This document provides guidance to strengthen the implementation of internal controls within the Kimberley Process Certification Scheme (KPCS). It outlines existing KPCS requirements for internal controls and recommendations from 2005 and 2006. The guidance aims to help Participants establish effective internal control systems to eliminate conflict diamonds from trade. It provides 23 recommendations addressing issues like cross-border trade controls, export documentation, production monitoring, licensing of miners/traders, and measures targeting known conflict areas. Participants are urged to implement applicable recommendations and report on progress to improve traceability and prevent conflict diamonds.
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2006 Administrative Decision on Internal Controls
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Administrative Decision
Improving implementation of internal controls in the KPCS
1. Internal Controls in the KPCS: Existing provisions
In accordance with Section IV(a) of the KPCS document, which comprises part of the
minimum requirements for Participants, each Participant should โestablish a system of
internal controls designed to eliminate the presence of conflict diamonds from shipments
of rough diamonds imported into and exported from its territoryโ.
Section IV(f) of the KPCS document further requires Participants, โwhen establishing a
system of internal controls, take into account, where appropriate, the further options and
recommendations for internal controls as elaborated in Annex II.โ
2. Development of recommendations relating to artisanal alluvial production,
Moscow Plenary, November 2005
In November 2005, Plenary adopted a Declaration on improving internal controls over
alluvial diamond production (the Moscow Declaration), setting out a number of
recommendations for effective internal controls over artisanal alluvial diamond mining.
Plenary noted that the Declaration should guide efforts to improve the traceability of
alluvial production, as well as help potential donors channel capacity-building assistance
to further the effective implementation of the Certification Scheme.
Plenary fully endorsed the finding of the sub-group on alluvial production that effective
internal controls in alluvial mining areas are crucial to the overall effectiveness of the
Kimberley Process Certification Scheme in preventing conflict diamonds from entering
the legitimate diamond trade. Plenary further noted that several review visits to alluvial
producer Participants have emphasized the need for further strengthening of internal
controls over artisanal production and an enhancement of the traceability of production
from mine to export. Plenary noted that action to this end will require both determined
action by the authorities of alluvial producer Participants and, in many cases, targeted
capacity-building assistance by other Participants and the international donor community.
Section 2 a) of the Moscow Declaration contains a number of key policies and actions
which, if implemented by artisanal alluvial producers, would significantly enhance their
ability to guarantee that only diamonds produced and traded in accordance with national
legislation and the standards of the KPCS would be exported. Section 2 b) of the Moscow
Declaration identified a number of areas in which concerted and focussed assistance by
bilateral and multilateral donors would be most valuable in enhancing national capacities
to ensure effective internal controls.
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3. Development of further guidance on effective internal controls, Gaborone
Plenary, November 2006
Participants and Observers recognise the need for more detailed guidance on effective
implementation of internal controls for all types of Participants building on and
complementing the Recommendations in Annex II, to ensure that every Participant has an
effective and credible system of internal controls in place.
The Ad Hoc Working Group on the Review of the KPCS has recommended in its report
to the Gaborone Plenary that:
โIn parallel with the Review of the KPCS, an additional list of internal control standards
for all Participants will be prepared complementary to the recommendations contained in
Annex II to the basic KPCS document. Key recommendations from the Moscow
declaration on improving internal controls over artisanal-alluvial diamond mining should
be integrated into this list. Implementation of the measures set out in it should be
promoted as part of the peer review system. Review visits should be mandated in a
revised Administrative Decision on Peer Review to assess specifically whether
Participants have effective measures in place, on the basis of the measures set out in such
an additional list of internal controls. Applicants for participation in the KPCS should be
invited to take into account, while designing national internal control measures, both the
mandatory and the optional KPCS requirements indicated in Annex II and in the
additional list of internal controls.โ
In developing this guidance, Plenary sought best practices and guidance which it
considered:
- proven, being implemented by at least one Participant, and therefore possible
- effective and directly relevant to the aim of excluding conflict diamonds from the
legitimate trade;
- proportionate in the costs and burdens imposed in relation to the impact and
benefits expected.
Plenary drew inter alia on the Moscow Declaration on improving internal controls over
alluvial diamond production, the resolution on illicit diamond production in Cote
dโIvoire, the existing recommendations in Annex II, the findings of the peer review
system to date, and the experiences of Participants in implementing internal controls
nationally.
4. Status of complementary guidance on internal controls
The guidance on internal controls in this Administrative Decision builds on the existing
requirements and recommendations and is intended to be complementary to them, and
without prejudice to them in any way.
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It is hoped that this complementary guidance on internal controls, together with the
recommendations in Annex II, will be helpful to all Participants seeking to establish and
implement a system of internal controls โdesigned to eliminate the presence of conflict
diamonds from shipments of rough diamonds imported into and exported from its
territoryโ in accordance with Section IV(a) of the KPCS document.
Plenary therefore urges every Participant to work towards fully implementing an
effective and credible system of internal controls drawing on:
- such of the measures outlined herein and recommendations in Annex II as
are applicable and appropriate to it, or
- such alternative system of internal controls as it deems necessary and
appropriate,
in either case, so as to achieve the objective of eliminating the presence of conflict
diamonds from shipments of rough diamonds imported into and exported from its
territory.
Consistent with the structure of the KPCS, all internal control measures, including those
set out herein, should be implemented in accordance with applicable national legislation
of Participants.
5. Technical assistance
Kimberley Process Participants with the capacity to provide relevant assistance, as well
as other multilateral and bilateral donors, are encouraged to provide support for the
implementation of effective internal controls, drawing upon the recommendations in
Annex II to the KPCS document and the complementary guidance on internal controls in
this Administrative Decision.
6. Follow up through the peer review mechanism
Plenary agrees that regular follow-up to recommendations and guidance on internal
controls will enhance their operational impact.
a) annual reports and reporting to Plenary
Plenary requests the Working Group on Monitoring to include a provision for reporting,
on a voluntary basis, on steps taken to implement the guidance on internal controls herein
in annual reports to be submitted by Participants regarding their implementation of the
KPCS in 2006 and subsequent years. This is addition to the existing provision for
reporting on implementation of the requirements of the KPCS (in particular Sections II,
III, IV and V of the KPCS document), which may include information on the extent to
which Participants are making use of the recommendations set out in Annex II.
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Plenary further requests the Working Group on Monitoring to report to Plenary in 2007
on the impact of all recommendations and guidance concerning internal controls,
including those included herein.
Plenary also encourages Participants who are willing and able to do so to report to
Plenary in 2007 on:
- Progress made towards improving the implementation of internal controls,
includingon the basis of guidance set out herein;
- Capacity-building assistance for improving internal controls in Participants, as
provided by other Participants and by bilateral and multilateral donors.
b) peer review visits
Plenary requests that future peer review visits assess implementation of all internal
controls, including the guidance set out herein,, and enter into dialogue on any internal
control measures whose implementation in the Participant under review would be
particularly beneficial to improving the effectiveness of that Participantโs internal
controls, whilst remaining conscious of the distinction between the minimum
requirements of the KPCS, and other provisions.
7. Applicants
Plenary requests that this Administrative Decision be brought to the attention of
applicants for KPCS participation, and further requests that the Participation Committee
enter into such dialogue as may be deemed appropriate with any applicant designing a
system of internal controls, on the basis of the KPCS document, including Annex II
thereto, and the complementaryguidanceon internal controls set out herein.
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Complementary guidance on internal controls
Implementing effective controls of cross-border trade
1. Participants should ensure that international payments for all purchases ofrough
diamonds are routed through banks rather than informal banking systems, and, where
possible, supported by verifiable documentation.
2. Participants should carry out physical inspections of imports and exports of rough
diamonds, consistent with national legislation, either on a comprehensive basis or on
the basis of a risk assessment (including random checks); such checks should include
examination of the value and, where possible, stated origin of diamonds in a given
shipment.
3. Participants are encouraged to require basic proof of identity and address of
exporters, and, in consultation with other Participants, as appropriate, of importers
before issuing certificates for exports of rough diamonds.
Export Processes
4. Before issuing a Certificate, exporting authorities are encouraged to request, in
accordance with national legislation, and in addition to a declaration that the rough
diamonds being exported are not conflict diamonds, appropriate supporting evidence
of the conflict-free origin of diamonds (which, in the case of producing participants
could include details of the production source, weight, characteristics,mining
operator, and receipts from any internal trade, and, in the case of non-producing
Participants, could include proof of legitimate import).
Ensuring effective enforcement of the Certification Scheme
5. Every Participant should where possible, in accordance with national legislation,
revoke the trading licenses (if any) of individuals or companies convicted of activities
relevant to the purposes of the Certification Scheme;
Internal controls in Participants with diamond production
(i) Ensuring traceability of production from mine to export
Every Participant with diamond production is encouraged to:
6. Ensure that all diamond mining operations (whether industrial, semi-industrial and/or
artisanal) are subject to licensing, and that implementation of this requirement is
verified on a regular basis by the authorities; and
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7. Require that full records of production (including place of production; weight; and, to
the extent possible, qualitative characteristics of diamonds produced) are kept by all
diamond mining operators.
(ii) Regulating diamond mining
Every Participant with diamond production is encouraged to:
8. Ensure regular cross-checking of aggregate reported production against the aggregate
actual capacity estimated by geological surveys, to the extent these are available to
government authorities (and where they are not available, Participants,particularly
those with artisanal production, are encouraged to carry out detailed geological
surveys of potential and actual production capacities in mining areas, or to work with
donors and/or exploration companies, as appropriate, to that end); and
9. Check the production capacity of individual mining sites against the production or
sales reported by these mining sites at regular intervals.
Control over Diamond Mines
10. Participants with industrial mines are encouraged to make available publicly a
register of licensed mines on their territory.
Participants with Artisanal Diamond Mining
11. Participants with artisanal diamond production are encouraged to put in place
functioning cadastre systems to maintain accurate and up-to-date information on
production areas and mining licenses granted, and ensure that the information
contained in cadastre entries is fed into and cross-checked against the information
derived from production reports.
12. Participants with artisanal diamond productionshould carry out periodic random spot
checks at mine sites to verify that all miners are licensed.
13. Participants withartisanal diamond productionshould work towards implementing a
system that ensures traceability of production from mine to export based on the
recommendations set out in the Moscow declaration.
14. Participants with artisanal diamond production are encouraged to move towards fully
computerized systems for registering and tracking the volume and origin of diamonds
produced and traded up until the point of export.
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Buyers, Sellers, Importers, Exporters, Polishers and Cutters and other Economic
Operators handling Rough Diamonds
15. Participants which register and license diamond buyers, sellers, exporters, agents and
courier companies involved in carrying rough diamonds in accordance with
Recommendations 13 and 14 of Annex II to the KPCS document are encouraged to
require information on any criminal convictions, in accordance with national law,
before issuing a licence. Participants are encouraged to update any such register
periodically, and to make the names of licence-holders publicly available, where
national legislation permits.
16. Participants should ensure appropriate controls, consistent with national legislation,
over activities of buyers, sellers, exporters, importers, polishers and cutters of rough
diamonds, and others involved in handling rough diamonds, to ensure compliance
with applicable national rules implementing the KPCS. To that end, Participants
should ensure that rough diamond buyers, sellers, importers and exporters maintain
verifiable records (including stock controls, KP certificates and purchase and sales
data), and, where possible, carry out checks to, inter alia, reconcile invoices with
Kimberley Process Certificates, and to reconcile trade with annual stock declarations.
Regulating the trade in artisanally-mined diamonds
17. Participants with artisanal production and internal trade should:
โข Verify buying licences on a regular basis;
โข Ensure that daily buying records are kept and are regularly submitted to the
appropriate authorities;
โข Undertake spot checks to ensure that traders are able to account for the origin of
all rough diamonds sold; and
โข Undertake spot checks to ensure that licence numbers given on receipts
correspond to the actual origin of the diamonds.
Industry self-regulation
18. Every Participant with diamond trade or polishing is encouraged to establish a system
of industry self-regulation, with appropriate oversight bygovernment. Such a system
of industry self-regulation could include the following components:
โข Membership by individuals and companies trading rough diamonds in self-
regulatory bodies for the rough diamond trade;
โข The adoption by such bodies of internal codes of conduct or bye-laws, subject to
enforcement by internal disciplinary bodies (including expulsion from
membership for serious violations of the internal codes of conduct or bye-laws);
such bodies should share information relevant to the implementation of the KPCS
with their members upon request of the supervisory authority;
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โข The requirement for members of suchbodies to have their records subjected to
independent auditing at regular intervals to ensure that all rough diamonds traded
by them can be traced to imports with valid KP certificates or to pre-KP stocks;
โข Spot-checks by the supervising authority to ensure that audit requirements are
respected; and
โข Facilitation of procedures for the issuance of KP certificates for members of such
bodies by the relevant KP exporting authority (โfast trackโ procedures), subject to
effective supervision by the exporting authority of the effectiveimplementationof
the system of self-regulation.
Accounting for the volume of rough diamonds polished
19. Every Participant with companies or individuals engaged in the polishing of rough
diamonds is encouraged to account on an annual basis for the overall volume of rough
diamonds used for cutting and polishing in its jurisdiction.
Free Trade Zones
20. Participants with free trade zones in their jurisdictions should license diamond buyers,
sellers, exporters, dealers, traders and cutters and polishers intending to deal in rough
diamonds in such zones, and should request details of any stock of rough diamonds
held by any such operators.
Actual conflict diamond situations
21. In addition to identifying areas of rebel mining activity, Participants that produce
diamonds and that have rebel groups suspected of mining diamonds within their
territories should provide as much information as possible about the quality
characteristics and quantity of production in such areas to the Chair.
22. Participants that produce diamonds in regions that have rebel groups suspected of
mining diamonds are encouraged to include qualitative data on individual diamond
shipments with each Kimberley Process Certificate issued.
23. Participants are encouraged to carry out targeted checks on imports and exports for
conflict diamonds, in accordance with national legislation and based on credible
evidence of the risks of conflict diamonds, which may include informationprovided
by the Chair concerning the characteristics of conflict diamond production.
Participants are encouraged to ensure that trade bodies and industry self-regulatory
organisations disseminate to their members any additional instructions relating to
conflict diamond production and measures requested of their members.
Gaborone
November 2006