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.
Our country desperately needs foreign investment, but surely, our country does not need black money being dumped into it. Pic Reuters
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.