29 October, 2020

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Colombo International Financial City; A Money Laundering Hub?

By Amrit Muttukumaru

Amrit Muttukumaru

Amrit Muttukumaru

The controversial Chinese funded ‘Colombo Port City’ project has been re-christened also without public consultation as ‘Colombo International Financial City’ to establish an offshore financial centre as the centerpiece of the re-claimed land adjoining the Galle Face Green. It is said to “fill the vacuum between Singapore and Dubai” and touted as a “major income earner and an employment provider for Sri Lanka”.

This is all well and good if the country like Singapore has a pool of competent legislators and civil servants with integrity and a track record of adherence to the rule of law. Sadly there is no comparison. Of course Sri Lanka scores on democratic values which are dwindling.

The lack of transparency in responding to public concerns on environmental, land alienation, land use and employment issues is not the focus of this article. Its focus is on the integrity of the ‘Colombo International Financial City’ which is dependent on the political will to have and comply with internationally accepted accounting/financial standards and regulations. If there is any breakdown or compromise as is the wont in this country, the ‘Financial City’ may end up as a hub for money laundering by drug dealers, arms dealers, the mafia, politically induced corruption and as a source of terror funding.

Political Will

Examples galore under successive administrations of there being no political will for transparency in governance and upholding the rule of law particularly since then President J.R. Jayewardene in the post 1977 period is said to have issued the invitation – “Let the robber barons come“!

In the area of financial services under the present Yahapalanaya government there is no better example than the alleged Central Bank Treasury Bond scams which are still festering and the failure of the new Governor to restore the battered credibility of the CB through a transparent in-house investigation to determine whether due process was breached and by whom. Other examples under Yahapalanaya include (i) credible allegation of the shameful attempt by a Cabinet sub-committee to make the ‘National Audit Bill’ ineffective by the removal of some key provisions (ii) farcical ‘Constitutional Council’ for good governance where 7 of its 10 members are politicians. The purported ‘independent’ commissions are established under it and the CC recommends appointments to key State institutions which include the judiciary.

There is also no political will to get to the root of credible allegations of financial and other crimes under the Rajapaksa administration and hold those concerned truly accountable. This is most likely a continuation of “You scratch my back and I’ll scratch yours” syndrome which is a feature in this country not necessarily confined to politicians. Any deviation from this practice will most likely be for political or pecuniary expediency.

Under the circumstances, is it reasonable to expect the ‘Financial City’ to be administered with integrity?

Heroin Detections, Casinos, Floating Armoury

If frequent detections of large quantities of illegally-trafficked drugs such as heroin on the high seas is the  tip of the iceberg, Sri Lanka may well be on the way to becoming a regional hub for illicit drugs. There are allegations of a nexus between drug dealers and politicians. Stories doing the rounds of widespread corruption in the customs establishment in the context of the alleged extravagant lifestyles of many customs officers does nothing to allay the fears one may have in the integrity of the proposed ‘Financial City’.

Although not much is heard today of the proposed setting up of large casinos initiated during the Rajapaksa administration, the public are all at sea on the actual position under the current Yahapalanaya government. The rate at which the Sirisena-Wickremesinghe administration are resurrecting Rajapaksa initiated projects which they condemned in the run-up to the elections, the country may also be on the verge of becoming a regional casino hub with all its likely implications for money laundering and mafia activities. It is possible that the feasibility of some major property development investments in the heart of Colombo is dependent on the establishment of large casinos. The writer is not stating that establishing casinos per se is all bad. In this day and age it can be argued it is inevitable particularly if tourism is going to be a major contributor to the economy. What needs to be flagged is that there must be appropriate laws and regulations which are enforced and zero tolerance of corrupt practices. Is this likely in the Sri Lanka of today? Will the government shed clarity on this issue?

Much controversy also surrounds the legality or otherwise of the activities of Avant-Garde Maritime Services (Pvt.) Limited said to be operating a floating armoury on the high seas and alleged to be engaged in money laundering. The government claims it has led to the country incurring a loss in excess of Rs. 11 Billion. Confusion is worse confounded after two senior Cabinet ministers in the Yahapalanaya government allegedly defended Avant-Garde after which one of them resigned.

This is the ground reality in a country that proposes to have an ‘International Financial City’ to function as an offshore international financial centre.

CA Sri Lanka – Corruption

Given the political and socio-economic ground reality of present day Sri Lanka, it is difficult to envisage an ethical and transparent ‘Colombo International Financial City’ respecting the rule of law. A major impediment are influential sections of our professionals – particularly Chartered Accountants/Auditors and lawyers.

I state with responsibility that CA Sri Lanka (Institute of Chartered Accountants of Sri Lanka) which regulates the country’s Chartered Accountants and Auditors is corrupt. After all, Chartered Accountants and Auditors are the first line of defence against corruption in all entities dealing with financial resources.

I ask could the alleged terrible corruption and abuse of power under the Rajapaksa administration have taken place without the complicity of professionals and business leaders? 
Let me emphasise – this by no means exonerates wrongdoing by politicians. They must be held accountable for their command responsibility.

The integrity of CA Sri Lanka is heavily compromised due to its shameful conduct after my complaint made as far back as 8 August 2005 of the Professional Misconduct by the Sri Lankan affiliates of PwC and Ernst & Young in the fraudulent privatization of the Sri Lanka Insurance Corporation (SLIC). To date it has not concluded its investigation, has reneged on its undertakings given to me and kept me the complainant in the dark. This is notwithstanding several written reminders. The undertakings include:

(i) “to complete the investigation early and transparently.” (Ref. e-mail of 13 March 2006)

(ii) “After investigation is completed you will be informed of the determination.”  (Ref. e-mail of 18 March 2006)

(iii) “The rationale for the determination would be given” (Ref. e-mail of 18 March 2006)

Notwithstanding these written undertakings, I was informed by Secretary, CA Sri Lanka in his ‘Registered’ letter dated 3 August 2016 marked ‘Confidential’:

“The Council has directed me to inform that the Council appointed committees to inquire into your complaint and the proceedings of the said inquiries are now concluded.

Therefore, we wish to inform you that this matter is now closed.

Does this not confirm CA Sri Lanka corruption? It is appalling that CA Sri Lanka keeps a major public interest issue ‘Confidential’!

While PwC (Indonesia & Sri Lanka) functioned as Consultant, Investment Banking and Legal Advisory Services to the Government of Sri Lanka, Ernst & Young (Sri Lanka) were the Auditors to SLIC.

In the context of all ‘Partners’ under the ‘Partnership’ law in Sri Lanka being ‘Jointly and severally’ liable for any wrongdoing, my demand that CA Sri Lanka:

forthwith discloses in the public domain the identity of those who were ‘Partners’ of PwC and EY for five years prior to 11 April 2003 which is the date on which the scandalous SLIC privatization took place” has been ignored.

It is outrageous that some Partners falling under this period are appointed directors of quoted companies and banks. Some have even been appointed to the Quality Assurance Board of CA Sri Lanka!

It is baffling why even those purportedly battling corruption such as Friday Forum and its convener – Chandra Jayaratne, Transparency International Sri Lanka and its leading light – J.C. Weliamuna, Citizens’ Movement for Good Governance and its President – Dr. A.C. Visvalingam  steer clear of naming and shaming and demanding accountability from the Partners concerned of PwC and Ernst & Young faulted for grave professional misconduct by the Supreme Court, Parliament’s watchdog COPE, the Attorney-General and CA Sri Lanka’s Ethics Committee itself in the scandalous SLIC privatization.

It is in this context that unbridled corruption flourishes with impunity.

Conclusion

An article in ‘The Guardian’ titled ‘Dubai’s dark side targeted by international finance police’ inter alia alleges:

Fears are intensifying that the emirate has become a global centre for terror funding, money-laundering, drug money and mafia cash”

“United Arab Emirates is not so much awash with vast oil wealth but built on a toxic tide of illicit cash: a place where Russian mafia and drug cartels clean their dirty cash and alQaida finances terror atrocities. And at its heart is Dubai, a world financial centre

Will the same be true of the ‘Colombo International Financial City’?

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Latest comments

  • 8
    3

    Amrit,

    What is wrong with money laundering? All leading countries in the world do it. Where do you think the 19 billion dollars siphoned by MR gone. Do you mean to say Dubai or Seychelles did not have a hand in laundering this money or Switzerland for that matter. Australia too has been a beneficiary of the Rajapaksa largesse. Why do you think MR still gets the red carpet welcome in Malaysia and Singapore not to mention Uganda for that matter even though he is no longer the president of Sri Lanka.

    • 5
      0

      BBS rep, why don’t you help authorities to recover the 19 billion (some say it is 18 and others 20) by divulging all the information in your possession.

      Soma

      • 1
        0

        Like the cancelled Indian Coal Power project in Sampur, the Chinese money laundering city in Colombo should also be cancelled!

        Environmental groups must file cases against the Chinese Port city in various courts in the country and continue to block this environmental and financial disaster in the making.

        Look at all the useless Chinese white elephants in Hambantota, this port city in Colombo will be another useless white elephant and Sri lankans will have to bear the environmental cost of it!

  • 6
    4

    In Sri lanka, most of the commercial frauds and Criminal acts are by politicians and their affiliates.

    One example, is Ravi Karunayakae had an accusation for foreign exchange fraud or something like that. That is taking large amounts of money from Raj Rajatathnam who is now in jail for investment fraud and supportig LTTE with that money. He was postponing the case until the 100 day govt came. As soon as that happened, he recurited a retiring Judge to hear the case. He won the case, and the Judge retired.

  • 4
    0

    ““United Arab Emirates is not so much awash with vast oil wealth but built on a toxic tide of illicit cash: a place where Russian mafia and drug cartels clean their dirty cash and alQaida finances terror atrocities. And at its heart is Dubai, a world financial centre”

    Will the same be true of the ‘Colombo International Financial City’”

    Perhaps that may be the final objective of the wine guzzling pretentious Buddhists and part-time Buddhists occupying the seat of power in Colombo.

  • 4
    0

    Hear, hear!

    I think the only way to purge the state and the private sector of this malice is to
    a) get rid of all current politicians and replace with younger and unblemished ones,
    b) get rid of political appointments and use merit as the sole criterion, and
    c) change Sri Lankan culture to NOT favour family members, co-ethnics and co-religionists.

    Then and ONLY then can we hope to have Yahapalanaya.

    • 2
      0

      “get rid of all current politicians and replace with younger and unblemished ones,”

      Where do you find younger and unblemished ones, almost 90 percent is half corrupt already due to the immoral guidance given by the educated professionals and the politicians. Apples do not fall far from the tree.

    • 3
      0

      Sinhalese Buddhist,

      You are dreaming man!
      But dreams are the only means of us Lankans surviving each new cabal which takes over after each election.

      Many expectations of the MS government have been dashed on the alter of political expediency.

      As you say the ‘farcical’ Constitutional Council is the bottom tier of misgovernment, nepotism and mismanagement.

  • 2
    2

    Amrit Muttukumaru,

    Apropos your question ‘Will the same be true of the ‘Colombo International Financial City’?’, the answer is that Colombo is making considerable strides to take its place in the highest echelons of this global game.

    One practitioner of the dark arts told me that we will be “second to none”. “What they can do, we will do better.” This person is a past holder of the Emile Savundra Trophy for Financial Innovation. Remember the old fraud? He who coined the phrase ‘Mr Frost, in business there is NO ethics, only legality’. We have now gone beyond that.)

  • 1
    0

    We have to start some where. Being pessimistic will not work. Money laundering drug trafficking casinos financial frauds death squads white vans are already there. Can we import politicians. No. We have to work with the corrupt ones. What is urgently required is to strengthen the legal frame work and clean up the politicized admin network and the judiciary. We cannot have a successful financial hub in a country where a debt recovery case takes an average of six years and a land dispute case could take over 50 years.

    • 0
      0

      One way to attack bribery and corruption is to make the Inland Revenue Department independent where officials may work without fear or favour.
      No political inference should be tolerated. The cleanup will be slow and gradual but we can, hopefully, recover the earlier sublime standards in due course. Another method is to create a separate Court – like the Commercial Court – to dispose of IRD-related cases for speed, efficiency and good example.

      Kettikaran

  • 2
    0

    According to well recieved and cross checked information. Biggest frauds in Sri Lanka are politicians and their activties run in to billions of dollars (both past and present, and future too), while second biggest frauds are the judges whose bribes run to billions of rupees, third comes police whose big wigs wacks millions of rupees while small partners fraud thousands. I cant imagine where the doctors can be placed in this list (may be second or third), but their activities are supposed to be official or quasi-official as they charge fees that could get accounted (while some take outright bribes too), then we have other govt officials at various levels from top to bottom (because I have been at the top long ago), all of them (except very few genuine poor guys) are absolutely corrupt. How can a country devolop when extreme top to very lowest level govt machinery is 99.9% corrupt? Good luck Sri Lanka, I am happy I am no more there, thank god (if he/she excist).

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