Lack of legal framework hinders probe into controversial Batti campus: CBSL

Central Bank (CBSL) officials testifying before the Parliament Select Committee held that prevailing laws in the country have handicapped investigations pertaining to the financial trail of the controversial shariah university registered as a business entity in the name of Batticaloa Campus Ltd.

Most parts of Governor Dr. Indrajit Coomaraswamy’s testimony before the PSC yesterday took place on camera. 

Explaining the role of the Financial Intelligence Unit (FIU) established under the CBSL, Dr. Coomaraswamy said: “There was no direct reporting of the work of FIU to the Governor. The FIU functions as an independent institution within the CBSL in terms of the order made by the President under the provisions of the Financial Transactions Reporting Act No. 06 of 2006 under 

 The CBSL only provides administrative support. The overall objective of the FIU is to combat money laundering, terrorist financing, and related crimes in Sri Lanka in line with international standards. There is a financial taskforce which covers investigations into anti-money laundering and terrorism funding. That task force monitors all transactions over Rs. 1 million and suspicious transactions. They froze Easter Sunday bombers’ bank accounts immediately after the terror attack,” he said. 

Responding to an explanation requested by the committee based on the issues in the Finance Act, the Department of Supervision of Non-Bank Financial Institutions Director R. R. Jayaratne said: “The Batticaloa Campus did not inform us that they were taking a loan. So, we did not accept money credited to its bank account as a loan because it had not completed the necessary procedures. Those funds had been categorised as personal remittances. There is no category to accommodate such transactions.”

Jayarathne, suggesting action to address the deficiencies in the Finance Act, said: “The Act was amended before, and the Suspicious Transactions Regulations was passed in 2017, but this institute had received some funds in 2015. According to the new Amendments to the Act, we could investigate funds received earlier to that only up to six months back or a court action had been initiated prior to the new law coming to force. Accordingly, investigations which were in progress should have been completed within six months since the date of the new law coming to force, which was 20 May 2018. 

There were practical issues due to this because those who had been investigated usually can ask for more time to submit documents, so the process could get delayed. If the process could not be completed before the deadline, we have no legal powers to proceed. For example, there were investigations about the Panama Papers. Those who were subjected to investigations knew that technical loophole. They used it and escaped investigation.”

Financial Intelligence Unit (FIU) Director D. M. Rupasinghe was also present before the Select Committee.

(AH)