Money laundering: Why Lanka is listed among high risk countries
Our country which has been categorised negatively in many spheres has now been categorised as a “high risk” country for money laundering. The list of the names of other countries published on the website of the Financial Action Task Force (FATF) are Bosnia, Herzegovina, North Korea, Ethiopia, Iran, Iraq, Syria, Trinidad, Tobago, Tunisia, Vanuatu and Yemen.We, Sri Lankans, have to hang our heads in shame as our country has been listed among the notorious countries for various reasons as one of the “high risk” countries for money laundering.
Money laundering
Money laundering in simple language is the process of converting the black money which has been amassed through illegal activities such as drug trafficking, human trafficking, arms smuggling, bribery and corruption, fraudulent transactions, commissions and kickbacks and any other money derived through various illegal acts. This money is known as “black money”, as the earnings of this money cannot be explained or declared, or deposited in legal financial institutions.
Black money
Any person or group of people who have an international network of illegal activities have to find means of using this black money as legal money for their luxurious living or their needs. In order to launder this “black money” into “white money” they look for opportunities where they could invest such black money in countries where the monetary legislation is either weak or there are loopholes to invest this money in major projects or business, that the country is offering for foreign investment. Under the government of the late J.R. Jayewardene, our country invited foreigners to invest their money under the Free Trade Zone (FTZ) concept. From that time onwards the Board of Investment (BOI), established by the government, has been accepting offers by foreign investors to establish factories, industrial estates etc., in the FTZ, which enabled them to bring in large sums of foreign currency and also with tax concession as well as a concession to repatriate the profits back to their countries.
This innovative concept of the Free Trade Zone (FTZ) did in fact bring financial benefits to our country to a very great extent, though a small percentage of investors may have channeled their illegally earned black money to be invested in these zones.
Haven for money laundering
With such wide opportunities provided by the government, members of the mafia groups found ways of channeling their money through foreign investors to undertake business investments in our country. As the years went by our country needed foreign exchange investment and, subject to correction, at a certain period, no questions were asked from investors as to the origin of their invested funds. This opened a gate for members of the groups engaged in illegal activities to dump their “black money” into our country through the provision offered by our country to invest in the FTZ. There is also concern amongst financial experts that a newly enacted foreign exchange regulation which is to come into operation in the near future may enhance the opportunity for unscrupulous individuals to launder black money.
Legislation
The government realising that legislation has to be brought in to prevent and curtail money laundering, enacted a bill in 2005 which was subsequently certified in 2006. This act was known as the “Prevention of Money Laundering Act No.5 of 2006”. This act has very stringent legal sanctions to prevent money laundering. This act provides for the law enforcement officers to presume that any movable or immovable property acquired by a person has been derived or realised directly or indirectly from any unlawful activity or from the proceeds of any unlawful activity, until the contrary is proved.
Legal action
In the past three years several cases of money laundering have been brought in the court of law against members of the previous government and officials connected to the former government. These cases are proceeding but so far, subject to correction, no individual has been convicted on charges of money laundering. Further there are similar allegations against high profile politicians who were in the previous government, and some of them who are now in the present government. The public expect that these cases will be speedily investigated and concluded and the culprits brought to book.
The bond issue
The scam at the central bank bond issue is now a subject of interest to all citizens of this country. To recapitulate, there was evidence given by a former bank employee, employed by the personalities involved in the bond scam to the effect that a certain expatriate chairman of one of the company’s brought in rupees hundred million in five hundred and thousand rupee notes and placed them in the safe of the particular company. It was also revealed that there was no record in their books as to the receipt of the hundred million rupees, who brought the money and how the money was being utilised. This is a clear case of money laundering. The origin of the rupees hundred million is not established, whether this money was withdrawn from any bank or how this so called chairman came into possession of such a large amount of money. The evidence was recorded at the presidential commission which is available for any law enforcement agency to probe as to the identity of this so called chairman, to trace and question him as to how he brought rupees hundred million and placed it in the safe of the company. Subject to correction, no law enforcement agency is reported to have commenced any investigation into this disclosure in the Presidential Commission inquiry. This is a clear case of money laundering which should be investigated under the Prevention of Money Laundering Act No.5 of 2006.
Caution
In view of the categorisation of Sri Lanka by the FATF among the “high risk” countries, as a country where international criminals who engage in illegal activities could launder the money they have earned through illegal activities, the authorities who are responsible for receiving proposals for investment in our country from foreign companies or individuals should be cautious enough to examine the source of investment, and whether such investment is derived from legal earnings by checking with the relevant banks or financial institutions which have been listed as their banking or financial institutions from which the investment monies will be transmitted.
If there is even an element of doubt about the investors and from where the money is coming, it would be safer to reject such proposals for investment rather than accepting them with open arms. It is not to look a gift horse in the mouth, or suspect every proposal of investment, but we do not want to be categorised as a country where black money could be dumped. Our country desperately needs foreign investment, but surely, our country does not need black money being dumped for it to be categorised as a high risk country as declared by the FATF.
( The writer is a retired Deputy Inspector General of Police)