16 May, 2022

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Recover Proceeds Of Crime To Fund Cash Transfers To The Poor

By Chandra Jayaratne

Chandra Jayaratne

Dear Mr. President Gotabaya Rajapaksa,

Establish Your Integrity and Commitment to Good Governance at this time of Serious Economic Crisis: Recover Proceeds of Crime & Use Such Funds to Provide Relief to Poor & Vulnerable Citizen Segments

Your attention is drawn to the several submissions addressed by the writer, appealing to you and your lead executives in charge of effective law enforcement, seeking timely strategic action to contain serious economic crimes, which continues to drain the economy of valuable state resources and state revenues.

The most recent submissions related to the need to focus attention in controlling the annual illicit financial flows of Sri Lanka, estimated between 3-4 billion US Dollars per annum, based on 2021 estimates[1]. Global Financial Integrity Report titled “Illicit Financial Flows from Developing Countries: 2004-2013 by Dev Kar and Joseph Spanjers – December 2015”, estimates the average annual Illicit Financial Flows of Sri Lanka, in respect the 10 year period 2004-2013 at USD 1,997 million per annum[2].

Your attention is also drawn to the Sunday Times article by Namini Wijedasa[3], noted below titled “Excessive sugar imports caused dollar drain, consumers did not receive benefit of tax cuts: Pyramid Wilmar’s multibillion sugar scam exposed by National Audit Office”. This article notes: “Pyramid Wilmar (Pvt) Ltd–the private company accused of profiteering from the Government’s massive sugar tax cut–imported 1,222 percent more sugar than usual between October 2020 and February 2021, but did not pass the advantage to consumers, the National Audit Office (NAO) states. The NAO calls on the Government to recover its lost revenue by correctly identifying the companies that had benefited from not transferring the tax cut to the people”.

The aforementioned National Audit Office report should be the starting point for you and the current regime, to establish your integrity and commitment to good governance at this time of serious economic crisis; and to recover any embedded proceeds of crime and to use such funds to provide relief to poor and vulnerable citizen segments. You now have the option to order the authorities to actively seek options to recover any unfair, unreasonable and unacceptable gains made using the reported scam, for example by examining options for direct recovery under any law or by an indirect recovery action, with the latter possibly evidenced by establishing purported linkage by any private business entity via an act of corruption of any public servant, willfully and with knowledge, causing the reported wrongful and unlawful loss to the government with or without any wrongful or unlawful benefit, favour or advantage to any person.

You and your government have at last admitted the perilous state of the macro-economy, which is now so much closer to Sri Lanka being classified as a failed state; and have publicly appealed for political parties and societal support to initiate planned national strategic action, which must be taken without delay. Your government’s new team in charge of economic strategy development has canvassed the support of all segments of society to initiate corrective action; and warned that the consequences could impact severely on the public and that the citizens in the national interest must bear any such pain and difficulties caused to lifestyles and livelihoods, until the national turnaround is achieved in the future.

The proposed strategic action is being implemented very much later than it should have been initiated; and had it been implemented on a timely basis, the consequential pain on citizens and business would have been very much lesser than that likely in the near term future. It is very much regretted that the essential corrective action steps, so effectively articulated for over one and half years by leading economists and knowledgeable citizens, signaling an impending serious economic crisis, were so blatantly ignored by you, your government and your lead economic management team. As a consequence business and citizens are now required to bear the consequences of past mismanagement by many regimes, including your regime, where the expected pain will be hard to bear, when it impacts in full on the small and medium businesses and especially the poor and vulnerable citizen segments.

It is therefore incumbent upon the government, to even partly alleviate and offset the pain and suffering of businesses and citizens by making concessions to those who are likely to be seriously impacted and recompense those citizens who will find it difficult to manage their lifestyles and livelihoods; and to further arrange an effective and correctly targeted cash transfer system using technology similar to that leveraged in India under the “Aadhaar Scheme”.

It is recognized that the state will need to introduce severe restraints on fiscal spending, imposing cuts on defense, other non essential spends and defer discretionary capital spends; introduce taxation reforms with measures to raise state revenue, leveraging non regressive tax options to the extent possible. The other available option is to address with commitment the need to limit to a minimum the illicit financial flow and eliminate all serious economic crimes and recover proceeds of crime and use the same to fund the costs of concession to the severely impacted segments.

As an initial step to give positive signals to the citizens who are presently impacted by the economic crisis and those citizens required to bear the pain and suffering upon the implementation of the planned corrective actions aimed at stabilizing the economy, you are requested to establish integrity and commitment of yourself, your government and leaders in governance by taking the undernoted transparent action urgently, to optimize the recovery of proceeds of crime, illicit financial flows, stolen state assets and willfully evaded state revenues:

1) Publicly announce a policy that that the government will establish with necessary law reforms independent legal structures, systems, coordination and oversight mechanisms to actively with commitment to optimize the recovery of proceeds of crime, illicit financial flows, stolen state assets and willfully evaded state revenues, applying professional best practices, competent personnel and seeking support of local independent and international agencies;

2) Pending 1 above instruct the Inspector General of Police, the Attorney General, the Auditor General, The Director Financial Intelligence Unit, the Director General of the Bribery Commission, the Commissioner General of Inland Revenue, the Director General of Customs and Excise Commissioner, individually and where necessary collectively, to Investigate with independence all known, reported or suspected cases including international and local investigative exposes (eg. Panama/ Mauritius/ Pandora/Paradise Papers) for recovery of proceeds of crime, illicit financial flows, stolen state assets and willfully evaded state revenues; and to ensure strict compliance with all related international conventions and agreements, including commitments made by Sri Lanka following the Anti Corruption Summit in UK and its follow up meetings. Here all investigations previously initiated by any units referred to above (including the now defunct Financial Crimes Investigation Division and the Special Presidential Task Force for Recovery of Stolen State Assets) with options for recoveries which remains completed with no action finalization, all partly completed investigations and recorded suspicious transaction reports not proceeded with, should be reopened and actively investigated for recovery of proceeds of crime options.

3) Take early steps to enact the Proceeds of Crime Act, duly developed and approved by all stakeholders in 2019; but not submitted to the Cabinet for approval by the last regime in governance

4) Seek best available local and international technical and network assistance as well as training and infrastructure support for effective and independent investigation, prosecution and recovery action in terms of the Sri Lankan legal framework to be strengthened by the proposed Proceeds of Crime Act.

5) The new structure to be established for the suggested recovery process to be staffed by competent, experienced and international systems exposed personnel, knowledgeable in serious financial and related crime investigations, money laundering, tracking/tracing and analyzing financial transactions/data/electronic and telecommunications data, international data base surfing, use of sophisticated IT based analytical tools and investigating changes in net assets, developing specific charge sheets for violations of the law and assembling evidence professionally for prosecution etc. ( including the recall of all such experienced personnel transferred out or early retired from their areas of expertise following your assumption of office)

As a caring and concerned citizen always placing the interests of the state as a high priority, I earnestly look to your change management leadership action following this submission.

Yours Sincerely,

Chandra Jayaratne

Excessive sugar imports caused dollar drain, consumers did not receive benefit of tax cuts

By Namini Wijedasa

Pyramid Wilmar’s multibillion sugar scam exposed by National Audit Office

Pyramid Wilmar (Pvt) Ltd–the private company accused of profiteering from the Government’s massive sugar tax cut–imported 1,222 percent more sugar than usual between October 2020 and February 2021, but did not pass the advantage to consumers, the National Audit Office (NAO) states.

The NAO calls on the Government to recover its lost revenue by correctly identifying the companies that had benefited from not transferring the tax cut to the people.

The Finance Ministry admitted last year that the Government’s decision to slash the sugar tax caused “foregone revenue” of Rs 15.951bn while not achieving the desired effect of reducing retail prices. (The NAO report places the lost tax income even higher). The Ministry also said it was only carrying out instructions from the President’s office as conveyed by his Secretary, P.B. Jayasundera.

Foregone earnings are the difference between earnings actually achieved and earnings that could have been achieved by way of tax.

Importers and traders earned “greater economic advantage through the reduction of taxes on sugar by the Government, while suppressing the Government’s intention to provide concessions to the consumers,” the NAO said. The price of sugar in the market “had not decreased in line with the rate of tax reduction from the date of commencement”.

In October 14, 2020, the Finance Ministry reduced the special commodity levy (SCL) imposed on a kilo of sugar from Rs 50 to a mere 25 cents. By February 2021, the Treasury had lost around Rs 16.763bn in tax income, says a special NAO report produced on the request of Parliament’s Public Accounts Committee.

During the period of the tax cut, Pyramid Wilmar imported more than 125,000MT of white sugar to Sri Lanka. This is 45 percent of the total quantity brought in by all importers (which was 277,713MT). It was also an increase of 1,222 percent from Pyramid Wilmar’s usual sugar imports. The tax advantage gained was Rs 6.22bn, the NAO said.

Pyramid Wilmar was the only company from among nine major sugar merchants that brought in more than 10 percent of its earlier imported volumes, the NAO said. It had purchased just 2.1mn kilos of sugar a month during the first nine-and-a-half months of 2020. After the tax cut, this shot up to 27.8mn kilos a month.

Just one other importer boosted its sugar imports–by about six percent–during the same period. The quantities brought in by the seven others merchants dropped.

Meanwhile, Pyramid Wilmar already had 7,608MT of sugar in a bonded warehouse (without paying tax). On the day the SCL was reduced, it released 7,468MT to the market, paying the new rate of 25 cents a kilo. It received an immediate tax benefit of Rs 378mn within a day as the selling price of sugar had not yet been reduced.

Sri Lanka consumes an average of 50,000 metric tonnes of white and brown sugar a month. Average domestic production is around 4,359 metric tonnes. The difference of 45,000 metric tonnes was covered through imports.

A Consumer Affairs Authority (CAA) market survey between October 14 and November 1, 2020, showed the sugar price did not come down along with lowering of the SCL from Rs 50 to 25 cents. A maximum retail price (MRP) of Rs 90 per 1kg packet of sugar and Rs 85 per 1kg of loose sugar was decreed on November 10, 2020.

In June, still scrambling to control fluctuations, the CAA issued a gazette to rein in hoarding. On February 8, 2021, the MRP gazette was revoked. By the last week of July, the market price of sugar reached Rs 130.52 a kilo. It rose to Rs. 133.24 during the first week of August.

Even Lanka Sathosa–which sells the sugar it buys from the private sector–did not make purchases at the MRP. Therefore, the loss incurred from the date of the tax cut to early February 2021, when the controlled price was removed, was around Rs 102mn.

The Finance Ministry issued a gazette introducing a licence scheme for imported sugar. There were no follow-up instructions for implementation and no criteria.

“As such, the Import and Export Controller had granted approval for import of all stocks requested by all importers who had submitted applications for import of sugar,” the NAO states.

A massive quantity of sugar was purchased, according to Sri Lanka Customs data. The nine main companies imported 391.9mn kilos in the nine-and-a-half months before the tax cut. But between October 2020 and February 2021–around four months–they imported 245.4mn kilos. This led to significant foreign exchange outflows and defeated the purpose of issuing import licenses.

While the scheme was introduced on October 30, 2020, implementation was delayed till November 18. During the interim, 18 companies imported 101,527MT. While an additional five percent of CIF value should be charged for goods shipped in without permits, the Controller General of Import and Export decided to levy only two percent of CIF value on these sugar stocks. The resultant loss of revenue was Rs 433.1mn.


[1] https://www.colombotelegraph.com/index.php/with-so-much-debate-on-twin-deficits-forex-external-debt-crisis-why-no-focus-on-the-impact-of-control-over-illicit-financial-flows/

[2] file:///C:/Users/User/Downloads/IFF-Update-2015-Final-1%20(1).pdf

[3] https://www.sundaytimes.lk/220410/news/excessive-sugar-imports-caused-dollar-drain-consumers-did-not-receive-benefit-of-tax-cuts-479572.html

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Latest comments

  • 10
    5

    Mr. Chandra Jayaratne: You addressed this communication to “Mr. President Gatabaya Rajapakse”.

    Sorry to ask you to seek immediate attention from a proper Medical Practitioner to check on the working of your “Nerves System” which interprets and responds to stimuli from outside from our bodies as well as from inside. If there is nothing wrong, I know you will not address this President as “Mr.” and will not definitely ask him to “Recoupe” the “Loses” and credit those to the people, because “He”- The President is the “Architect” of all those “CRIMES”. Remember, as soon as he assumed duties the “Tax Breaks” he gave to all the “Associates” and allowed to “Drain” out Tax Revenue to the tune of billions. This very “Sugar Deal” granted to his “Associates” turned out to be the biggest scandal in the business world. So you are asking the “ALI BABA” to “Recover” the “LOOT” master-minded by him alone. Doesn’t that “Request” look very “ERROTIC” and “LUDICROUS”?

    • 10
      0

      I’ve not yet read the article, Simon, so I cannot comment on it.
      .
      My request: although I don’t know Mr Chandra Jayaratne at all, I think that he’s a decent man. Don’t direct sarcasm at him.
      .
      Panini Edirisinhe/ Bandarawela

      • 1
        0

        Have you seen this, Panini?

        https://island.lk/jvp-and-the-cost-of-lost-revolution/

        I’ve never heard of the author before but just googled the name someone on CT kept referring to, tho he didnt give a link. He turned out to be a ’71 JVPer; worth bearing in mind what he ends up saying.

    • 7
      0

      Dear Simon,
      Though Mr CJ is a decent and educated guy who I know well, and who I can call a gentleman, unfortunately here he is thinking that Gota and his siblings are like him and of a vintage when politocos had a conscience and came to serve the public and not themselves.
      He is naïve to say the least and should realise that Gota and gang are impervious to the niceties of good governance. A total revamp is the need of our times, and has to be undertaken by some others surely.
      When this gang is directly involved in these misdemeanours and criminal activity, how can they rectify anything as it will fall back on themselves.
      Had he addressed this to all Sri Lankans to rally round to do it, there is merit.

      • 5
        0

        The ongoing model of incessant protests MUST be enhanced until
        Nandasena steps down with no alternative. He must then be arrested
        by the IGP on the latest evidence of corrupt activity, even under PTA
        if needed.
        The public must be aware of the following persons involved in
        financial crimes:-
        Gamini Wickramasinghe: Laundering over $.7.5 Bil to offshore Accounts, & holding Rajapakse offshore money accounts.
        New Fortress Energy deal -The bribery part in off-shore A/cs.
        Gamini Wickramasinghe – Offshore accounts & Rajapakse money
        in Seychelles etc.
        Sajad Mowzoon of Pyramid Wilmar – involvement in sugar import scam & country’s loss of Rs,15.9 bil.
        Nushad Perera – Swindled Rs.100 bi. in the sugar & garlic scams
        Nimal Lanza – His earnng of over 750 Mil.$ and Rajapakse financier.
        Nirupa Rajapakse & hiru Nadasean re Pandora papers.
        Varuni Amunugama: Her earnings in millions via Govt. tenders.
        etc as revealed in Whatsapp messages circulating currently.

      • 3
        1

        My View: Thanks. You said it better than I. “Had he addressed this to all Sri Lankans to rally round to do it, there is merit”. In my style, I said: “You are asking ALI BABA” to recover the “Loot” and that is stupid and ludicrous. I know to say it that way is “Bitter” and that is why I started with the word “Sorry”.

  • 4
    0

    Simple Simon

    Typical Sri Lankan trait of shooting the messenger . The need of the hour is to unite, not nitpick .

    • 2
      1

      Pundit: When the “Messenger” is misdirecting the “Message”, what do you expect others who see it to do? Keep quiet? OR Tell the “Messenger” of his “Misdirection”? That is what I did. I told him: “You are not addressing the correct people”.

      At this hour the people are getting UNITED and have correctly IDENTIFIED to whom the “Message” must be sent – “Gota Go Home”. So, at this hour no one must be allowed to “Misdirect” that “Message”.

  • 4
    0

    CJ , currently there is news that today’s Silly Lanka more than 90 % of wealth is owned by Less than 20 % people. My assumption is 10 % is politicians, past , present and future other 10% is co called Vyathgama , Rajapaksas cronies, political financiers and hangers. For example the casino owned by current advisory committee member Dhamika are still open for business, well lit 24 / 7 , stored fuel / diesel for uninterrupted supply, quite a few foreigners mainly Indians are travelling there for few days of package deal fun. Few having hushed discussions on protests outside. Looks like there is two worlds in Rajapaksa’s Sorry Lanka.

  • 3
    1

    Like the country has any money to implement all these safeguards and money recovery processes you specify 🙄……unless the idea is to highlight them for future governments.

    Any money the IMF money gives us will be used to set up all the systems that you mention. If all is investigated for money recovery, it will be found that the R’s were complicit, implicit, explicit, illiterate, and very stupid in the abuse of the Lankan monetary system. Their ultimate abuse of the money of the hardworking-suffering-Lankan-Masses was for setting up the megalomaniacal overturn of the global world order via China and Russia. If that sounds farfetched, just look at the freaky Port-City horror coming up under the very noses of starving Sri Lankans. 🏴‍☠️🏴‍☠️🏴‍☠️

  • 3
    0

    Recover Proceeds Of Crime To Fund Cash Transfers To The Poor
    ———
    One has to wonder exactly how much money has been earned through fraud and theft in SL.
    There are rumours flying around that the Rajapaksa family has stolen around 50 billion USD appx.
    You have the bond scam under the previous government.
    Then you have to add up all the frauds every politician has done since 1948.
    Then add up all the money the corrupt businessmen and members of the ‘elite’ stole.
    In other words all the money the islands satanists (freemasons and tares) have stolen, and it should makes head spin.
    It could well be 100s of billions or even trillions in total!
    Land grabbing is another issue.
    All of this was revealed by Mark Alan King and his gematria findings some time back. That in every nation, the money and assets of all the satanists would be confiscated and given to a new ruling class, who will use it to eradicate poverty.
    He even found a gematria entry that said the total value of all the theft the freemasons have committed world wide, may well be in the quadrillions of dollars today!

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