This refers to the column appearing in the Opinion Section of Colombo Telegraph on 10.01.2019 under the caption “Governor Indrajit and EU ‘Blacklist’ On Money Laundering” by Mr. Amrit Muttukumaru, which carries erroneous allegations against Dr. Indrajit Coomaraswamy, the Governor and the Central Bank of Sri Lanka (CBSL). Therefore, CBSL wishes to provide the following information to readers of Colombo Telegraph to be aware of the action taken by the CBSL so far since July 2016, with respect to issues raised in the above article under reference.
a) In November 2017, Sri Lanka was listed as a jurisdiction with strategic Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) deficiencies in the Financial Action Task Force’s (FATF) Compliance Document (more commonly identified as “the Grey List”). Upon listing, a time bound action plan to address the strategic deficiencies identified in relation to AML/CFT was provided to Sri Lanka.
Since the listing, Sri Lanka has made a high-level political commitment and taken effective and tangible steps to implement the FATF Action Plan including passing Trust Ordinance (Amendment) Act No 6 of 2018, Mutual Assistance in Criminal Matters (Amendment) Act No 24 of 2018, Issue of Regulation implementing United Nations Security Council on DPRK and Iran, issuance of various directives and guidelines on the implementation of Regulation on DPRK and Iran, Issue of Customer Due Diligence Rule for Designated Non- Finance Businesses, implement risk-based supervision, enforcement actions and outreach for financial institutions and designated non-finance businesses.
The Governor, as the Chairman of the National Coordinating Committee established to coordinate AML/CFT matters, is committed to support global efforts in combating money laundering and terrorist financing and increasing Sri Lanka’s compliance level with the FATF Recommendations.
b) Regarding EAP group of companies and whether CBSL has done the appropriate due diligence; CBSL wishes to inform that all relevant parties were instructed to carry out the transaction in compliance with applicable laws, rules and regulations. Further, the banks concerned have proved confirmation as to the conformity with applicable laws, when funds were received to the country under this transaction.
c) The Central Bank of Sri Lanka (CBSL) has taken several regulatory actions against Perpetual Treasuries Limited, including the suspension of business and activities with effect from 06.07.2017, based on the findings of the regulatory investigations carried out by the CBSL and the recommendations made by the Presidential Commission of Inquiry (PCoI). Further, criminal proceedings against Perpetual Treasuries Limited and several individuals connected to the irregularities have also been initiated based on a complaint made to the Criminal Investigations Department by the CBSL.
Steps have also been initiated by the CBSL, by way of civil recovery action, to recover the unlawful gains made by Perpetual Treasuries Limited at the expense of the Employees’ Provident Fund.
d) A press notice is to be issued in a few days on the action taken by the Monetary Board of the Central Bank of Sri Lanka in carrying out forensic audits to implement recommendations of the Report of the Presidential Commission of Inquiry into Treasury bond issuances and this notice will also be available on the CBSL website.
e) On politically exposed persons being directors of banks, the CBSL being a statutory body is required to act upon the statutory powers afforded to it. In terms of the provisions of statutes administered by CBSL, there is no legal restriction for the politically exposed persons (PEPs) to be appointed as directors of banks. The criteria for the appointment, election and nomination of directors of licensed banks have been provided for in Section 42 of the Banking Act No. 30 of 1988, which does not impose any specific restriction on PEPs to be appointed, elected or nominated as directors of such banks.
Section 42 of the Banking Act, authorizes the Director of Bank Supervision (DBS) to assess the fitness and propriety of a person to be appointed as a director of a licensed bank, and accordingly, number of factors are considered by DBS, inter alia, possession of academic and professional qualifications, effective experience in banking, finance, business or administration, findings of any regulatory/supervisory authority, conviction by any Court in Sri Lanka or abroad etc., prior to granting his approval for such appointment. If a person satisfies the criteria given in section 42 of the Banking Act, DBS has the authority to approve such person as a director of a licensed bank, irrespective of his relationship with PEPs, since such relationship or affiliation has not been specified in the quoted section as a means of disqualification for being appointed as a director.
Accordingly, CBSL reiterates the fact that there is no restriction for appointments of PEPs as Board members of licensed banks in terms of law. However, if such person has committed any act/omission in contravention of any of the criteria given under section 42(2) of the Banking Act, amounting such person to be disqualified from becoming a director of a licensed bank, DBS/CBSL will consider such disqualification in assessing his fitness and propriety.
f) On the Panama papers; based on the news articles published in newspapers, the then Exchange Control Department (ECD) identified the Sri Lankan names listed in Panama Papers by browsing the website of the International Consortium of Investigative Journalists (ICIJ) in July 2016. An investigation was initiated in this regard in terms of the provisions of the Exchange Control Act (ECA) No. 23 of 1953.
During the investigation, required information was called from the relevant persons in terms of ECA. Most of the persons in the list declared that they didn’t possess any foreign assets as published in ICIJ website.
After conducting the investigation, no information was revealed on investments as published by ICIJ. However, based on the information revealed on other foreign assets, required measures were taken to continue the investigations as per the provisions of ECA. The time period prescribed by the Foreign Exchange Act No. 12 of 2017 to conclude investigations under ECA expired on 19.05.2018 as stipulated in the Foreign Exchange Act No 12 of 2017. These investigations also lapsed on that date.