Adapted from a forum post originally written by denverappraiser of American Gem Registry
'Conflict diamonds', 'blood diamonds', and similar terms are used to describe stones where the stones' history contains at least one worker who was not treated fairly. Of late, this has referred to revolutionaries in Sierra Leone and Angola who have been using slave labor to mine diamonds and then using the proceeds from the mining to fund their war but there have been plenty of other similar issues over the years.
Diamonds have been synonymous with money for a long long time, and money has been a part of war since money was invented. Plundering natural resources has been one of the primary purposes of almost every war ranging from the Spanish conquistadors to the Iraqi invasion of Kuwait. Although it's not usually about diamonds, it's a very similar issue whether you're talking about gold, iron, lumber, or oil, and all have all been plagued with similar problems. The manufacturing processes can also be done in an exploitive fashion and has lead to abuses in India, China, Vietnam, Russia and many other places.
There is no scientific test to know where a particular stone was mined, where it was cut or who was involved in the various processes although there are more clues available than there are with, say, oil or gold. The customary solution involves a certification system called the Kimberly Process where every time the stone changes hands during its path from the mine to the retailer the seller must declare that they either mined it themselves using UN approved methods or they bought it from someone who provided them with the this assurance. This produces a chain of certification that leads all the way from the mine to the consumer. It works pretty well, and there has been an international treaty making it illegal to import diamonds into the United States, Canada, Europe, Japan and most of the rest of the world without Kimberly Certification since 2002. If you buy a stone from a legitimate dealer in one of these countries, this solves about 99% of the problem.
There are some brands of diamonds where part of the value of the brand is that they guarantee the origin. The government of the Northwest Territories in Canada has a certification of stones mined and cut in Canada and, presumably, that process doesn't involve slaves or recently stolen lands. The governments of South Africa and Botswana have similar programs although they aren't as well marketed in the US as the Canadian goods. There are also cutting houses that offer various statements about how their workers are treated and where they get their supplies as part of their brand marketing. Most dealers can get these stones if you ask about them.
Another tactic is to buy vintage or antique stones. This doesn't guarantee that your stone was mined in a responsible way but at least it means that you aren't contributing to the current crop of pirates in Africa. Diamonds recycle pretty well and recycling is a good thing in its own right.
There is another side to this as well. Mining and manufacturing of diamonds is a major economic activity for many of the nations of the world and it's the way that hundreds of thousands of people feed themselves and their families. The tendency to boycott diamonds entirely, or to buy exclusively Canadian goods over these issues is harming exactly the people that it's supposed to help. The flip side of avoiding 'blood diamonds' is to encourage the consumption of 'development diamonds'. There are fine people in Botswana, Namibia, South Africa and many other places who both need and deserve your business every bit as much as the Canadians do.
Every diamond legally imported into the United States since 2002 has been required to be part of the Kimberley process whether it came from Canada, Namibia, Australia or anywhere else. Every major diamond producing, diamond consuming or diamond processing country is a signer to Kimberley including China, India, Sierra Leone (where the DeCaprio movie is set) and even traditional 'bad guy' states like Russia and Vietnam. You would find it hard to buy a conflict diamond in the US, Europe, Canada, Japan et al if you tried. 0.1% of the world supply is still a serious problem, and the industry, the non-profits and the affected countries are working hard to make that even smaller but this is not nearly the problem that people are expecting based on the Hollywood portrayals.
Congratulations on wishing to spend your money in a socially responsible way.