Following the Murky Trail Left by Diamonds and Cash A square mile of traders in Antwerp, Belgium, forms the hub of the global diamond industry. ANTWERP, Belgium - The bond between banker and diamond dealer has long been a cozy one in an industry shaped by an insular culture of carats and cash, secrets and intrigues, weddings and bar mitzvahs. But lately those old bonds are dissolving in the packed square mile of gem traders here that forms the hub of the global diamond industry. Jean-Claude Delepière, director of a Belgian agency that seeks to discover money laundering, says the battle is an uphill one. A flurry of legal cases, investigations and leaked bank documents have drawn attention to the opaque movement of diamond-backed money. The dealings between gem traders and bankers are coming under new scrutiny as European governments extend crackdowns on tax evasion and money laundering at a time of persistent economic trouble. 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 Citroën economy car while our targets are flying and using jets," said Jean-Claude Delepière, 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 naïve, 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 the banking giant HSBC and its Swiss branch in Geneva. HSBC, which says it is cooperating with the Belgian authorities, was targeted because of information leaked to various governments by a former bank employee, Hervé Falciani, who has cast himself as an industry whistle-blower. "What is important to understand is that it was the biggest diamond network ever," Mr. Falciani said in an interview. Belgium is in the middle of a very big investigation. In November, the Flemish newspaper De Tijd reported that of almost 3,000 secret Swiss accounts at HSBC on a list provided by Mr. Falciani, 70 percent were held by diamond dealers. Those murky ties have drawn unwanted attention to Omega Diamonds, one of the largest importers of African diamonds, which faces fines of up to $6.3 billion in a customs fraud trial that started in November. Omega is accused of a scheme to avoid taxes from 2003 to 2008 by transacting deals for Congolese diamonds through dozens of offshore companies and banks in Dubai and Geneva, before allegedly transferring the money back to Belgium. The most epic clash, however, pits the century-old diamond cutting and polishing merchants of New York, Lazare Kaplan International, against Antwerp Diamond Bank, an almost 80-year-old institution on the edge of the Antwerp rail station. For more than two decades, the two companies were intertwined in business. But they became bitter enemies after Lazare accused the bank of helping a high-living Israeli dealer launder $135 million from the sales of Lazare's rough diamonds through secret Swiss accounts, claiming he did not repay the New York company for its stones. The bank denies the allegations, which Lazare made in criminal and civil lawsuits in Antwerp and New York, and accuses Lazare of using the lawsuits to avoid paying debts of almost $45 million it owes to the bank. The hunt to recover the $135 million is now a full-time quest for Leon Tempelsman, 57, Lazare's president. He has become a fixture in courtroom hearings alongside his father, Maurice, 84, chairman of the board and a native of Antwerp who was the last romantic companion of Jacqueline Kennedy Onassis. "Our objective is recovery and not revenge," said the younger Mr. Tempelsman. We trusted our banks and expected the banks and bankers to conduct themselves in conformity with the law. We were wrong. Even for someone like him, with a long family history in the diamond business, the case has become Exhibit A in exposing the underside of an industry increasingly capable of exploiting the easy movement of money across borders, and the extraordinarily complex financial transactions often used to disguise it. Because of the nature of the product, "the diamond trade lends itself to financial abuse," Mr. Tempelsman said.