Lesotho, renowned for producing some of the highest-quality diamonds in the world, finds itself in the paradoxical position of being both a legitimate source of gemstone exports and a jurisdiction vulnerable to illicit diamond trade. While diamonds are a key source of national income and foreign investment, the integrity of this sector is increasingly threatened by smuggling, informal mining, and regulatory evasion. Although the country has made commendable efforts to align with international norms, such as the Kimberley Process Certification Scheme (KPCS) and Financial Action Task Force (FATF) recommendations, implementation challenges and outdated legislation have limited the impact of these measures.
The diamond sector is primarily regulated through the Precious Stones Order of 1970 and the Mines and Minerals Act of 2005. While the Precious Stones Order seeks to control the possession and sale of uncut diamonds, its provisions are severely outdated and lack adequate deterrents or mechanisms to address modern illicit trading methods. Similarly, the Mines and Minerals Act outlines the procedure for acquiring prospecting and mining rights, but it does not explicitly criminalise unauthorised trade or offer a detailed enforcement framework for the prosecution of related offences.
Compounding the problem is the widespread existence of informal mining operations. Artisanal diggers, who operate outside any legal recognition or licensing regime, frequently extract diamonds from known deposits, sometimes near or within licensed areas. These stones are often sold directly to unlicensed buyers, transported across Lesotho’s porous borders into South Africa, and laundered through legitimate channels. The absence of a framework to formalise artisanal and small-scale mining (ASM) means that such operations remain invisible to regulatory authorities and outside of any taxation or beneficiation structure.
Cross-border smuggling is further facilitated by weak customs enforcement and a lack of digital tracking tools. Although Lesotho participates in the KPCS, it has faced criticism for inadequate internal controls, limited transparency, and inconsistencies in recordkeeping. Informal trade routes, lack of border surveillance, and limited prosecutorial capacity have enabled unregulated diamonds to bypass formal export systems.
Corruption and regulatory capture also play a role in the persistence of illicit trading practices. Reports of politically exposed persons receiving favoured access to concessions or shielding individuals from compliance requirements have surfaced. These patterns erode investor confidence and undermine the credibility of public institutions tasked with overseeing the sector.
Legal consequences for involvement in illicit diamond trading in Lesotho exist in principle but are rarely enforced in practice. Under the Precious Stones Order, unauthorised possession or sale of diamonds constitutes a criminal offence. Individuals convicted under the Order may be subjected to fines, imprisonment, or both. In aggravated cases, such as organised smuggling or fraudulent declarations, offenders may also face charges under Lesotho’s Penal Code or anti-corruption statutes. Where illicit diamond proceeds are laundered through financial institutions, both the perpetrators and complicit institutions may incur liability under the Financial Institutions (Anti-Money Laundering and Countering the Financing of Terrorism) Regulations. However, in the absence of proactive investigation and prosecution, these legal provisions have had limited deterrent effect.
The regulatory vacuum around beneficial ownership and corporate transparency exacerbates the issue. Without a centralised database or mandatory disclosure requirements, it is difficult to identify the natural persons controlling companies involved in diamond trading. This creates loopholes through which criminal actors can exploit nominee structures or shell entities to conceal illicit proceeds.
To address these issues, Lesotho requires a suite of legal and institutional reforms. First, the Precious Stones Order must be repealed and replaced with a comprehensive statute that addresses current risks, includes digital tracking mechanisms, and imposes enhanced penalties for illegal activity. Second, the country should develop a regulatory framework to formally license and monitor artisanal and small-scale mining operations, incorporating environmental and social safeguards. Third, a centralised registry of diamond transactions and mining rights should be established, linked to customs and revenue systems. This would allow for real-time monitoring and greater transparency in the supply chain. Fourth, improved coordination between the Ministry of Mining, the Financial Intelligence Unit (FIU), the Lesotho Revenue Authority, and the Directorate on Corruption and Economic Offences (DCEO) is essential for effective enforcement.
Illicit diamond trading in Lesotho is not merely a legal infraction; it is a threat to economic governance, fiscal stability, and the rule of law. A comprehensive, enforceable, and modern legal framework, together with the political will to apply it is essential to restore accountability in the diamond sector. The time to act is now, before systemic erosion of trust and transparency becomes irreversible.