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India Focuses on Fighting Fraud

Jan 5, 2017 4:20 AM   By Joshua Freedman
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RAPAPORT... India has beefed up its diamond disciplinary capabilities to put a stop to bankrupt traders setting up new companies to escape debts and curb other fraudulent activities.

The new Trade Disciplinary Committee will have more power to target scams than India’s existing diamond trade organizations, according to Sanjay Kothari, the convener of the new panel. It will also have increased ability to ban members from Mumbai’s Bharat Diamond Bourse (BDB).

At present, the Gem & Jewellery Export Promotion Council (GJEPC), the BDB and the Mumbai Diamond Merchants’ Association (MDMA) have their own separate arbitration processes. This means each organization can only bring its own members to task. In addition, the Indian legal system struggles to deal appropriately with ethical breaches in the trade, Kothari claimed.

These realities mean a trader can often go bust or mislead a bank and then open a new, outwardly clean business and get away unpunished.

“The idea is to see people don’t go scot-free and start a new business as soon as they go bankrupt,” Kothari told Rapaport News. “The legal system is such that it takes a long time at the moment.”

The 21-person Trade Disciplinary Committee will govern all members of the GJEPC, the BDB and the MDMA. It will comprise representatives from the three groups, with three or five impartial members chosen to hear each case. Once they have given a consensus, the verdict will be taken to the rest of the panel for review.

As well as bankruptcy and fraud matters, the committee will consider cases of non-disclosure of synthetics, false inscriptions and other ethical breaches.

“The old system was loose – you couldn’t force people to come,” added Kothari, a former chairman of the GJEPC. “Now we’ll be able to force people to come. We can remove membership from the BDB, ban them from the bourse. Before we couldn’t do that.”

The GJEPC approved the new system at its annual general meeting in December, with the other trade groups involved set to give it the go-ahead in the coming month.
Tags: bankruptcy, Bharat Diamond Bourse, fraud, India, Joshua Freedman, MDMA, Mumbai Diamond Merchants’ Association, Sanjay Kothari, Synthetics, Trade Disciplinary Committee
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