By Amrit Muttukumaru –
Sri Lanka is doing its damnedest to prepare a fertile ground for terrorism by (i) making minorities particularly Tamils and Muslims feel insecure by being treated as inferior to the majority Sinhala-Buddhists who comprise 70% of the population (ii) giving hegemony through constitutional measures and tacit government consent to Sinhala – Buddhists (iii) giving Buddhist clergy undue importance in matters of governance (iv) minorities particularly Muslims being subject to hate speech, violence and economic isolation instigated with impunity by extremists (v) nefarious activities of Sinhala-Buddhist and Muslim extremists not being stopped in their tracks due to reasons of vote bank politics by both major parties – SLPP and UNP (vi) although the long-drawn armed conflict with the LTTE came to a controversial bloody end in 2009 in the absence of credible accountability, the root causes leading to the conflict have still not been adequately addressed (vii) Reconciliation issues continue to fester.
Terrorism is facilitated by money laundering and the trade in illicit drugs being made easier (i) by the new Foreign Exchange Act No. 12 of 2017 effective from 20 November 2017 which repealed the Exchange Control Act No. 24 of 1953 (ii) corruption in high places (iii) nexus between those dealing in money laundering and illicit drugs with key sections of the political leadership, intelligence agencies, law enforcement agencies and financial regulatory agencies.
It has been plausibly argued that the new Foreign Exchange Act No. 12 of 2017 has the potential to encourage and legitimize money laundering.
A precursor to this dangerous Foreign Exchange Act is the ‘invitation’ issued by then Finance Minister Ravi Karunanayake through India’s prestigious publication ‘The Hindu’ of 5 October 2015 to “Sri Lankans and Indians who had to take back their deposits from banks in Switzerland to place their funds in Sri Lanka”. He had further assured that “No questions would be asked”!
In the context of the Act inter alia stating “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 Dr. Indrajit Coomaraswamy under whose tenure the new Act became effective to have at the very least publicly cautioned the government against the enactment of such an Act. Not only has he not done so but more reprehensibly he has the audacity to cite this dangerous Act to justify CBSL 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’ he has even cast aspersions on the credibility of the ‘International Consortium of Investigative Journalists’ by stating:
“After conducting the investigation, no information was revealed on investments as published by ICIJ.”
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.
The UPSHOT of all this is that in the aftermath of the horrific Easter Sunday carnage, it is reported that security forces have unearthed “assets worth Rs 7 billion” attributed to suspects belonging to the National Thowheed Jamath (NTJ) said to be mainly responsible for the carnage.
Hub for Illicit Drugs?
Frequent detections of large hauls of heroin, cocaine and other illicit drugs which most likely are the tip of the iceberg would suggest that Sri Lanka has become a regional hub for the trade in illicit drugs in the Asian region. Such an occurrence is only possible under enabling conditions which include lax laws which facilitate money laundering/smuggling and the nexus between sections of the political leadership and bureaucracy with key players in the trade in illicit drugs. Does not the Reuters report “Sri Lanka is becoming a hub for cocaine as it is a risk-free location with less legal restrictions” confirm this position?
The link between money laundering, illicit drugs and funding of terrorism does not require elaboration.
It is reported that a high profile Sri Lankan arrested in Dubai this year 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?
It is becoming apparent that for the most part Sri Lanka is only able to attract FDIs mired in controversy. The latest is the “$ 3.85 billion investment for an oil refinery in Hambantota”. One wonders whether this is a replay of the much hyped 2017 Volkswagen vehicle assembly plant in Kuliyapitiya which turned out to be a hoax. Those who hyped the Volkswagen assembly plant are largely the same persons now hyping the purported oil refinery in Hambantota. There was even a “ground breaking ceremony” for the Volkswagen plant.
Even the earlier 2016 $75 million tyre manufacturing plant in Horana is mired in controversy due to its promoter’s alleged involvement in controversial business dealings under the Rajapaksa administration. This case brings into focus the cosy relationship between competing politicians and the raison d’être why competing administrations are reluctant to hold wrongdoers accountable.
EAP Group Sale
The CBSL has failed to disclose whether its claimed ‘due diligence’ in regard to the sale of EAP Group companies has considered the damning allegations in the news report in ‘The Sunday Times’ of 3 June 2018 “Purchase of Edirisinghe Group: Investors in a labyrinth of multiple companies”?
In particular CBSL has avoided confirming whether there is any truth to the terrible 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”
If the CBSL considers the report spurious, why has ‘The Sunday Times’ not been taken to task?
Mano Tittawella former Chairman, EAP Group is currently Senior Adviser to the Minister of Finance under which falls the CBSL. This is the ground reality in Sri Lanka.
Bond Scam & Money Laundering
In the context of the CBSL being the issuing agency for Treasury Bonds, a key recommendation of the report of the Presidential Commission of Inquiry into the Treasury Bond scam which is possibly the largest financial scam to hit this country since independence was the forensic audit to be carried out by the CBSL. The report was available in the public domain from 3 January 2018. It is now 17 months since then and the forensic audit is still not in the public domain. A reason for the delay from Governor Coomaraswamy will be appreciated.
Impunity is so endemic in Sri Lanka that even crucial issues incidental to the bond scam related to possible money laundering thrown up by witnesses at the Presidential Commission which include possible tax evasion and PEPs being directors of banks do not appear to be even on the CBSL radar.
We await to see whether the CBSL in its forensic audit will even CONSIDER addressing the alleged (i) “millions” encashed “several times” being left on “PTL CEO Kasun Palisena’s chair” (ii) “cash amounting to Rs.145 million” being “dumped” without being “supported by any documentation” in the “Chairman’s safe”
Politically Exposed Persons
On the subject of PEPs (Politically Exposed Persons) where else in the world would (i) a Senior Deputy Governor of the Central Bank soon after retirement be appointed a Director of a leading bank?(ii) a Chief Justice of the Supreme Court soon after retirement be appointed a Director of a leading bank? (iii) a highly connected PEP previously Chairman of a leading bank be currently Chairman of a competitor bank?
Thumbs its nose at FATF
Sri Lanka has virtually thumbed its nose at the ‘Grey List’ placed on the country by the FATF (Financial Action Task Force) in November 2017 following which the EU which considers Sri Lanka “high-risk” for money laundering issued its ‘Black List’ in February 2018.
FATF recommendations are “recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.”
Notwithstanding the FATF in October 2016 putting Sri Lanka on notice that the country will be assessed on its commitment to combat money laundering and in October 2017 listing the country as having ‘strategic AML/CFT deficiencies’, Sri Lanka in callous disregard made its contentious Foreign Exchange Act, No. 12 of 2017 further liberalizing capital inflows effective from 20 November 2017.
While Dr. Indrajit Coomaraswamy who has been CBSL Governor since 3 July 2016 for 16 months prior to this ruling must bear some responsibility (together with former Governors Messrs. Cabraal and Mahendran) he together with Minister of Finance, Mangala Samaraweera must bear major responsibility for the country continuing to be on the Blacklist.
This writer wishes to place on record the courageous stand of Mangala Samaraweera in articulating the imperative to have Sri Lanka as a SECULAR State in the context of a multi-ethnic and multi-religious country. Sadly he has been viciously criticized with no support from any of his Cabinet colleagues or even from the State Minister of Finance, Eran Wickramaratne who hails from a very prominent Christian family.
In the context of little respect for the rule of law, the contentious Foreign Exchange Act No. 12 of 2017 and regulatory agencies such as CBSL for the most part being indifferent, is there no danger that the proposed ‘Colombo International Financial City’ with high end casinos also reportedly being part of the mix, may enhance Sri Lanka’s image as a premier hub for money laundering in the Asian region?
There is a mismatch on the one hand of a country with a weak economy, poor infrastructure and atrocious governance bending over backwards even for questionable FDIs and financial assistance and on the other the swanky high-rise apartments, office blocks, shopping malls and fancy restaurants dotting the city of Colombo with high-end vehicles which would do even a first world country proud. The large Chinese investments are mainly geo-political in nature connected to big power rivalry in the Indian Ocean with its own set of implications.
At this rate one wonders whether Sri Lanka will ever be removed from the EU ‘Black List’ and the FATF ‘Grey List’?