Governor Indrajit, release forthwith forensic audit on bond scams

Saturday, 9 November 2019 00:01 -     - {{hitsCtrl.values.hits}}

Governor of the Central Bank of Sri Lanka, Indrajit Coomaraswamy


By Amrit Muttukumaru

It is shameful that the Central Bank of Sri Lanka (CBSL) has reportedly sought the approval of the Attorney General to release to the public domain its long-delayed ‘forensic audit’ of the egregious Treasury bond scams as it “could influence the upcoming Presidential Election” (Sunday Times, 3 November). 

Is this not the very reason it should be in the public domain to enable voters to make informed decisions? The CBSL is the issuing agency of Treasury bonds. 

The forensic audit was a key recommendation of the report of the Presidential Commission on the bond scams which was available in the public domain from 3 January 2018. It is only now after a protracted delay of 22 months that the audits have been completed.

The Treasury Bond Scam epitomises the worst excesses of the Yahapalana Government’s alleged corruption and abuse of power. This by no means should portray that the previous Rajapaksa administration was any better. 

Corruption and abuse of power is so endemic that none of the presidential candidates are demanding its release. Even Colombo-based NGOs, usually very active during the run-up to national elections and who make a killing during this period, are mute! 

Political hot potato

The bond scams are such a hot potato that Parliament was dissolved on the eve of the August 2015 General Elections to prevent the D.E.W. Gunasekera-led COPE report on the 27 February 2015 bond scam from being presented to Parliament.

No one with fiduciary responsibility with access to official data on the 27 February 2015 and March 2016 bond scams has credibly quantified the loss incurred by the Government and the people. Various ‘unofficial’ estimates have indicated astronomical losses. As the issuing agency of Treasury bonds, should it not have proactively engaged the attention of the CBSL long before a Presidential Commission had ordered it? 

Now that the long-delayed forensic audit has been completed, the CBSL is stalling its presentation by the shameful recourse to seeking the approval of the Attorney-General! This must be viewed in the context when some high-ranking law officers of the State themselves have reportedly behaved in a manner that beggars belief and have themselves not been held accountable.

Scope of forensic audit

The ‘forensic audit’ will be of little value unless it has credibly addressed:

1) The loss incurred by the Government and the people

2) Implications to the economy

3) Naming the politicians and public servants responsible for the scams 

4) Issues incidental to the bond scams thrown up by witnesses at the Presidential Commission 

related to:

i) Integrity of banking system

ii) Possible money laundering

(iii) Possible tax evasion

iv) Politically Exposed Persons (PEPs) being directors of banks 

Dr. Coomaraswamy was appointed CBSL Governor on 3 July 2016. It was under his watch that the contentious ‘Foreign Exchange Act, No. 12 of 2017’ was enacted on 28 July 2017 and became effective from 20 November 2017 – 16 months after he took office. 

The Act inter alia states “The Central Bank shall as the agent of the Government, be responsible for implementing the provisions of this Act”.

This Act which repealed the ‘Exchange Control Act No. 24 of 1953’  further liberalises foreign exchange transactions and in effect is conducive for money laundering if people are so inclined. In the context of the absence of the political will to enforce even existing laws and regulations on a level playing field, is it not downright dangerous to have such an Act in the statute book? 

A precursor to this dangerous Foreign Exchange Act is the ‘invitation’ issued by then Finance Minister Ravi Karunanayake (he continues to be a Cabinet Minister) 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”!

It beggars belief that CBSL has the audacity to cite the contentious ‘Foreign Exchange Act, No. 12 of 2017’ to justify inaction on the Sri Lankan names 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.”

Illicit drugs and terrorism

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?

It were these enabling conditions and lax security that led to the Easter Sunday carnage resulting in around 253 persons killed and 500 injured and the national psyche badly wounded. 

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 had 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”? One could only speculate as to how many other cases not yet in the public domain have escaped the notice of the CBSL?


Much was expected from Dr. Coomaraswamy after his appointment as CBSL Governor. 

Would he rise to the occasion at least now on the eve of a crucial Presidential Election and immediately place in the public domain the forensic audit of the egregious bond scams?

On 7 November the ‘Daily FT’ reports Governor Coomaraswamy as having stated: “No amount of policies and regulations would ensure growth, prosperity and stability if good governance and compliance frameworks were fragile.”

Are these merely empty words to the Governor?