Belgium probes murky world of cash, diamonds and banks such as HSBC

The dealings between gem traders and bankers are coming under new scrutiny as European governments extend crackdowns on tax evasion and money laundering.

The complex ties between Antwerp's bankers and its diamond merchants have investigators especially worried. Government authorities, they warn, are easily outpaced by an industry skilled at moving vast amounts of money through international transfers, backed by diamonds or offshore cash as collateral.

"Our investigative resources are like a Citroen economy car, while our targets are flying and using jets," said Jean-Claude Delepihre, director for the past 20 years of the Belgium Financial Intelligence unit, an agency that sorts through reports of suspicious transactions for prosecutors. "We can't be naive, because the interests are enormous."

In late October, the Brussels prosecutor dispatched a small army of investigators in connection with an inquiry by Judge Michel Claise to stage dawn raids on the Antwerp homes of a number of diamond dealers in a tax-evasion investigation focusing on HSBC and its Swiss branch in Geneva. HSBC, which says it is co-operating with the Belgian authorities, was targeted because of information leaked to various governments by Hervi Falciani, a former bank employee.

"What is important to understand is that it was the biggest diamond network ever," Falciani said.

In November, the Flemish newspaper De Tijd reported that of almost 3,000 secret Swiss accounts at HSBC on a list provided by Falciani, 70 per cent were held by diamond dealers.