Transparency International Sri Lanka (TISL) has appealed to the President to initiate a transparent and comprehensive inquiry into the recently impacted financial institutions and companies affiliated to them prior to the proposed relaxation of current exchange control regulations to allow Sri Lankan nationals and companies to invest up to US$ 500,000 overseas without Central Bank approval from December 2009.
In a letter addressed to the President in his capacity as Minister of Finance, TISL points out the need for the new exchange control regime to be subject to transparent processes being adopted by all connected persons within strictly applicable governance procedures and regulations. “This should include the establishment and implementation of risk management procedures and an independent regulatory control framework including due reporting and accounting of transactions. We also feel that wider consultation with all stake holders will bring in integrity and credibility into the entire process,” the letter adds.
The letter states that TISL has no objections to the proposed limited level relaxation of capital account transactions, provided due processes of long term, macro-economic policy impact evaluations are carried out along with associated risk evaluations. “We trust that this evaluation will take into account the increases in foreign reserves consequent to the Government’s recent borrowings from overseas to shore up the foreign currency reserves. We trust that the proposed relaxation will be introduced in an environment where Sri Lanka has substantial NET foreign currency reserves with SUSTAINABLE macro-economic stability and NOT in a context where fiscal deficits are out of control and public debt is seen to be increasing.”
Referring to the proposed inquiry into the businesses, TISL suggests that after the inquiry, it will have to be ascertained whether these businesses have directly or indirectly engaged in significant violation of Exchange Control Regulations and/or in illegal foreign currency transactions, and whether as a consequence of the perceived frauds/scams by directors and officers of these companies, caused the state and the relevant stakeholders of these institutions to suffer financial losses.
The need to determine whether any other approved financial institutions like Banks, Forex dealers and Money Transfer/Exchange dealers have either been associated with or have assisted in any unauthorized foreign exchange transfers to take place or for misrepresentation of facts or cover up of such frauds/scams has also been stressed in the letter.
“Based on the findings, action will have to be instituted against any errant institutions and their directors and officers, and any errant Bankers and Auditors etc, who have been associated with any illegal foreign exchange transfers and/or have failed to discharge due accountability in rendering professional services with diligence and according to expected best practices,” the letter concludes.
Download : Letter to the President | Central Bank Reply