Chandra J writes to President on essential strategic reform initiatives

President Maithripala Sirisena

22 October 2017

President Maithripala Sirisena,

President of Sri Lanka,

Presidential Secretariat,

Janadhipathi Mawatha,

Colombo 1.

Dear Mr. President

Essential strategic reform initiatives to prevent leakage of State revenue, money laundering and reduce the size of the informal economy

In line with the commitments of your Government, to foster good governance, transparency and law and order; enhance economic freedom whilst optimising State revenue: effective management of the external reserves and reduce the ill effects of money laundering, and expanding informal economy, it is essential that strategic reforms be introduced as a priority.

The under noted unlawful actions and challenges, which negatively impact on the achievement of the above goals, must be minimised and effectively controlled by essential reforms and restructures being strategically implemented, preferably as a part of the 2018 budget implementation action program:

1.Misuses of the foreign exchange liberalisation involving wrongful use of corporate fund transfers and corporate credit cards for illicit trading and money laundering as evidenced in investigation findings

2.Organised use of couriers for unauthorised movement of currency, precious metals ,precious stones, jewellery,  and narcotics as evidenced by  recent significant Customs detections

3.Purported illegal transfer of state assets by previous regimes and associated money laundering

4.Organised money laundering initiatives leveraging Crypto-currencies 

5.Ineffectiveness of organised structures and systems, information sharing and network assistance amongst the  key players engaged in detection and control, regulatory, investigation and prosecution of the offenses referred to above

6.The need for regulators, investigators and prosecutors to immediately examine jointly, any opportunities for errant persons and those who have committed large scale impact violations of the Exchange Control Act, to escape the legal net by any failure on the part of regulators, investigators and prosecutors failing to take timely action, prior to the new Exchange Management Act abolishing the criminal liability for offenses under the Exchange Control Act,

7.The legal provisions applicable in Sri Lanka (reference Prevention of Money Laundering Act No 5 of 2006 and Amendment Act No. 40 of 2011) appearing to require amendment to conform with international conventions and incorporate international best practices, especially as regards the definition and scope of coverage of  

a.Applicable persons engaged in money laundering 

b.Offense of money laundering

c.Presumption

d.Those persons and professionals assisting and or associated in the commission of the unlawful acts

e.Freezing of assets, etc.

8.Ineffectiveness of processes developing  and network support in mutual legal assistance (MLA processes) and International  Intra Investigator Mutual Assistance/Information Exchange processes

9.The lack of effectively  enforced professional codes of ethics and conduct binding professionals to take appropriate action, upon becoming aware of Non Compliance with Laws and Regulations (NOCLAR).

In the light of above it is recommended that the following Strategic Reform Initiatives be implemented with Cabinet approval being obtained via a cabinet paper endorsed by you as the President:

1.Create two new Units within the Financial Crimes Investigation Department, network supported by the Central Bank, Financial Investigations Unit and Customs/Inland Revenue and Excise, to specifically investigate: 

a.Organised crimes dealing with

i.unauthorised movement of currency, precious metals, precious stones, jewellery,

ii.wrongful use of corporate fund transfers and corporate credit cards for illicit trading and money laundering

b.money laundering initiatives leveraging crypto-currencies

2.Appoint two High Level Committees to  review and recommend before the yearend 2017

a.Legislative Legal Reforms to strengthen the control, investigation, and prosecution of Money Laundering Offenses

b.Best practice structures, systems and intra agency network support  in minimising money laundering and organised crimes dealing with unlawful movement of  currency, precious metals, precious stones, jewellery,  and narcotics

c.Measures to enhance the effectiveness and enforcement of codes of conduct and ethics dealing with Non Compliance with Laws and Regulations (NOCLAR)

d.Options to enhance the capability of developing  and embedding within the investigation structures and systems, the best practices and processes of developing  and network support in mutual legal assistance (MLA processes) and International  Intra Investigator Mutual Assistance/Information Exchanges

The effective implementation of the above recommendations will no doubt support the goals of the Government led by you, in realising the goals set out in the opening paragraph of this letter

Yours sincerely,

Chandra Jayaratne

cc. Prime Minister

Finance Minister

Minister of Justice

Minister of Law and Order

Minister of Strategic Development,

Secretary to the President

Governor, Central Bank

Inspector General of Police

Commissioner General of Income Tax

Director General of Customs

Director General of Excise