By Amrit Muttukumaru –
Sri Lanka’s apex monetary, financial and banking regulator – Central Bank of Sri Lanka (CBSL) in recent times particularly under the Governorship of Nivard Cabraal, Arjuna Mahendran and presently Dr. Indrajit Coomaraswamy has demonstrated to the world at large that the CBSL and hence the country does not have the will to fully implement the laws already in place (however inadequate) to combat money laundering.
On 11 January 2019 the CBSL in one of its rare responses on behalf of Governor Coomaraswamy promised to issue a “press notice in a few days” on the “forensic audits” carried out by CBSL “to implement recommendations of the Report of the Presidential Commission of Inquiry” on the Treasury Bond scam which is arguably the largest financial scam to have taken place in the post-independence history of Sri Lanka. It is now MORE THAN A MONTH and the country is still awaiting the “press notice”!
The rare CBSL response, a crude master class on PREVARICATION was subsequent to my article “Governor Indrajit & EU ‘Blacklist’ On Money Laundering” which related to the more than year old European Union (EU) ‘BLACKLIST’ placed on Sri Lanka for money laundering subsequent to the ‘Financial Action Task Force’ (FATF) placing the country on its ‘GREY LIST’ from November 2017. The FATF recommendations are “recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.”
My said article published in the ‘Colombo Telegraph’ (CT) was of no interest to the mainstream print media as was the CT news item with the damning allegation “Massive Fraud At Sampath Bank”. It was alleged by the “victims” that CBSL “was in a deep slumber while Sampath Bank was siphoning off the customers’ money”. We are still to hear from the CBSL on this alleged “Massive Fraud”.
Not all the play on words by the CBSL in its evasive response in the ‘Colombo Telegraph’ “Central Bank Response To Muttukumaru’s Allegations Against CBSL Governor Dr. Indrajit Coomaraswamy” can undo the HUGE DAMAGE to the economy by Sri Lanka continuing to be on the EU ‘blacklist’.
Of what use is the CBSL “time bound action plan” when just LAST WEEK the EU REITERATED that Sri Lanka continued to be a “high-risk third country” for money laundering? No doubt FATF and EU are aware that the CBSL will not stand up and be counted in the face of there being
NO POLITICAL WILL to fully implement even existing laws.
Need we be surprised that the Foreign Direct Investments (FDIs) in recent times are tainted with controversy? It hardly needs comment that Chinese/Indian investments are for the most part based on geo-political considerations which are themselves controversial.
While Coomaraswamy who has been CBSL Governor since 3 July 2016 for 16 months PRIOR to this ruling (November 2017) must bear some responsibility (together with Messrs. Cabraal and Mahendran), he must bear MAJOR RESPONSIBILITY for the country CONTINUING to be on the ‘Blacklist’ for over a year.
A key recommendation of the report of the Presidential Commission of Inquiry into the egregious Treasury Bond scam was the FORENSIC AUDIT to be carried out by the CBSL. The report was available in the public domain from 3 January 2018.
How long does it take for the CBSL to carry out its forensic audit? The CBSL which is the issuing agency for Treasury Bonds has to date not even QUANTIFIED the loss incurred by the State which is widely perceived to be huge. Even crucial issues of governance incidental to the bond scam thrown up by witnesses at the Presidential Commission which include possible tax evasion, money laundering and PEPs (Politically Exposed Persons) being directors of banks do not appear to be even on the radar.
Of what use are the claimed “Steps initiated by the CBSL” if it has not resulted in holding those concerned ACCOUNTABLE?
We trust the promised “press notice in a few days” of the forensic audit of the bond scam will also address:
i) Kaushitha Rathnaveera, a Senior Dealer of PTL (Perpetual Treasuries Limited) disclosing to the Presidential Commission (PCoI) that “millions” encashed by him were “several times” left on “PTL CEO Kasun Palisena’s chair”
ii) Nuwan Salgado, Chief Dealer of PTL disclosing to the PCoI that on the “instructions of PTL CEO Kasun Palisena” he maintained a record of payments to “informants” code named as ‘Charlie’, ‘Tango’ and others
(iii) B.R. Sinniah, Chief Financial Officer of GTLPL (Global Transportation and Logistics Pvt Ltd) said to be controlled by former Finance Minister (presently Minister of Power and Energy) Ravi Karunanayake’s family in his testimony to the PCoI disclosing:
“Chairman ‘Lakshmi Kanthan’ who resides in Britain had arrived at the Company on two occasions in February 2016 and 2017 and dumped cash amounting to Rs.145 million in the Chairman’s safe”
“it had not been supported by any documentation or receipt issued to Mr. Kanthan neither were there any entries in the GTLPL accounts books regarding these two cash inflows”
It is likely that both FATF and EU will track the CBSL “press notice” (if issued) with interest.
Politically Exposed Persons
In the context of Politically Exposed Persons (PEPs) being at the centre of the worldwide efforts for the prevention of money laundering, CBSL’s long meandering on PEPs in its response is nothing but a fig leaf to cover-up its blatant inaction on this front.
Why is the CBSL tolerating directors of banks who as per its own definition are clearly PEPs? To put it another way, when even the mere “Opening of accounts” in banks by PEPs is under SCRUTINY, is it not RIDICULOUS for the CBSL to state “there is no legal restriction for the politically exposed persons (PEPs) to be appointed as directors of banks.”?
The PEPs we are talking about include (i) A former Chief Justice soon after retirement being appointed as a Director of a leading bank (ii) A former CBSL Senior Deputy Governor soon after retirement appointed as a Director of a leading bank. He is presently its Chairman (iii) An individual known to be very close to the incumbent Prime Minister, holding crucial state office and the son-in-law of a senior cabinet minister being previously Chairman of a leading bank and currently Chairman of a competitor bank. By no definition are these persons run-of-the-mill PEPs!
It is now more than two years since the ‘International Consortium of Investigative Journalists’ (ICIJ) in a worldwide exposé named persons in several countries including Sri Lanka allegedly linked to offshore companies in tax havens revealed in the ‘Panama Papers’.
While not suggesting or implying that the mere listing of names and entities in tax havens is indicative of wrongdoing, it must be appreciated that until the accounts are determined LEGITIMATE, they will remain suspect and the persons concerned ‘NOT FIT & PROPER’ to hold any position of TRUST involving the Public. Inaction on the part of CBSL’s Bank Supervision Department as is the case today does INJUSTICE to those who have legitimate accounts.
A name included in the ‘Panama Papers’ is an erstwhile colleague of CBSL Governor, Coomaraswamy on the Director Board of JKH arguably the country’s most diversified conglomerate with top tier market capitalization. This person from 1 January 2019 has assumed the position of Chairman of JKH. Until this date he was Chairman of a Bank controlled by JKH. There is speculation that ‘conflict of interest’ may have a role in the inaction of CBSL’s Bank Supervision Department.
Coomaraswamy was a Board Director of JKH for more than 5 years from 7 February 2011 until his resignation on 3 July 2016 subsequent to his appointment as CBSL Governor. Unless he functioned pro bono, he would have received pecuniary benefits from this office. Now his sister Radhika Coomaraswamy has been appointed as an ‘Independent Non-Executive Director’ of JKH with effect from 1 October 2018.
EAP Group Sale
I pointedly ask the CBSL whether its DUE DILIGENCE has considered the DAMNING allegations in the news report in ‘The Sunday Times’ 3 June 2018 “Purchase of Edirisinghe Group: Investors in a labyrinth of multiple companies”?
I ask is there any truth to the allegation “But punitive action is being blocked by the Ministry of Finance which has taken from the Customs Department a file containing evidence against the suspects”?
Does the CBSL consider this report spurious? If so why has ‘The Sunday Times’ not been taken to task?
Mano Tittawella until recently Chairman, EAP Group is currently Senior Adviser to the Minister of Finance and Media under which falls the CBSL.
Links with Jailed Hedge Fund Manager
Intriguingly the CBSL has maintained ‘RADIO SILENCE’ on Governor Coomaraswamy’s links with jailed hedge fund manager Raj Rajaratnam for ‘Insider Trading’. When questioned on this soon after his appointment as CBSL Governor, he responded as follows:
(a) He was invited by Rajaratnam when he was “finishing at Commonwealth Secretariat” for “delivering some professional services” on “macroeconomic research”
(b) “That happened for about 10 – 11 months and then of course he was charged and the operation stopped. It took another year for the whole thing to be wound up legally”
By stating “It took another year for the whole thing to be wound up legally” does he not tacitly ADMIT that after Rajaratnam was “charged” he CONTINUED in service for “another year” and drew remuneration for doing so? The question also arises why a person only doing “macroeconomic research” for an organization should apparently be involved in its ‘winding up’?
Should not Coomaraswamy CLARIFY this in the PUBLIC INTEREST?
In a country where commentators are UNEASY to ‘name and shame’ wrongdoers and even the Prime Minister is not naming the politicians identified by the police as interfering in investigations into illicit drugs, I am DENIGRATED by anonymous apologists/proxies infuriated by my ‘naming and shaming’. It has become STANDARD PRACTICE to accuse me of ‘jealousy’, ‘vendetta’, ‘defamation’ and what-not! Even my family relationship is dragged into the mix. I have responded appropriately to these cowards. A major reason for widespread corruption with impunity in this country is the reluctance to ‘name and shame’ the ‘BIG FISH’ in the CORPORATE WORLD who collude with high end politicians and bureaucrats. Emergency power purchase over several years is a classic example.
A repeated CANARD to cast aspersions on my CREDIBILTY is to accuse me of DEFAMATION in relation to my exposé of wrongdoing in the Rotary movement. I emphasize I have NEVER BEEN FAULTED by any court for DEFAMATION. I have also NEVER HAD A DAMAGES AWARD given against me in any defamation claim. I CHALLENGE anyone to prove otherwise.
We have it on the authority of the Finance Minister himself (Mangala Samaraweera) under whom SRI LANKA CUSTOMS falls that Sri Lanka’s TOP DEALERS IN ILLICIT DRUGS are not those languishing in jail but some of those holding high posts in social service organizations such as some Presidents of ROTARY CLUBS. He stridently made this allegation last year at a press conference claiming “PERSONAL KNOWLEDGE”. His back peddling a few days later:
“Inadvertently, I also mentioned Rotarians and Lions Clubs, which I deeply regret.” does not hold up.
Readers can LISTEN to his words in the link given below and decide for themselves whether there is any likelihood of any “inadvertence”?
Intriguingly neither the Rotary movement nor any of its prominent members have SUED Samaraweera for DEFAMATION or even issued a press statement DENYING his damning charge!
In the context of the foregoing – particularly the absence of the political will to enforce existing laws and regulations on a level playing field, it is downright dangerous to have in the statute book the recently enacted ‘Foreign Exchange Act, No. 12 of 2017’ which further liberalizes foreign exchange transactions which in effect is conducive for money laundering if people are so inclined.
The Act inter alia states “The Central Bank shall as the agent of the Government, be responsible for implementing the provisions of this Act”.
One would have expected CBSL Governor Coomaraswamy at the very least to have publicly CAUTIONED the government against the enactment of such an Act.
It beggars belief that CBSL has the AUDACITY to cite this DANGEROUS ACT to justify its INACTION on Sri Lankans named in the ‘Panama Papers’:
“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.”
On CBSL’s inaction on the Sri Lankan names in the ‘Panama Papers’ it has even cast aspersions on the CREDIBILTY of the ‘International Consortium of Investigative Journalists’ by stating:
“After conducting the investigation, no information was revealed on investments as published by ICIJ.”
In the context of little respect for the rule of law, would not the ‘Colombo International Financial City’ turn out to be a hub for money laundering? The country already demonstrates all the indications of being a hub for illicit drugs.
It has been reported today (19 February) that a high profile Sri Lankan arrested recently in Dubai for his alleged involvement in the illicit drugs trade has allegedly deposited as much as “Rs.10 billion in 23 bank accounts” in Sri Lanka and Dubai. Even if half this sum was deposited in Sri Lankan banks, does it not indicate that the CBSL has been in “deep slumber” in this respect too? One could only speculate as to how many other cases not yet in the public domain have escaped the notice of the CBSL?
The CBSL “deep slumber” is also apparent in regard to (i) ‘forensic audit’ on the Bond Scam (ii) Politically Exposed Persons (PEPs) (iii) ‘Panama Papers’ (iv) EAP Group Sale (v) Governor Coomaraswamy’s links with jailed hedge fund manager, Raj Rajaratnam.
In the PUBLIC INTEREST I look forward to a CREDIBLE response without PREVARICATION from CBSL to each of the issues raised in this article.