legislation
to
ensure
that
precious
metal
extraction,
production
and
circulation
is
carried
out
under
strict
state
control.
This
chapter
only
focuses
on
the
provisions
and
issues
that
are
relevant
from
the
KPCS
point
of
view.
a) Basic
legislation
The
core
legal
text,
Federal
Law
No.41-­‐ФЗ
established
in
1998
the
legal
basis
for
regulating
the
relations
in
the
field
of
geological
exploration
and
prospecting
of
deposits
of
precious
metals
and
precious
stones,
their
extraction,
production,
utilization
and
circulation,
etc.
It
set
up
the
scope
of
state
monopoly,
established
the
framework
of
state
regulation
and
the
role
of
governmental
authorities,
and
regulated
the
precious
metals
and
precious
stones
market.
State
control
in
particular
focused
on
the
following
areas:
licensing
and
record
keeping
requirements,
procedures
on
dealing
with
precious
metals,
control
system
over
the
quality
of
sorting,
classification
and
valuation
of
natural
rough
diamonds
(further
detailed
in
Russia
Federation
KP
Review
Report
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8

9. Government
Resolution
No.
371),
special
procedure
of
customs
control
over
imports
and
exports
of
precious
metals
and
precious
stones
and
articles
made
thereof.
b) Import/export
in
accordance
with
the
KPCS
Therefore,
at
the
inception
of
the
KPCS,
the
Russian
Federation’s
internal
control
system
was
already
well
regulated,
and
required
few
modifications.
In
2003,
Government
Resolution
No.
527
introduced
the
obligation
that,
as
part
of
the
existing
state
control
over
imports
of
rough
diamonds
into
the
territory
of
the
Russian
Federation,
the
presence
of
a
KP
Certificate
is
checked
as
a
mandatory
document
for
customs
purposes.
A
mirror
provision
is
to
be
found
for
exports
in
Government
Resolution
No
67,
which
sets
out
that
all
rough
diamonds
shipments
exported
from
the
territory
of
the
Russian
Federation
must
be
accompanied
with
a
Certificate
which
confirms
that
the
shipments
are
of
Russian
origin
and
do
not
contain
conflict
diamonds.
The
review
team
inquired
why
this
legislation
only
foresaw
the
possibility
of
exporting
diamond
of
Russian
origin,
and
whether
this
requirement
also
applied
to
re-­‐export
of
diamonds
that
are
not
of
Russian
origin.
In
a
follow-­‐up
communication,
the
Russian
KP
focal
point
explained
that
this
resolution
was
issued
at
the
initial
stage
of
implementing
the
KPCS
and
the
wording
...
“rough
diamonds
are
of
Russian
origin
and
do
not
contain
conflict
diamonds”
was
introduced
in
order
to
allow
for
open
data
collection
on
Russian
rough
diamond
production,
which
was
classified
information
in
pre-­‐KP
times.
At
the
same
time,
the
Russian
KP
focal
point
forwarded
to
the
Team
the
Russian
Finance
Ministry’s
Order
No
60n,
which
was
introduced
on
the
legal
basis
of
Government
Resolution
No.
67.
This
order
gave
empowerments
to
the
Administrative
Department
(Vyazalov
S.Yu.)
and
the
Gokhran
of
Russia
(Rybkin
V.B.)
to
ensure
compliance
with
the
import/export
requirements
of
the
KPCS
including
the
export
of
diamonds
that
were
imported
into
the
territory
of
the
Russian
Federation
rather
than
mined
in
Russia.
c) Future
economic
integration
Russia
Federation
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10. The
Russian
Federation
informed
the
Review
Team
of
possible
future
integration
between
the
Republic
of
Belarus,
Republic
of
Kazakhstan
and
the
Russian
Federation
which
may
result
in
the
three
countries
joining
the
KPCS
as
one
body.
This
is
not
unprecedented
as
the
European
Union
already
participates
in
the
KPCS
as
one
participant,
representing
28
countries.
Belarus,
Kazakhstan
and
the
Russian
Federation
already
form
a
customs
union
under
the
Eurasian
Economic
Community
(EEC)
and
since
Kazakhstan
joined
the
KPCS
in
2012,
all
three
countries
are
KPCS
participants.
Pursuant
to
Decision
No.
19
the
EEC
Interstate
Council
(the
Superior
Body
of
the
Customs
Union)
of
2009
“until
the
Customs
Union
between
the
Republic
of
Belarus,
Republic
of
Kazakhstan
and
Russian
Federation
as
a
regional
economic
integration
organization
joins
the
international
Certification
Scheme
for
rough
diamonds,
diamonds
*…+
are
moved
across
the
state
*…+
with
due
consideration
for
the
requirements
of
the
international
Certification
Scheme
for
rough
diamonds.”
At
the
review
team’s
inquiry
Ministry
of
Finance
Officials
confirmed
that
for
the
time
being,
in
spite
of
the
customs
union,
KPCS
checks
continue
to
be
performed
at
the
borders
of
these
countries.
The
ordinary
mailing
of
precious
stones
across
state
borders
in
the
Customs
Union
is
prohibited.
At
the
same
time,
the
legislative
framework
governing
the
movement
of
precious
stones
in/out
of
the
Customs
Union
in
accordance
with
KPCS
minimum
requirements
is
already
in
place
and
is
regulated
in
detail
(Decision
of
the
EEC
Body
No.
134).
d) Penalties
in
accordance
with
Section
IV
In
accordance
with
point
(d)
of
Sections
IV
of
the
KP
core
document,
Participants
should
“*…+
maintain
dissuasive
and
proportional
penalties
for
transgressions.
Penalties
for
shipments
without
KP
certificate
In
case
a
shipment
without
a
certificate
is
being
imported
into
the
customs
territory,
or
it
is
being
imported
with
any
violations
of
the
requirements
of
the
KPCS,
“the
state
control
report
notes
on
the
necessity
of
returning
the
shipment
to
the
state
of
import,”
pursuant
to
Decision
of
the
EEC
Body
No.
134.
The
report
of
the
last
KP
review
visit
in
2005
contained
a
recommendation
for
the
Russian
Federation
to
Russia
Federation
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11. amend
its
legislation
to
enact
more
stringent
penalties,
for
instance
by
providing
for
the
seizure
of
the
shipment.
When
this
issue
was
raised,
Ministry
of
Finance
representatives
admitted
that
no
such
amendment
was
made.
In
their
interpretation
of
the
international
obligations
under
the
KPCS,
since
the
state
control
checking
the
existence
of
a
certificate
happens
before
the
customs
checks,
in
the
absence
of
a
certificate
they
cannot
let
the
shipment
enter
the
customs
territory
of
the
Russian
Federation;
hence
the
shipment
must
be
returned.
The
costs
of
the
return
are
imposed
on
the
importer.
The
review
team
noted
that
returning
the
shipment
as
a
punishment
might
not
be
sufficiently
dissuasive,
even
though
this
act
does
ensure
the
absence
of
conflict
diamonds
in
the
Russian
Federation,
so
the
KPCS
minimum
requirements
are
met.
At
the
same
time,
the
penalty
might
not
be
effectively
dissuasive
since
the
shipment
is
returned
to
the
sender
without
any
additional
penalty
(apart
from
having
to
cover
the
costs
of
return),
which
in
fact
does
not
prevent
the
criminals
from
trying
to
import
again
to
another
Participant.
In
addition,
there
appears
to
be
a
discrepancy
when
incomplete
certificates
are
penalised
more
stringently
that
the
complete
absence
of
certificates
(see
below).
e) Penalties
on
shipments
with
expired
KP
certificate
Russian
customs
representatives
confirmed
that
a
certificate
with
an
expiry
date
that
has
passed
qualifies
as
no
certificate,
thus
the
shipment
will
be
returned
in
this
case
as
well.
f) Penalties
for
illegal
shipments
In
terms
of
dealing
with
shipments
from
suspended
KP
participants,
such
as
Cote
d’Ivoire,
Venezuela,
and
the
Central
African
Republic,
the
Russian
representatives
noted
certain
issues
with
giving
legal
effect
to
KP
Administrative
Decisions
that
do
not
have
a
legal
basis
in
United
Nations
Resolutions
(such
as
CAR,
Venezuela),
as
opposed
to
those
that
do
have
a
UN
basis
(Cote
d’Ivoire).
In
any
event,
any
potential
shipments
from
all
of
these
countries
are
equally
detained.
Russia
Federation
KP
Review
Report
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2013
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11

12. g) Penalties
on
shipments
with
incomplete
KP
certificate
When
diamond
shipments
arrive
with
a
certificate
that
is
incomplete,
customs
will
examine
the
irregularities
and
apply
the
appropriate
customs
procedures
and
penalties;
these
can
be
fines,
or
even
imprisonment.
Following
the
review
visit,
the
Russian
Federation
provided
the
Review
Team
excerpts
from
their
administrative
offence
code
and
criminal
code
where
examples
of
such
penalties
are
specified.
Under
administrative
rules,
for
“non-­‐observance
of
the
measures
established
by
the
international
treaties
of
the
member
states
of
the
Customs
union”,
non-­‐declaration
or
misleading
declaration
of
goods,
presentation
of
invalid
documents
during
the
performance
of
customs
operations,
forging
documents,
stamps,
seals
or
forms,
varying
administrative
fines
are
imposed
(ranging
from
1500
to
300
000
RUB
=
50
–
10
000
USD)
together
with
the
confiscation
of
the
goods
and
the
documents.
The
penalties
are
more
stringent
for
officials
than
for
citizens.
Under
criminal
rules,
forgery
of
documents
can
lead
to
up
to
two
years’
prison
sentence,
while
knowingly
using
a
forged
document
may
lead
to
up
to
two
years’
corrective
labour.
3.4. Production
Russia
Federation
KP
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12

13. Almost
all
of
the
Russian
Federation
diamond
production
is
by
ALROSA
and
mined
predominantly
in
the
Sakha
Republic
(Yakutia).
The
review
team
visited
diamond
mining
and
processing
facilities
in
Mirny
and
Nakyn
field.
Production
is
from
kimberlite
pipes
and
smaller
alluvial
deposits.
The
mine
site
visits
were
to
Internatsionalny
mine
in
Mirny
(open
cast
mining
has
stopped
and
is
now
underground
mining)
and
Nyurba
mine
in
Nakyn
field
(open
cast
mining).
At
the
underground
Internatsionalny
mine
the
team
met
with
relevant
mine
management
and
was
briefed
on
the
mining
operation
and
methods
of
ore
extraction.
After
a
short
safety
briefing,
the
review
team
descended
1000
m
deep
to
witness
the
underground
mining
activities,
from
technical
equipment,
maintenance
areas
to
mining
excavation
areas.
The
team
was
informed
that
the
capacity
of
the
mine
is
500,000
tons
per
annum
and
the
life
span
is
estimated
to
be
up
until
the
year
2020.
The
team
visited
both
of
these
mines
ore
processing
plants.
Plant
16
in
Nakyn
field
was
undergoing
maintenance
and
as
such
the
team
was
unable
to
witness
the
plant
in
operation
and
see
the
final
stage
of
diamond
extraction.
The
team
however
did
witness
the
process
in
action
at
Plant
3
in
Mirny.
Access
to
the
plant
is
monitored
by
strict
access
points
and
CCTV
surveillance.
Operations
occur
in
shifts
and
security
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Federation
KP
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August
2013
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13

14. searches
are
mandatory
for
all
employees.
Extraction
of
diamonds
takes
place
in
sorting
glove
boxes.
These
glove
boxes
are
controlled
by
unique
seals
and
each
has
a
seal
number.
At
the
end
of
each
shift
the
diamonds
are
removed
from
the
glove
box
that
is
contained
in
sealed
containers.
The
container
is
weighed
and
the
weight
recorded.
The
sealed
container
is
then
placed
in
a
secure
safe.
At
the
point
of
movement
from
the
processing
plant
to
DSC
the
containers
are
removed
from
the
safe
and
placed
into
carrier
cases
that
are
sealed.
These
cases
are
then
moved
to
the
DSC
(by
a
contracted
security
firm)
for
sorting
and
preliminary
valuation
accompanied
by
extensive
paper
work
to
maintain
an
audit
trail
of
the
diamonds
extracted.
As
a
result
of
these
controls,
protection
of
these
diamonds
is
ensured.
3.5. Controls
3.5.1. Procedures
in
place
at
industry
level
The
integrity
and
compliance
to
the
KP
requirements
was
verified
through
visual
inspection
by
means
of
field
visits
to
Mirny
and
Nakyn
field
mining
and
recovery
facilities,
a
visit
and
presentation
at
the
Diamond
Sorting
Centre
in
Mirny,
as
well
as
during
meetings
held
with
Gokhran,
the
Ministry
of
Finance
and
Spicialized
Customs
Post
in
Moscow.
A
visual
inspection
of
the
United
Selling
Organisation
allowed
the
Russia
Federation
KP
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14

15. review
team
to
witness
and
pose
questions
on
the
control
and
monitoring
systems
in
use
in
the
Russian
federation.
A
brief
review
of
each
is
highlighted
below.
3.5.1.1.Verification
of
the
movement
of
goods
from
the
Source
to
Export
a) Processing
plants:
Processing
methods
used
at
ALROSA
plants
include
autogenous
milling,
dense
media
separation
(DMS),
spiral
concentration,
pneumatic
flotation
and
X-­‐ray
luminescence
separation.
Diamonds
are
extracted
in
the
final
stage
of
recovery
in
a
secure
processing
plant.
Strict
accounting
rules
are
followed
on
all
movement
of
ore,
concentrates
and
rough
diamonds.
Strict
security
control
access
and
monitoring
ensures
equipment
and
sorting
glove
boxes
are
not
tampered
with.
Machines
are
cleaned
and
glove
boxes
are
checked
before
the
start
of
a
new
shift.
Diamonds
extracted
are
contained
in
sealed
containers
which
are
weighed
and
all
information
is
recorded
in
a
log
book
and
placed
in
a
safe
until
transfer.
Upon
transfer
from
the
plant
to
Mirny
these
diamonds
are
then
placed
into
carrier
cases
which
are
also
sealed
in
order
to
be
transported
to
the
Diamond
Sorting
centre
(DSC)
in
Mirny.
A
contracted
company
is
used
for
the
transportation
of
these
goods.
This
process
is
the
same
at
all
processing
plant.
b) The
Diamond
Sorting
Centre
(hereafter
referred
to
as
DSC):
Rough
diamonds,
after
processing,
at
ore
treatment
plants
are
sent
to
Mirny.
At
the
DSC
the
diamonds
undergo
preliminary
sorting
and
valuation
prior
to
delivery
to
Moscow’s
United
Selling
Organisation
(USO)
or
to
Yakutsk
to
the
Yakutsk
Diamond
Russia
Federation
KP
Review
Report
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July
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03
August
2013
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15

16. Trading
Enterprise
(YaPTA).
The
movement
and
tracking
of
diamond
production
is
computerised.
Acceptance
of
these
diamonds
and
all
technological
operations
are
logged
and
tracked
in
a
computer
database.
The
review
team
was
given
a
presentation
on
the
flow
of
goods
and
was
able
to
verify
the
preliminary
sorting
and
valuation
in
process
as
well
as
witness
a
State
Controller
verifying
the
various
classified
goods.
Implementation
of
State
control
is
administered
by
Gokhran.
There
are
two
State
controllers
permanently
working
in
Mirny
to
administer
and
implement
control
at
any
time.
c)
United
Selling
Organisation
(hereafter
referred
to
as
USO):
The
visit
to
witness
the
process
of
receiving
of
goods
from
Mirny,
all
diamond
handling,
sorting
and
finally
the
box
preparation
for
sale,
gave
the
review
team
an
in-­‐
depth
understanding
of
the
complex
system
of
diamond
classification
and
control.
USO
prepares
for
sales
mainly
under
long
term
agreements,
to
a
lesser
extent
for
sales
by
tender
or
spot
sales.
The
USO
is
equipped
with
the
most
advance
technology
and
equipment
to
facilitate
the
maximum
benefit
of
determining
a
value
for
their
product.
The
valuation
is
based
on
the
Ministry
of
Finance
price
book;
in
the
practice,
ALROSA,
Gokhran
and
the
State
jointly
agree
on
the
price.
Safety
and
control
of
the
product
was
witnessed
at
the
highest
level.
Employees
were
to
be
subjected
to
collective
responsibility
if
a
rough
diamond
went
missing,
although
apparently
it
never
happened.
At
all
stages
from
the
receipt
of
the
bagged
and
sealed
box
in
the
receiving
area
through
to
the
sorting
and
the
eventual
box
preparation
for
sale,
the
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Federation
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17. diamonds
are
tracked
and
strictly
controlled.
The
activities
are
constantly
checked
by
State
Controllers;
the
containers
are
sealed
jointly
by
a
representative
of
USO
and
a
representative
of
state.
A
fully
automated
accounting
system
is
in
place
to
record
and
track
the
movement
of
rough
diamonds.
3.5.2. Import
and
export
procedures
and
regime
In
order
to
fulfil
the
mandate
of
the
review
visit,
the
processes
of
import
and
export
of
unpolished
diamonds
needed
to
be
verified.
In
order
to
witness
this
procedure,
the
review
team
visited
the
secure
premises
of
the
Centre
of
Precious
Metals
and
Precious
Stones
registration
(a
specialised
customs
station
at
Smolnaya
Street,
nr
12)
in
order
to
witness
the
operational
work
of
customs
authorities
and
state
control
on
the
process
of
clearing
shipments
for
import
and
export.
A
detailed
account
of
each
activity
was
given
by
state
control,
customs
representatives
and
members
of
staff
as
the
team
was
walked
through
each
stage.
3.5.2.1. Outgoing
rough
diamond
shipments
(Exports)
Russia
Federation
KP
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18. The
premises
are
divided
into
two
sections
namely
Administration
and
the
Registration.
During
the
registration
the
documents
are
prepared,
the
customs
declaration
of
imports
and
exports
and
all
the
supporting
documents
are
registered
in
the
system.
A
check
list
is
issued
to
verify
that
all
the
required
documents
are
attached.
The
State
Controller
also
plays
a
role
in
the
registration
of
the
imports
and
exports.
Licensees
with
intent
to
export
are
required
to
submit
a
KPC
declaration
attesting
that
the
diamonds
have
been
sourced
through
the
legal
sources
and
that
they
are
conflict
free.
Documents
that
confirm
the
origin
of
the
diamonds
are
also
required.
a) Control
of
KP
Certificates
The
Russian
federation
ensures
that
a
KP
Certificate
accompanies
each
shipment
of
rough
diamonds
on
export.
The
KP
certificate
contains
eighteen
(18)
degrees
of
protection
at
the
polygraphic
level;
it
expires
within
30
days.
All
rough
diamond
exporters
need
to
hold
licenses
as
well
as
registration
certificates
of
the
Russian
State
Assay
Chamber.
The
KP
certificate
is
filled
and
issued
from
one
centralised
place
only,
at
the
specialised
customs
station
in
Moscow,
in
order
to
execute
state
control
over
the
customs
clearance
of
rough
diamond
shipments.
Processes
and
records
were
verified
to
ensure
this
process
is
evident.
b) Point
of
Export
All
documentation
proving
either
that
the
diamonds
were
mined
in
the
Russian
Federation
or
imported
with
a
valid
KP
certificate
must
accompany
the
intended
shipment
for
export.
The
State
Controller
of
the
Ministry
of
Finance
does
the
process
control
by
conducting
a
physical
inspection
on
every
shipment
and
a
state
control
report
is
generated
by
the
State
Controller.
A
KP
certificate
is
then
issued,
which
is
presented
at
the
Customs.
The
parcel
intended
for
export
is
sealed
jointly
by
state
control
and
the
owner’s
representative
and
placed
into
a
tamperproof
container
which
is
a
special
transparent
plastic
package.
The
original
KP
certificate
and
its
copy
are
placed
into
the
container.
An
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Federation
KP
Review
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03
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19. authenticated
copy
of
the
KP
certificate
forms
part
of
the
shipping
documentation.
The
KP
certificate
number
is
indicated
on
each
container
and
in
the
shipping
documents.
The
Gokhran
of
Russia
transmits
a
detailed
e-­‐mail
message
to
the
relevant
Importing
Authority
of
the
country
of
destination.
This
notification
will
only
include
the
KP
certificate
number
and
date
of
issuance
to
ensure
confidentiality.
All
export
of
shipments
is
electronically
captured.
Copies
of
the
original
KPC
issued
are
scanned
and
archived
electronically
for
future
references.
The
process
of
rough
diamond
exports
is
completed
upon
the
receipt
of
the
import
confirmation
coupon.
These
coupons
are
registered
electronically
and
filed
into
the
set
of
documents
pertaining
to
the
specific
export.
The
review
team
requested
to
see
the
return
coupons
of
some
exports
and
these
were
gladly
provided.
All
details
of
unpolished
diamond
shipments
are
recorded
in
a
computerised
database.
Verification
as
well
as
visual
inspection
by
the
review
team
of
the
KP
certificate
was
found
to
meet
all
the
requirements
as
set
out
in
Section
II
(c)
and
Annex
1
of
the
KPCS
document.
Details
of
current
signatories
and
stamps
have
been
circulated
to
all
participants
through
the
KP
Chair
and
an
updated
specimen
certificate
is
present.
The
Russian
Federation
complies
with
the
relevant
recommendations
of
Annex
II
of
the
KP
Core
Document.
3.5.2.2. Incoming
rough
diamond
shipments
(Imports)
The
Russian
Federation’s
specialized
customs
checkpoint
in
Moscow
is
the
only
point
of
entry
for
all
incoming
rough
diamond
shipments.
It
is
at
this
facility
where
state
controllers
of
the
Ministry
of
Finance
check
the
KP
certificates.
They
check
for
authenticity
and
carry
out
procedures
of
state
control.
A
visual
comparison
is
done
between
the
certificates
accompanying
the
shipment
with
the
specimen
available.
If
required,
further
comparison
is
be
done
by
means
of
Russia
Federation
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20. instrumentation,
and
also
by
verifying
that
the
data
declared
on
the
certificate
matches
the
information
received
via
e-­‐mail.
Only
shipments
of
rough
diamonds
arriving
from
KP
participant
countries
in
tamperproof
containers
are
allowed
for
customs
clearance.
All
shipping
documents
and
KP
certificate
must
be
present.
The
Importing
Authority
inspects
the
shipment
of
rough
diamonds
to
verify
that
the
seals
and
the
container
have
not
been
tampered
with.
Once
all
procedures
as
well
as
state
control
have
been
completed,
an
advance
e-­‐mail
is
sent
to
the
relevant
Authority
of
the
exporting
country
stating
that
the
rough
import
has
been
registered
in
compliance
with
the
KPCS
requirements.
The
Gokhran
of
Russia
opens
and
sorts
all
incoming
rough
diamond
shipments
in
compliance
with
the
grading
system
accepted
in
the
Russian
Federation.
After
all
sorting
and
valuation
is
done,
a
detachable
import
confirmation
coupon
is
filled
in
by
an
official
of
Gokhran,
certified
with
appropriate
signatures
and
stamps
and
returned
to
the
relevant
Export
Authority.
All
certificate
originals
are
safely
kept
in
the
vault
of
Gokhran
of
Russia
and
all
data
pertaining
to
the
import
certificate
is
recorded
on
a
computerised
database.
Access
to
the
certificates
has
to
be
authorized
by
the
head
of
state
control
service
or
an
authorized
person
of
the
Kimberley
Process
in
the
Russian
federation.
While
polished
diamonds
are
outside
of
the
mandate
of
the
KPCS,
it
is
worth
mentioning
that
Gokhran
is
also
informed
of
the
volume
of
rough
diamonds
sold
to
be
manufactured.
On
the
basis
of
this
information
a
precalculation
would
be
made
which
helps
to
keep
track
of
the
amount
of
diamonds
polished
from
diamonds
mined
in
the
Russian
Federation.
a)
Controls
on
non-­‐compliant
Imports
In
terms
of
Resolution
2005
No.
335
section
15
subsection
(c)
of
the
government
regulations
of
the
administrative
department,
if
a
certificate
is
not
fully
completed,
attached
or
non-­‐compliant,
the
corresponding
customs
procedures
and
measures
would
be
put
in
place.
The
corresponding
sanctions
are
implemented
on
non-­‐compliant
Russia
Federation
KP
Review
Report
–27
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20

21. shipments
which
are
then
returned
back
to
the
exporter.
For
more
information
on
sanctions
see
chapter
3.3.
Legal
Framework.
3.5.3.
Concerns
raised
by
the
Russian
Federation
The
sending
of
a
confirmation
receipt
to
the
relevant
Exporting
Authority
is
a
requirement
of
import
regime.
The
Russian
Federation
brought
to
the
teams’
attention
that
not
all
countries
to
which
the
Russian
Federation
exports
its
goods
fulfil
this
requirement.
In
addition,
it
was
mentioned
that
they
send
advance
notifications
of
exports
as
per
Recommendation
19
of
the
KP
Core
Document
and
they
would
encourage
more
KP
Participants
to
have
the
same
practice.
3.6. System
of
Internal
Controls
and
Industry
Self-­‐Regulation
Section
IV
of
the
KPCS
states
that:
“Participants
understand
that
a
voluntary
system
of
industry
self-­‐regulation
will
provide
for
a
system
of
warranties
underpinned
through
verification
by
independent
auditors
of
individual
companies
and
supported
by
internal
penalties
set
by
industry,
which
will
help
to
facilitate
the
full
traceability
of
rough
diamond
transactions
by
government
authorities”.
In
the
Russian
Federation
when
rough
diamonds
are
presented
for
state
control
at
export,
the
owner
needs
to
produce
a
written
guarantee
that
the
diamonds
being
exported
are
not
conflict
diamonds.
The
state
control
system
also
exercises
control
at
mine
sites,
sorting
and
valuation,
transportation,
handling
and
storage
and
till
the
shipments
leave
the
territory
of
the
Russian
Federation.
All
rough
diamond
movements
are
traced
and
recorded.
3.7. Statistics:
The
statistics
for
2011
and
2012
are
all
submitted
to
the
Chair
of
the
WGS
and
posted
on
the
official
KP
web-­‐site
and
the
website
of
the
Ministry
of
Finance
of
the
RF
within
the
set
terms.
Russia
Federation
KP
Review
Report
–27
July
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August
2013
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21

22. Annual
Rough
Diamonds
Statistics
Summary:
2011
Description
Volume
(cts)
Value
(USD)
USD
/ct
Production
35,139,800.00
$
2,674,713,800.00
$
76.12
Import
154,080.59
$
69,852,398.36
$
453.35
Export
32,346,947.52
$
3,811,238,484.46
$
177.82
Annual
Rough
Diamonds
Statistics
Summary:
2012
Description
Volume
(cts)
Value
(USD)
USD
/ct
Production
34,927,650.00
$
2,873,728,990.00
$
82.28
Import
141,430.72
$
151,158,859.31
$
1,068.78
Export
29,805,240.93
$
29,805,240.93
$
130.77
4. Best
Practices:
The
following
Best
Practices
were
identified
by
the
Review
Team:
a. The
Russian
Federation
recognises
that
it
is
of
paramount
importance
that,
given
the
large
production
capacity
of
the
Russian
Federation,
the
mining,
extraction,
movement
and
trade
of
these
rough
diamonds
is
efficiently
monitored.
The
Russian
Federation
has
established
internal
systems
of
control
designed
to
eliminate
the
presence
of
conflict
diamonds.
Russia
Federation
KP
Review
Report
–27
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03
August
2013
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22

23. b. This
process
is
evident
throughout
their
diamond
pipeline
of
producing,
exporting
and
importing
rough
diamonds
within
the
Russian
Federation.
They
ensure
that
clients
and
consumers
can
be
confident
that
ethical,
social
and
environmental
standards
have
been
met
in
the
production
of
Russian
Federation
diamonds.
c. All
employees
that
the
Review
Team
met
with
are
trained
and
supported
to
ensure
that
they
work
consistently
in
an
ethical,
honest
and
legal
manner.
d. Openness
and
transparency
was
noticed
in
all
spheres
of
the
review.
Further
explanation
and
supporting
documentation
were
readily
made
available
upon
request.
5. Conclusion:
A
week
of
field
visits,
tours,
presentations
and
walk
through
of
all
processes
left
the
Review
Team
exhausted
but
inspired.
The
Diamond
supply
chain
of
the
Russian
Federation
can
serve
as
an
example
to
all
other
KP
participants.
Based
on
excellent
legislative
guidelines,
safe
and
secure
mining,
processing
and
sorting
facilities
coupled
with
a
strong
system
of
controls
for
regulation,
the
Review
Team
found
the
Russian
Federation
to
be
fully
compliant
and
exceeds
the
minimum
requirements
of
the
Kimberley
Process
Certification
Scheme.
In
many
respects
the
Russian
legislation,
based
on
a
framework
that
was
already
well
regulated
before
the
inception
of
the
KPCS,
goes
beyond
KP
minimum
requirements.
It
is
a
good
example
of
well-­‐coordinated
legislation
covering
all
aspects
of
rough
diamond
trade,
although
the
parts
referring
to
obligations
under
the
KPCS
are
scattered
in
many
various
documents
which
might
make
interpretation
cumbersome.
It
was
useful
and
interesting
for
the
Team
to
receive
update
on
the
planned
participation
of
the
Russian
Federation
together
with
Belarus
and
Kazakstan
as
a
regional
economic
integration,
and
the
legal
framework
seems
to
be
already
in
place
to
make
this
possible.
The
Review
team
should
note
that
the
Russian
Federation
did
not
implement
the
recommendation
of
the
previous
review
visit
on
imposing
stronger
penalties
for
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Federation
KP
Review
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–27
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03
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2013
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23

24. shipments
without
a
certificate,
although
the
current
practice
of
returning
the
shipment
complies
with
KPCS
minimum
requirements.
Nevertheless,
it
would
be
more
dissuasive
for
importers
to
face
fine,
confiscation,
or
other
penalties
when
attempting
an
import
without
a
certificate,
and
confiscation
would
prevent
them
from
attempting
re-­‐import
into
another
KP
Participant.
It
would
be
more
proportionate
if
the
lack
of
certificate
implied
a
penalty
that
is
just
as
stringent
as
what
would
be
imposed
for
incomplete
and
forged
certificates;
especially
since
these
latter
aspects
are
very
well
regulated
and
effectively
harsh
to
be
good
examples
of
sufficiently
dissuasive
penalties.
Taking
into
full
consideration
that
the
trade
in
conflict
diamonds
is
a
matter
of
international
concern,
the
Review
Team
is
satisfied
that
the
Russian
Federation
is
playing
its
part
and
is
doing
due
diligence
through
its
high
standards
of
business
practices.
Russia
Federation
KP
Review
Report
–27
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03
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2013
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25. 6. Annexures
Annexure
1
Programme
of
the
2013
Kimberley
Process
Review
Visit
to
the
Russian
Federation
(28
July
–
2
August
2013)
Date
Event
Time
Expert
group
26-­‐27
July
2013
Arrival
in
Moscow
South
Africa
(Chair
RV)
1. Levy
Rapoo
2. Michael
Muirhead
3. Jacobeth
Moloisane
Angola
1. Estanislau
Buio
2. Jose
Chivangulula
Malanga
Botswana
1.
Tebogo
Selaelo
European
Union
1.
Marianna
Kondas
World
Diamond
Council
1.
Mark
Van
Bockstael
Total:
8
Day
1
28
July
2013
Departure
from
Domodedovo
airport
for
Mirny
21.20
Day
2
29
July
2013
Arrival
to
Mirny,
check
in
at
Zarnitsa
hotel
08.30
–
09.30
Departure
for
“Internatsionalny”
underground
mine,
arrival
9.30
–
10.00
Meeting
with
mine
administration,
change
of
clothes,
briefing
10.00
–
11.00
Descent
to
a
horizon,
review
of
underground
technical
equipment
and
work
of
miners
11.00
–
13.30
Ascent,
change
of
clothes,
lunch
13.30
–
15.00
Departure
for
the
Diamond
Sorting
Centre
(DSC),
arrival
15.00
–
15.30
Visit
to
the
DSC,
review
of
a
production
area.
Presentation
by
a
representative
of
the
state
control
authority
in
Mirny
15.30
–
17.00
Review
of
Mir
mine
from
the
viewing
point
17.30
–
18.00
Departure
for
the
hotel
18.00
Meeting
with
Igor
Sobolev,
ALROSA
First
Vice-­‐President
–
Executive
Director
18.30
–
19.00
Lunch
in
the
hotel
19.00
–
20.00
Day
3
30
July
2013
Departure
for
airport,
flight
to
the
Nakyn
field
,
Mi-­‐8
helicopter
09.30
–
10.00
Arrival
at
Nakyn,
review
of
the
Nyurba
mine
form
the
viewing
point
12.00
–
13.00
Lunch
13.00
–
14.00
Visit
to
the
Plant
No.16
(processing
facility),
review
of
the
finishing
department
14.00
–
16.30
Departure
for
Mirny,
arrival
17.00
–
19.00
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Federation
KP
Review
Report
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26.
Visit
to
the
Plant
No.3
(processing
facility),
review
of
the
finishing
department
19.00-­‐20.30
members
Arrival
at
the
hotel,
dinner
21.00
–
22.00
Day
4
31
July
2013
Departure
for
airport,
check-­‐in
08.00
Flight
to
Moscow
09.40
Arrival
at
Domodedovo
Airport
09.35
(Moscow
time)
Check
in
at
the
hotel
Lunch
Visit
to
the
ALROSA
United
Selling
Organisation
(USO)
(sorting,
export
operations,
internal
market
operations)
15:00
–
17:00
Lunch
19:00
–
21:00
Day
5
1
August
2013,
AM
half
day
Meeting
with
the
representatives
from
Ministry
of
Finance,
Ministry
of
Industry
and
Trade
of
the
Russian
Federation
(Minpromtorg
of
Russia),
Ministry
of
Foreign
Affairs,
State
Depository
for
Precious
Metals
and
Gems
(Gokhran),
Assay
Office
(the
Ministry
of
Finance
building).
Review
of
the
legislation
of
the
Russian
Federation
with
regard
to
the
implementation
of
the
KPCS,
procedure
for
approval
and
certification
of
rough
diamonds
export.
9:00
–
11:00
Lunch
11:30
–
13:00
1
August
2013,
PM
half
day
Presentation
of
the
system
of
state
control
and
control
operations
with
natural
diamonds
(State
Depository
for
Precious
Metals
and
Gems(Gohkran),
maintenance
of
statistical
database
of
export
and
import
of
rough
diamonds
(State
Depository
for
Precious
Metals
and
Gems(Gohkran);
14:00
–
15:00
Review
of
the
procedures
of
state
control
over
the
quality
of
sorting
and
evaluation
of
rough
diamonds
(State
Depository
for
Precious
Metals
and
Gems(Gohkran);
15:00
–
16:00
Russia
Federation
KP
Review
Report
–27
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03
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2013
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26

27.
Dinner
Personal
programme
Day
6
2
August
2013,
AM
half
day
Visit
to
the
centre
of
precious
metals
and
precious
stones
registration
(specialized
customs
station,
Smolnaya
St.,
12)
8:30
–
9:00
Review
of
the
work
of
customs
authorities,
the
state
control
of
the
Ministry
of
Finance
on
registration
form
of
import
/
export
of
rough
diamonds
(Smolnaya
St.,
12)
9:30
–
10:30
Review
of
the
production
of
diamonds
(“BRILLIANTY
ALROSA”)
11:00
–
12:00
Lunch
12:00
–
13:00
Visit
to
“The
Diamond
Treasury”
exhibition
in
the
Kremlin
14:00
–
16:00
Dinner
19:00
–
21:00
Day
7
Departure
from
Moscow
Annexure
2
List
of
Documents
provided
to
the
Review
Team
Type
of
Document
Document
Presentations
! Presentation
on
State
Control
System
of
Precious
Stones
Circulation
by
Gokhran
of
Russia
Legislation
! Russian
Federation
Administrative
Offences
and
Criminal
Codes
! Order
of
the
Ministry
of
Finance
of
the
Russian
Delegation
! Legislation
for
rough
Diamonds
! Resolution
of
the
Government
of
the
Russian
Federation
of
June30,
2004
No.
329
“On
the
Ministry
of
Finance
of
Russian
Federation”(as
amended.
Reports
! Russian
Federation
Annual
Report
for
the
Year
2012
! ALROSA
Annual
Report
for
the
Year
2012
Additional
Information
! ALROSA
Guide
to
the
Company
Russia
Federation
KP
Review
Report
–27
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03
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2013
Page
27