Anti-corruption activists have raised grave concerns about the formal and very public invitation from President Gotabaya Rajapaksa’s Government to investors engaging in serious financial crimes to park their “black money” in Sri Lanka’s commercial banks just months after Sri Lanka
At a press briefing on 1 May, 2020 Spokesman for the Cabinet of Ministers Minister Bandula Gunawardane said that expatriate Sri Lankans and local and foreign investors could deposit unlimited foreign currencies including “black money” in special deposit accounts at any private commercial bank in Sri Lanka.
In a letter addressed to the Secretary to the President, the Inspector General of Police and host of other Government officials, good governance activist and former head of the Ceylon Chamber of Commerce, Chandra Jayaratne said he was “appalled” by the news quoting Gunawardane that black money holders were formally invited to deposit foreign exchange in Sri Lanka receive premium investment yields. Jayaratne noted that according to Gunawardane, all such deposits will be free from any restrictions under local statues and regulatory framework
The letter calls on the officials to “advise” the cabinet of ministers that the shift in policy towards money laundering could have consequences on Sri Lanka’s ratings for compliance with global anti-money laundering initiatives and measures.
Jayaratne said that over the past several years, officials at the Central Bank, the Sri Lanka Police, the AG’s Department and the ministries of Finance, Justice and Foreign Affairs together with the CID, FCID and the Bribery Commission had taken several strategic initiatives collectively to reverse Sri Lanka’s negative rankings on money laundering risk.
The invitation comes only seven months after Sri Lanka was removed from international terror financing watchdog Financial Action Task Force’s ‘grey list’. FATF is an inter-governmental body established in 1989 to combat money laundering, terrorist financing and other threats to the integrity of the international financial system. In October 2019, FATF said Sri Lanka had made significant progress in addressing the strategic anti-money laundering deficiencies the body had previously identified.
In his letter Jayaratne warned of the consequential impact of national jurisdictional risks if Sri Lanka were reversed to its previous FATF rating as a country on the body’s Grey List.
The Special Deposit Accounts were announced by the Rajapaksa Government as the country faced an unprecedented foreign reserves crisis. It was a follow up to a desperate appeal from the Central Bank to Sri Lankans around the world to deposit their foreign currency in Sri Lankan banks “as a gesture of goodwill” for at least a three month period.
Already economically vulnerable Sri Lanka’s economy is being dealt a death blow by the corona virus which has shut down production in the country for over a month and cut export forecasts by over 40 percent for 2020. Since the beginning of 2020 Sri Lanka has had its credit rating downgraded twice by Fitch Ratings and was recently given a distrastrous B Negative rating. Fitch Ratings said Sri Lanka’s foreign reserves were in the range of USD 7.2 billion while the country owed over USD 3.2 billion in foreign debt payments between May and December 2020.
“Fitch estimates Sri Lanka’s external liquidity ratio, defined as liquid external assets/external liabilities, at about 64%, among the weakest in the ‘B’ rating category,” the rating agency said in its media release about the downgrade of Sri Lanka’s credit rating.
In a bizarre development the Sir Lankan Government under President Gotabaya Rajapaksa has taken to slamming Fitch Ratings for the downgrades and insisting that by the Government’s own calculations the country was in good economic health.
This week, the Economist rated Sri Lanka among the weakest of 66 emerging market economies, with a ranking of 61 in terms of its strength to face the economic crisis created by the corona virus. The only countries weaker than Sri Lanka, according to the Economist ranking were Angola, Bahrain, Zambia, Lebanon and Venezuela.
In the background of this devastating economic outlook, official invitations from the Government to money launderers and financial criminals would only erode confidence in the country’s financial system and warn off big investors who would view this policy as one of very high risk, financial experts warned.
Furthermore, the invitation would gravely endanger Sri Lanka’s foreign investments as powerful countries around the world are likely to include these statements as indicators of major risk in their country reports on Sri Lanka, scaring off investors.
It was unlikely that even well known money laundering destinations in the Caribbean Ocean and elsewhere in the world have ever publicly invited tainted money into their jurisdictions, financial experts said. (Chinthika De Silva)