By Amrit Muttukumaru –
The response of the Central Bank of Sri Lanka (CBSL) on behalf of its Governor Indrajit Coomaraswamy to my article “Governor Indrajit & EU ‘Blacklist’ On Money Laundering” is a crude master class on PREVARICATION. In the ‘Comments’ section of the ‘Colombo Telegraph’ Kalinga describes it aptly as “A confession of dereliction of duty and due diligence by so called govenor of Central Bank.” The CBSL does not source the response to any particular official which is the norm in CREDIBLE organizations. The fact that none of the major print media thought it fit to publish my article which deals with an issue which does enormous economic damage to the country tells its own story.
Not all the verbal gymnastics engaged by CBSL can undo the HUGE DAMAGE to the economy by Sri Lanka continuing to be on the European Union (EU) ‘BLACKLIST’ for money laundering for over a year. The EU issued the ‘Blacklist’ subsequent to the ‘Financial Action Task Force’ (FATF) placing the country on its ‘GREY LIST’ from November 2017. FATF recommendations are “recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.”
While Coomaraswamy who has been CBSL Governor since 3 July 2016 for 16 months PRIOR to this ruling 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.
Of what use is the CBSL“time bound action plan” if the country continues to be on the EU ‘Blacklist’ for more than a year? What is its timeframe for the removal of the ‘Blacklist’?
Of what use are the claimed “Steps initiated by the CBSL” if it has not resulted in holding those concerned ACCOUNTABLE for the Treasury Bond Scam under the Yahapalana government which is arguably the largest financial scam to have taken place in the post-independence history of Sri Lanka.
I repeat (a) how long does it take for the CBSL to carry out its much vaunted FORENSIC AUDIT? (b) 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 (c) even crucial issues of governance incidental to the bond scam thrown up by witnesses at the Presidential Commission (PCoI) which include possible tax evasion, money laundering and PEPs (Politically Exposed Persons) being directors of banks are not even on the radar.
We look forward to the CBSL “press notice is to be issued in a few days” on the subject of “forensic audits”.
We trust it will also address:
i) Kaushitha Rathnaveera, a Senior Dealer of PTL (Perpetual Treasuries Limited) disclosing to the Presidential Commission (PCoI) probing the Bond Scam 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” with interest.
Politically Exposed Persons
Politically Exposed Persons (PEPs) are at the centre of the worldwide efforts for the prevention of money laundering.
CBSL’s long meandering on PEPs is nothing but a fig leaf to cover-up its blatant inaction on this front.
When CBSL itself as per its ‘Financial Transactions Reporting Act No.6 of 2006’ –
(a) Defines PEPs:
As “individuals in Sri Lanka or abroad who are, or have been, entrusted with prominent public functions” e.g. Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of State owned corporations, important political party officials. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves. The definition is not intended to cover middle ranking or more junior officials in the forgoing categories.”
(b) PEP Bank Accounts:
“Opening of accounts for ‘politically exposed persons’ (PEP) should have authorization of senior management.”
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.”?
For example, it was revealed at the Presidential Bond Commission that 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 was “appointed to the Board of Directors of the BOC in 2015 by the then Finance Minister Ravi Karunanayake for a period of one year”.
Ravi Karunanayake being a PEP is a no-brainer. B.R. Sinniah too is clearly a PEP consistent with the CBSL definition.
Although the case of B.R. Sinniah may not fall during the period Coomaraswamy was Governor, it demonstrates IMPUNITY under the watch of the CBSL.
Under no circumstances is it suggested that Ravi Karunanayake, B.R. Sinniah or all PEPs are engaged in unlawful activities. Nevertheless, the high risk PEPs pose cannot be ignored. The point being made is that laws and guidelines are there for a purpose and must be adhered to.
Even currently under the watch of CBSL Governor Coomaraswamy there are clear instances of PEPs being ‘directors’ of banks. It includes (a) Chairman of a leading bank who is the son-in-law of a senior minister (b) A former Chief Justice soon after retirement appointed as a Director of a leading bank (c) A former CBSL Senior Deputy Governor soon after retirement appointed as a Director of a leading bank. He is presently its Chairman.
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’.
By stating “After conducting the investigation, no information was revealed on investments as published by ICIJ.” is not CBSL casting ASPERSIONS on the INTEGRITY of ICIJ to cover-up its inaction or incompetence?
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.
This seems to be of no concern to CBSL Governor Coomaraswamy who has ignored this writer’s exhortations to him also in the public domain to address this issue. In this connection I refer to the questions posed to him in my e-mail of 30 August 2017 which include:
“Whether the Central Bank of Sri Lanka has investigated the legitimacy of the Sri Lankan accounts in the ‘Panama Papers’?”
A name included in the ‘Panama Papers’ is an erstwhile colleague of CBSL Governor, Coomaraswamy on the Director Board of 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 this conglomerate. Until this date he was Chairman of a Bank controlled by this conglomerate. There is speculation that ‘conflict of interest’ may have a role in the inaction of CBSL’s Bank Supervision Department.
Coomaraswamy was Board Director of this conglomerate 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 this conglomerate with effect from 1 October 2018.
The Coomaraswamys have had a long innings in this conglomerate. His cousin who was Finance Director resigned from this position reportedly for “personal reasons” in October 2002.
EAP Group Sale
I pointedly ask the CBSL whether its DUE DILIGENCE has considered the DAMNING allegations in the news report of ‘The Sunday Times’ 3 June 2018 “Purchase of Edirisinghe Group: Investors in a labyrinth of multiple companies”?
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.
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 state in relation to 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.”
In the context of little respect for the rule of law and regulatory agencies for the most part being indifferent or in some instances being active partners in wrongdoing, would not the proposed ‘Colombo International Financial City’ turn out to be a hub for money laundering?
At this rate one wonders whether Sri Lanka will EVER be removed from the FATF ‘GREY LIST’ and EU ‘BLACKLIST’? The official MOST RESPONSIBLE for the ‘Blacklist’ and to get it REMOVED is the CBSL Governor who is supposed to be INDEPENDENT – presently Dr. Indrajit Coomaraswamy. If the government is a stumbling block, is it not the honorable course of action for him to RESIGN? The likelihood of this happening can be gauged by Coomaraswamy’s RESPONSE when he was questioned after his appointment as CBSL Governor on his connection with jailed hedge fund manager Raj Rajaratnam for ‘Insider Trading’. He inter alia 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 be involved in its ‘winding up’?