Gaping Omissions In Article On CBSL Governor Coomaraswamy

Dr. Indrajit Coomaraswamy

By Amrit Muttukumaru

Amrit Muttukumaru

Objectivity, balanced reporting and the public interest demands that gaping omissions in Dr. W.A. Wijewardena’s adulatory article on Central Bank Governor Dr. Indrajit Coomaraswamy published in the ‘Colombo Telegraph’ and  Op-Ed page of the ‘Daily FT’ be placed on record. It is because of the key public office Coomaraswamy holds that such scrutiny becomes necessary.

Dr. Wijewardena – a former CBSL Deputy Governor is a prolific writer and resource person on economic affairs. He is also regularly featured in the ‘Colombo Telegraph’ and ‘Daily FT’. 

Stint with Raj Rajaratnam

Dr. W.A. Wijewardena (WAW) while referring to Coomaraswamy’s engagement with HNB bank for “nearly one and a half years”, fails to mention his “professional services” for almost 2 years to jailed hedge fund manager for ‘Insider Trading’ Raj Rajaratnam. 

Has not Coomaraswamy in his response to the media admitted that after Rajaratnam was “charged” for ‘Insider Trading’, he continued in service for “another year” and drew remuneration for doing so? Does not the question arise why a person only providing “macroeconomic research” should be involved in its ‘winding up’? Should not Coomaraswamy clarify this?

EU ‘Blacklist’

Another omission is the EU ‘Blacklist’ placed on Sri Lanka for money laundering in February 2018 in the context of Coomaraswamy assuming the position of CBSL Governor in July 2016 – almost 19 months after he took office. The EU ‘Blacklist’ was subsequent to the ‘Financial Action Task Force’ (FATF) placing the country on its ‘Grey List’ from November 2017. FATF recommendations are “recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.”

While Coomaraswamy must bear some responsibility (together with Messrs. Cabraal and Mahendran) for the FATF ‘Grey List’ and EU ‘Blacklist’, must he not bear major responsibility for the country  continuing to be in this position even today? 

How could this have escaped WAW’s notice?

Money Laundering

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 in the statute book the ‘Foreign Exchange Act, No. 12 of 2017’ which further liberalizes foreign exchange transactions which in effect is conducive for money laundering if people are so inclined. This Act which repeals the Exchange Control Act No. 24 of 1953 became effective from 20 November 2017 – 16 months after Coomaraswamy took office as CBSL Governor.

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

Given the virtues of Coomaraswamy extolled by WAW, should not Coomaraswamy have at the very least publicly cautioned the government against the enactment of such an Act which became effective in November 2017 especially when the country was on the FATF ‘Grey List’ from November 2017? This is in the context of FATF putting Sri Lanka on notice as far back as  October 2016 that the country would be assessed on the effectiveness of measures put in place to combat money laundering. Coomaraswamy took office as Governor in July 2016.

This is a country that proposes to establish an offshore financial centre as the centerpiece of the re-claimed land dubbed ‘Colombo International Financial City’. High end casinos are also said to be part of the mix. 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. 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?

How has WAW a former CBSL Deputy Governor missed all this?

Panama Papers

It is now more than three years since the International Consortium of Investigative Journalists’ (ICIJ) in a worldwide exposé named persons in several countries including Sri Lanka allegedly linked to offshore companies in tax havens revealed in the ‘Panama Papers’.

While not suggesting or implying that the mere listing of names and entities in tax havens is indicative of wrongdoing, it must be appreciated that until the accounts are determined legitimate, they will remain suspect and the persons concerned ‘not fit and proper’ to hold any position of trust involving the Public. 

A name included in the ‘Panama Papers’ is an erstwhile colleague of CBSL Governor Coomaraswamy on the Director Board of JKH arguably the country’s most diversified conglomerate with top tier market capitalization. This person from 1 January 2019 has assumed the position of Chairman of JKH. Until this date he was Chairman of a Bank controlled by JKH. Did ‘conflict of interest’ have a role in the inaction of CBSL’s Bank Supervision Department?

Coomaraswamy was a Board Director of JKH for more than 5 years from 7 February 2011 until his resignation on 3 July 2016 subsequent to his appointment as CBSL Governor. Unless he functioned pro bono, he would have received pecuniary benefits from this office. 

Now his sister Radhika Coomaraswamy has been appointed as an ‘Independent Non-Executive Director’ of JKH with effect from 1 October 2018.

It beggars belief that CBSL has the audacity to cite the new and 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.”

Are these of no concern to WAW?

Bond Scam – Forensic Audit

A key recommendation of the report of the Presidential Commission of Inquiry into the egregious Treasury Bond Scam is the Forensic Audit to be carried out by the CBSL. The Commission report was available in the public domain from 3 January 2018. The Forensic Audit has still not seen the light of day. The said scam is arguably the largest financial scam to have taken place in the post-independence history of Sri Lanka.

How long does it take for the CBSL to carry out its forensic audit? The CBSL which is the issuing agency for Treasury Bonds has to date not even quantified the loss incurred by the State which is widely perceived to be huge. 

Even crucial issues of governance incidental to the bond scam related to possible money laundering thrown up by witnesses at the Presidential Commission  which include possible tax evasion, PEPs (Politically Exposed Persons) being directors of banks and alleged bank malpractice do not appear to be even on the CBSL radar.

Politically Exposed Persons

In the context of Politically Exposed Persons (PEPs) being at the centre of the worldwide efforts for the prevention of money laundering, where else in the world (i) a Senior Deputy Governor of the Central Bank soon after retirement be appointed a Director of a leading bank? (ii) a Chief Justice of the Supreme Court soon after retirement be appointed a Director of a leading bank? (iii) a highly connected PEP previously Chairman of a leading bank be currently Chairman of a competitor bank?

Is it any surprise that Sri Lanka continues to be on the FATF ‘Grey List’ and EU ‘Blacklist’ for money laundering?


Dr. Wijewardena informs us that “According” to Dr. Coomaraswamy “the bank should have three attributes within it to do the job properly. The first was integrity. The second was technical expertise. The third was professionalism.” The readers can consider whether Coomaraswamy has been hoist with his own petard?

Source:Colombo Telegraph