Extending the net of AML/CFT: The need for public awareness

• The extension of mandatory obligations for Designated Non-Financial Businesses and Professions (DNFB&Ps)

Public policy implications

Tuesday, 21 November 2017

By Press Notice, the Central Bank of Sri Lanka (CBSL) through its Financial Intelligence Unit(FIU), has drawn the attention of the public to “Extraordinary Gazette Notification No. 2015/56 dated April 21, 2017 prescribing ‘Suspicious Transactions (Format)’ to be followed by Institutions defined under Section 33 of the FTRA”.

The purpose of this Notice, it is said, “is to inform the Designated Non-finance Businesses (DNFBs) (specified in the Notice), of their obligation to report any transaction where there is reasonable ground to suspect that the transaction may be related to commission of any unlawful activity/criminal offence as defined in Section 33 of the FTRA”.

This Notice has thus made it mandatory for DNFB&Ps to comply with the KYC/CDD requirements hitherto applicable only to licensed financial institutions, as defined in the Financial Transactions Reporting Act (FTRA). This is, in effect, an extension of the international requirements relating to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) to these non-financial businesses and professions.

Hitherto, AML/CFT obligations, though applicable to DNFB&Ps equally in terms of the law, were implemented and enforced only in respect of financial institutions.

Accordingly, of the 40+9 recommendations which have been issued by the FATF and compliance with which is used to rank countries on AML/CFT risk, four recommendations (12, 16, 24 and 25) were created in relation to the preventive measures that a number of non-financial businesses and professions, supervisory authorities/self-regulatory organisations, and other authorities concerned, should adopt to combat ML/TF in designated situations. This was one of the most important amendments to the 40 Recommendations of the FATF in 2003.

Implications

The implementation of these recommendations is very far-reaching and covers a very wide sphere of business and professional activity outside the financial system of the country.

In its commitment therefore to enforce these measures and eliminate the gaps in the level of country compliance with the global standards, and not merely to pay lip-service to the recommendations, the authorities will need to equip themselves with the human resources and the administrative supervisory and investigative infrastructure necessary, for effective implementation.

The non-financial businesses and professions designated are:

• casinos, 
• real estate agents, 
• dealers in precious metals, 
• dealers in precious stones, 
• lawyers, notaries, other independent legal professionals and accountants, 
• trusts and company service providers,
• Offshore units as defined.

What are some of the risks envisaged?

The risks connected to lawyers, accountants (as independent professions) and some other professions in the ML/TF field, lie basically in the potential misuse of these professions in concealing the identities of the beneficial owners of the transactions done through them. Therefore, countries are required to impose certain obligations on these categories to combat ML/TF, when they carry out the stated activities in the relevant FATF recommendations.

For instance with regard to real estate agents – money laundering through the real estate sector is considered a traditional way of ML, especially in cash-based societies and may have several forms, most of which are universal but some of which may be country specific. In Sri Lanka today, as it is in most countries, real estate transactions show an increasing trend, leading almost to what has been reliably identified as a “bubble” with significant economic implications. The financial transactions in this sphere of activity are large and demand very close scrutiny to ensure the legal source of funds.

Dealers in precious stones and metals – The risks of misusing the dealers in precious stones and metals are due to the fact that precious metals, particularly gold, attracts money launderers, as it has a high actual value and can be found in relatively small sizes, thus facilitating its transport, purchase and sale, in several regions around the world. Gold also preserves its value, regardless of its form, whether it comes in the form of bullion or gold articles. It is said that dealers are often interested in gold more than gems as it can be melted to change its form while preserving its value.

Diamonds can also be traded around the world easily as the small size of diamond stones and their high value, facilitate their concealment and transport and make it one of the most sought after gems and jewels with the risk of being misused as a ML means. In some cases, it was noted that diamonds are used as a means to finance terrorist acts and groups.

Noteworthy for DNFB&Ps

Accordingly, the Customer Due Diligence (CDD) and record-keeping requirements set out in Recommendations 5, 6, and 8 to 11 apply to designated non-financial businesses and professions in the following situations:

a) Casinos – when customers engage in financial transactions equal to or above the applicable designated threshold (still to be specified by the authorities).

b) Real estate agents – when they are involved in transactions for their client concerning the buying and selling of real estate.

c) Dealers in precious metals and dealers in precious stones - when they engage in any cash transaction with a customer equal to or above the applicable designated threshold (still to be specified by the authorities).

d) Lawyers, notaries, other independent legal professionals and accountants, when they prepare for, or carry out transactions for their client concerning the following activities: buying and selling of real estate; managing of client money, securities or other assets; management of bank, savings or securities accounts; organisation of contributions for the creation, operation or management of companies; creation, operation or management of legal persons or arrangements, and buying and selling of business entities.

e) Trust and company service providers when they prepare for, or carry out transactions for, a client concerning the activities listed in the definition in the Glossary.

According to the requirements set out in the relevant Recommendations:

Lawyers, notaries, other independent legal professionals, and accountants acting as independent legal professionals, are not required to report their suspicions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege.

Recommendation 24 requires that: Designated non-financial businesses and professions should be subject to regulatory and supervisory measures as set out below:

a) Casinos should be subject to a comprehensive regulatory and supervisory regime that ensures that they have effectively implemented the necessary AML/CFT measures. At a minimum:

• casinos should be licensed;
• competent authorities should take the necessary legal or regulatory measures to prevent criminals or their associates from holding, or being the beneficial owner of, a significant or controlling interest, holding a management function in, or being an operator of a casino
• Competent authorities should ensure that casinos are effectively supervised for compliance with AML/CFT requirements.

b)The competent authorities, in Sri Lanka’s case, the Central Bank of Sri Lanka, should establish guidelines, and provide feedback, which will assist designated non-financial businesses and professions in applying national measures to AML/CFT, and in particular, in detecting and reporting suspicious transactions (STRs).

It is believed that this is still a work in progress, although ideally, the rules or guidelines specifying the thresholds, where applicable, and the broad framework within which these DSNBF&Ps are obligated to operate, should have been issued simultaneously. On the contrary there has been more than a pregnant pause between the issue of the Press Notice and the Gazette Order and the issue of the rules and guidelines, which are an imperative if the authorities concerned are serious about their commitment to enforce the KYC/CDD obligations imposed on this sector.

It is also recommended that the relevant authorities should eliminate any confusion or misunderstanding some DNFBPs might have, especially, lawyers, accountants, notaries, and other independent legal professions, regarding a contradiction between the professional secrecy privilege and the reporting of STRs.

Gazette Order of 21 April 2017 – simultaneously, regulations cited as the Suspicious Transactions (Format) Regulations of 2017, have been notified and shall apply to every Institution within the meaning of Section 33 of the Act which are deemed to have obligations under AML/CFT.

While all institutions specified in the Gazette Order in Schedules I to IV have been identified and the formats comprehensively elaborated for reporting purposes, the DNFB&Ps referred to in Schedule V have not been fairly treated, in that examples of suspicious transactions elaborated in the other four schedules, have been completely left out. This is contrary to the recommendations of the FATF in this regard.

This is a serious omission, especially in circumstances where this category of entities have only recently been brought into the AML/CFT net and where no public awareness has so far been created by the authorities, of the circumstances in which these businesses and professionals can be used, or are vulnerable to, money laundering and terrorist financing.

Particularly where the legal profession is concerned, as a result of the “legal fog that is inevitable through interpretation of various laws based on stated cases and the inevitable legal arguments, we stand to lose the whole concept of what the law really means” (Money Launderers by Bob Blunden).

Therefore the simple question one needs to ask oneself is, as a financial institution, business or professional, “do you wish to handle the proceeds of any criminal or illegal activity, whatever that activity may be?” In other words do you wish to transact, or provide a safe haven to, what is commonly referred to as “dirty money”? If you do, you would end up profiting from a criminal or illegal enterprise.

Recommendations of the FATF for successful implementation

• Countries should work on providing a list of suspicious indicators to the various categories of DNFBPs to help them detect suspicious transactions. This could take place by coordination and constructive dialogue, amongst supervisory authorities i.e. the Financial Intelligence Unit (FIU) and the DNFB&Ps. This is an imperative and there is a lot of best practice in the literature available on the subject and from the region, not to want to reinvent the wheel. It is a cut and paste job with the addition of course of the inevitable local experience in the specific sectors which may be country specific.
• It is expected that forms have already been designed for reporting suspicious transactions and have been distributed to all categories of DNFBPs which conduct activities mentioned above. This is what the Gazette Order of April 2017 attempts to do, by specifying the reporting methods, the way of filling the reporting form, the minimum information required, and the competent authority responsible for receiving the reports. 
• More importantly, countries should direct DNFB&P categories to perform the financial operations and activities they carry out, through bank accounts – if possible - and lessen their reliance on cash in order to reduce the related risks and make monitoring and follow up procedures easier. 

In conclusion it is apparent thus that onerous obligations ensue for

• Banks

It is pertinent that even where these transactions are conducted in cash, the recipient of the cash, or their agents, the DFNB&Ps, would invariably deposit this cash in their bank accounts or those of their clients. It then becomes the obligation of the banks to perform the necessary due diligence, particularly where the DFNB&P concerned, it becomes apparent to the bank, has not done so, in identifying the source of funds for the relevant transaction. This then is incumbent upon the bank concerned to do so.

• The DNFB&Ps

The DNFB&Ps themselves, particularly the professionals, should realise the importance of protecting themselves by not entertaining large cash transactions and if they do, they will do so at their own risk. This therefore, does not need to be mandated if they conduct their business as responsible citizens and professionals at all times. The simple question one needs to ask oneself is “why should anyone want to transact in cash, particularly where the volumes are so large?” 

• The regulatory authorities

Large cash transactions through the licensed banks and non-bank financial institutions, over a specific threshold, are captured by the Regulator in the Cash Transaction Reports (CTRs), mandated to be filed by these institutions with the authority. It naturally follows that the authorities should be equipped to detect and flag these transactions and raise the level of inquiry necessary to detect their legality? It is pertinent to ask how many of such transactions were detected over the last so many years when AML/CFT obligations were applicable to even the DNFB&Ps, though not implemented, but which found their way into the banking system? 
After all this is the prime objective of money laundering and terrorist financing – laundering the proceeds of crime through the banking system!! The vibrant real estate sector, the casinos etc., have been flourishing over a considerable period of time regardless of AML/CFT concerns. There is naturally going to be quite a lot of resentment and angst when they feel the noose suddenly tightening round their necks. If these transactions had been probed as they should have been, the level of due diligence required from the banks too could have been significantly enhanced over the last decade since the law was enacted, to eliminate any reckless disregard that could have taken place for the necessary checks and balances to be put in place to ensure that this sector of businesses and professionals too were aware of their obligations under AML/CFT.

Additionally, it would be useful for the authorities to also consider the new threat on the horizon which looms large – crypto currencies – and what can be done to mitigate the AML/CFT concerns posed. The recent commentary by W.A. Wijewardena, the former Deputy Governor of the Central Bank of Sri Lanka, on the subject is indeed an eye opener.

As regulators the authorities always need to be proactive and ahead of these threats and not lag far behind, attempting to close the door after the horse has bolted so to speak. There has to be international best practice that can be used to formulate the necessary policies and safeguards and the use of the many forums available, particularly through the FATF, to assist in this regard.
(The writer was a consultant to the FIU of the Central Bank in its formative years, ex-Director of Bank Supervision and more recently Advisor to the Governor of the Central Bank.)

Had to raise money to pay for unaccounted expenditure: PM

2017-11-20

Testifying before the Bond Commission, Prime Minister Ranil Wickremasinghe today said he had directed former Central Bank Governor Arjun Mahedran to consider issuing Treasury Bonds by way of public auctions in accordance with the Economic Policy of the Government but expected that he would comply with due process in implementing the policy decision.

Premier Wickremesinghe said that he rested on the assurance of Governor Mahendran regarding the divestment of Arjun Aloysius’ ownership in Perpetual Treasuries and had insisted on the divestment prior to Mahendran taking over as Governor. He further said that he relied on the assurance given by Mahendran that there would be no conflict of interest. Prime Minister Wickremesinghe said that he made the same assumption regarding Ravi Karunanayake, when he questioned Karunanayake regarding the “Penthouse” allegations when it was first made by MP Mahindananda Aluthgamage.
“ I asked him ( Karunanayake) about it and he said no. There was no reason to go further”, Prime Minister Wickremesinghe said in response to a question posed by Attorney General Jayantha Jayasuriya.

The Commissions Chairman Justice K.T Chithrasiri read out from a list, the questions to the premier after which Attorney General Jayantha Jayasuriya followed suit.

At the onset of proceedings, Chairman of the Commission Justice K.T. Chitrasiri marked two affidavits submitted by the Prime Minister.

It was explained that the Prime Minister had answered by way of affidavits to 28 questions framed by the Commissioners ( handed over to the Commission on October 20, 2017) and to 20 questions formulated by the Attorney General’s officials (handed over to the Commission on November 18, 2017).

Following the markings at around 10.25 AM Chairman Justice Chithrasiri read out questions which had been prepared by the Commissioners which sought clarifications to the answers given by the Prime Minister by way of affidavits.
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Justice K.T. Chitrasiri: Now in the question number 5 (1) and (2) framed by the Commission, interalia inquired whether you were aware that Mr. Arjun Aloysius was a director and share holder of Perpetual Treasuries Ltd in 2014 and of some times in January 2015 and resigning from PTL after January 16, 2015 and also had questioned whether were you aware that Aloysius was a director of Perpetual Holding companies (Perpetual Capital Holdings and Perpetual Capital Pvt Ltd) even after January 2015. In your answers to question 5 (1) and (2) now you have stated that you were aware that Mr. Aloysius was a director of PTL and that when Arjuna Mahendran who was to be appointed Governor of the Central Bank you insisted that Mahendran must ensure that Aloysius resigns from the office of PTL and not involve himself with business activities of that Company in anyway and also that Aloysius should diverge himself from shares in Perpetual Treasuries Ltd. You have also stated that you have conveyed this to Aloysius also. And further you went on to say in the affidavit that Mahendran assured to you that Aloysius would not under any circumstances play any role of the business activities of the PTL and that you relied on those assurance given by Mahendran.

Now these are the clarifications we need. The first one is were you aware about the holding companies of PTL were Perpetual Capital Holding Pvt Ltd and Perpetual Capital Pvt Ltd ?
Prime Minister Ranil Wickremasinghe: No, I was not aware about the holding structure of those Companies

Justice K.T. Chitrasiri: Were you aware that Aloysius continued to be a director and share holder of those holding Companies even after January 2015?

Prime Minister Ranil Wickremasinghe: No, I was not aware but Mr. Aloysius did say to me he need bit of time to dispose his share holding to get good price. (shares of Perpetual Treasuries Ltd or shares he held in other entity in the name of PTL). I met him ( Aloysius) at one or two parties, and there he told me that he was pursuing his interests in Mendis distilleries.

Justice K.T. Chitrasiri: Now, the 10th question framed by this Commission to Prime Minister earlier asked you whether you instructed Mahendran on February 24 , 2015 to immediately stop the practice of Private Placement (Direct Placements). And In reply you have stated that you were aware at the time the practice of the CBSL was to issue the Majority of treasury bonds by way of private placements and that you were of the view that this system was unsatisfactory because it lacked transparency and also artificially suppressed market forces which should ideally determine interest rates and exchange rates. You have stated also in the affidavit that for these reasons you advocated the issuance of treasury bonds at ‘public auctions’. You have then stated that you directed Mahedran to consider issuing treasury bonds by way of public auctions in accordance with the economic policy of the Government and that you expected that he would comply with due procedure
And also replying to our 11th questions you have stated that ‘in the circumstances it was expected Mahendran would take appropriate steps in accordance with due procedures to give effect to the objectives of the Government as possible.

So, now we need clarifications on following: first, were you aware that the Monetary Law Act clearly specifies that it is the Monetary Board which vested with the sole authority to determine the policies and the measures of the Central Bank taken under the Monetary Law Act and that it is the Monetary Board which is the sole authority vested with powers in supervision commission of the CBSL under the Monetary Law Act?

Prime Minister Ranil Wickremasinghe: I’m aware of it but we have gone on the basis that in the constitution that the Government or the cabinet Ministers can determine the policies which applies to all institutions under the Government and in the light of the Secretary to give directions on general policies. So that applies to all institutes. We are on transparency which has to be implemented by the authorities. And secondly, also based on the constitution the control of the public lies with the parliament and it was in question that CBSL was acting and functioning without answering to Parliament. Therefore, all these bodies had to become answerable to parliament and the Auditor General’s powers have to be strengthened.

Justice Prasanna Jayawardena at this moment questioned the PM.

“Now that you have given directions to Mahendran, would you expect that the implementation of that order would be carried out in terms of the due process followed by the institution (CBSL)?

Prime Minister Ranil Wickremasinghe: Yes, he would have consulted. But there are three members in the Monetary Board. Two members were there including Secretary to the Treasury. I’m not aware as to how they proceed in the Monetary Board. But certainly the three members were aware because they were attending meetings. Beyond that I don’t micro manage institutes.

Justice Prasanna Jayawardena: So, would you expect what ever normal procedure had been followed in the CBSL when taking such decision would be followed?

Prime Minister Ranil Wickremasinghe: Yes I would expect

Justice K.T. Chitrasiri: Were you aware Monetary Law clearly specifies that the function of the Governor of the Central Bank is primarily to execute decisions and other tasks with the Monetary Board?

Prime Minister Ranil Wickremasinghe: Yes I was aware of it and wanted that to be restored, because in the previous era the Governor did not act with the Monetary Board but only informed the Monetary Board as to what happened. So, we committed that the Governor functioned under law, subject to what government policies are but we did not interfere in deciding interest rates or others things.

Justice K.T. Chitrasiri : Were you aware that as at February 2015, the policy of the Monetary Board to issue majority overwhelming treasury bonds by way of private placements, in fact in your answer you have acknowledged that it was the practice up to February. So were you aware of that?
Prime Minister Ranil Wickremasinghe: Yes, I was aware. Because, even in Parliament we have been informed on this. And I did ask Mahendran for all copies of every private placements up to 2008 and he gave details up to 2008. Subsequently, Governor Coomaraswamy also produced only up to 2008. So, there was a gray area as to how they were proceeding. Virtually, trillions of dollars have been taken from this and was in question.

Justice K.T. Chitrasiri: Were you aware of the established practice followed by the Monetary Board that when a major decision is to be taken which can effect the Monetary, the Monetary Board will first direct the relevant department of the CBSL about the relevant area to study the issue and submit a detailed board paper and then the Monetary Board will consider that board paper and discuss the relevant issues and only thereafter reach a decision?

Prime Minister Ranil Wickremasinghe: Yes. This was the procedure that they had followed earlier.
Justice K.T. Chitrasiri: In those circumstances, when you directed Mahendran to consider issuing treasury bonds by way of public auctions in accordance with the economic policies of the Government and would you have expected that he would comply with the due process and take appropriate steps in accordance with the due procedures? And did you advise him to give the Monetary Board the first directions and discuss at the Monetary Board?

Prime Minister Ranil Wickremasinghe: Well, I advised him to go ahead and I thought he would follow whatever the procedure which had been followed at that time.

Justice K.T. Chitrasiri: If So, did you expect Mahendran to also discuss at the Monetary Board on how to proceed with the possible shift from the overwhelming dependence on private placements to primary public auction system?

Prime Minister Ranil Wickremasinghe: No, I did not. I just told him what the policies are.
Justice K.T. Chitrasiri: Then, the question number 12 framed by this Commission about the money which was needed from February 2015 onward to fund payments to contractors on account of road projects and other constructions which may have not been previously accounted for and provided by the Ministry in 2014. Then question number 13 also states according to the evidence led before this Commission, the fund required were not included in the some of Rs. 13.5 billion, which the Department of Treasury Operations (TOD) requested the Public Debt Department to raise on March 2, 2015 for which purpose the February 27, 2015 bond auction was held.

This appears to be conferred by the fact that daily cash flow for the month of March 2015 which reflects the Rs. 13.5 billion by march 2 had been prepared by the TOD on or before February 20, 2015 , it was several days prior to the Cabinet sub Committee meeting on February 24, 2015 and breakfast meeting held on February 26, 2015, which you have referred in your answers. Then further, in daily cash flow forecast for the month of March 2015 states that the sum of rupees 13.5 billion required on 2 March, 2015 was primarily to fund the payment of capital expenditure.
So, we need clarifications on these, first is, in the view of aforesaid circumstances would you agree that the requirement of Rs. 13. 5 billion, required on March 2, 2015 which had been computed by department of Treasury Operations on or before February 20, 2015 was not connected with the requirement of additional funds in an amount of Rs. 15 billion which was urgently required as determined at the meetings on 24, and 26 February 2015.

Prime Minister Ranil Wickremasinghe: Yes, those are two separate requirements.

Justice K.T. Chitrasiri: Would you agree that the additional funds in the amount of Rs. 15 billion which was urgently required as determined in the meeting at the February 24 and 26 meetings, had to be raised separately or in addition to the sum stated in the daily cash flows prepared by the TOD?
Prime Minister Ranil Wickremasinghe: Yes, if the Commissioners would allow me I would like to explain. Generally, all the Government expenditure must be stated in the budget. What had happened in the previous years was that there were many projects approved which were not shown in the Appropriation Bill and the Act for the simple reason there was an agreement with the IMF on certain limits. You got around from the limits by not putting them in the books. Then when the money was collected you paid off but you have a problem. Actually we have two streams of payments to make. One is what is in the Appropriation Bill and one is outside that. I think for highways they were talking of primarily for that year including land compensation something around Rs. 75 billion -100 billion, in fact, last week I received a letter from a Singaporean company which had to be paid for doing a part of the Northern part of the expressway in 2013 or 2014. Actually no one knew about it till we got the letter. Even now we have various claims coming in and in the case of Sri Lanka this is not in the books but all the liabilities on the bag, if anything goes bad we still have to fund from the banks about Billions. We are going through it. It’s a forensic examination.

Justice K.T. Chitrasiri: Now, as we had questioned you in the 13 questions in the list, whether you had contacted Mahendran on February 26, or 27 2015 prior to and after the bond auctions, in your answers you have stated that in the evening of February 26, 2015 Mahendran said to you that it may be possible to raise the part of the additional funds required for the ongoing road works at the auction to be held on the next day. Then you have stated after the auction held on February 27, 2015 he informed that he had raised Rs. 10.5 billion.

So, now we need clarifications on that there had been a call from Mahendran’s telephone to a number at 12.39 p.m. on February 27 and then there had been three calls later in the afternoon on that day from Mahendran.

Is that the phone number that you can be contacted?

Prime Minister Ranil Wickremasinghe: Yes. I was contacted on this number and I have different phone numbers in use. But this was the number I was contactable on this day.
Justice Prasanna Jayawardena: Do you answer calls?

Prime Minister Ranil Wickremasinghe: I don’t answer calls personally. Generally since I work in my office room. There is someone outside who would check on the phone and deal with it.
Justice K.T. Chitrasiri : Do you recall the content of the four telephone calls?

I remember in the first call (12.39 p.m.) he told me don’t worry that we have enough money that we have raised. Then in the afternoon he gave me a call and described the details of what has happened and that they have taken Rs. 10 billion. And that was the two calls I remember. Other calls may be on some other issues.

At this point the Commissioners said they had concluded their questioning and requested the Attorney General if he had any questions.

Attorney General Jayantha Jayasuriya PC thereafter commenced his questioning, following the pattern of the Commissioners, the Chief Legal Officer of the country read out the questions to the Prime Minister. During the reading out of the questions, Jayasuriya PC did not ask many follow up questions to the answers provided.

Following are the excerpts of the questions put forth by the Attorney General

AG Jayantha Jayasuriya: You were questioned about the change of system that existed in 2015 and that the Governor had affected the change on the instructions that you have provided. And also you explained the due process for the Governor to follow in the new process when he was giving effect to the instructions you have given him. Now in 2017, another change had taken place with regard to the system that is adopted in relation to the Treasury bond auction. In your answer to question 26 (a) in the affidavit you have sent on 18th of November you had said that following past experience and on expert advise the current modified system was devised by the Monetary Board after reviving the working of the ongoing auction based system. That describes the way or the effort that had been taken to effect the change that was done in July 2017. Have you come to know or were you informed at any stage by Mr Arjuna Mahendran when he affected the change in 2015, whether a similar exercise had been carried out or not?

Prime Minister Ranil Wickremesinghe: What happened was, first we went over to the public auction system. We still did not know what the extent of the debt was, or what we had to pay. That was being done by him. It was done by him. It was complete only later on. He told me for instance that it might take upto 2021. Even we had the long term debts, the short term debts. We are going on and on and he advised us that unless we have a growth to pay we will become an indebted state like Greece. So While the Central Bank was working that out we now have developed a growth strategy also. Then subsequently Governor Coomaraswamy took on, but we had a big discussion on this. I think I have referred to it on a discussion with C. P. R. Perera who was called in and that was continued after Mahendran left and we got down a specialist from the US Treasury. The specialist finally gave us this system. The reason for this is when it became clear I would like my staff to hand over to Hon. Commissioners these three papers with figures on liability management , loan placement and also I would like to get agreements done which shows how we had to go ahead with this macro economic liberalization to get integrated into the global economy.

However it said the whole problem came from 2017 onwards because of the large amount debts and the bunching that treasury bonds subscribed for 2018 and 2019 were substation including annual bunching figure, and de-financing such debts on maturity date at a reasonable cost will be a difficult task, if not it may impact on domestic debt market expectedly on the interest rates.

The figure also shows that there is an annual and monthly bunch in the Sri Lanka development bond payments. In 2018 T bond maturity exceeds Rs 90 billion in six days throughout the year.

Then on commercial debts, annual interest bills of ISBs amounts to US $602 million in 2018 , further from 2019, matured amount stand at US $ 1000 to 1500 each year till 2027 except the year 2023 and 2024.

A pro active policy is needed to refinance risks of ISBs from 2019 onwards and then they suggested on the advice of this American that there should be a medium term debt strategy. This is something that evolved from 2015 till 2017.

I have given the commission the debt document, growth document and the agreement with the IMF both in 2016 and in 2017. That shows the whole economic policy of the government.

AG Jayantha Jayasuriya: That shows that you would agree that introducing this change would need extensive studies as well as sustainability of the mechanism that is going to be implemented. Are you aware whether in 2015 , when the change took place a similar exercise had been conducted by the Governor?

Prime Minister Ranil Wickremesinghe: We could not conduct any exercise in the treasury or in the Central Bank because the figures were not there. It took us the whole of 2015 and a part of 2016 to dig up all the figures and this was done as a result of what we did from 2015, that everything was available, transparent, and the Us Treasury advisor had come in, the IMF people had come in. It was not possible to have done it in 2015.

AG Jayantha Jayasuriya: Also you were questioned with regard to the conflict of interest situation that prevailed when Mr Arjuna Mahendran was appointed the Governor of Central Bank and also that in your answer to question 21 of the November 18 affidavit, you said that you believed that Mr Arjun Mahendran acted in good faith with regard to the assurances given to you. However there were at different stages like the public uproar after the auction of February 27 2015, then March 21 and March 31 2016 and then with the meeting with Mr C P R Perera that you referred to and as well as at a later stage when member of Parliament Mr Mahindananda Aluthgamage made a statement in the House in June 2016, the continuation of this conflict of interest situation were traced. Now in that context did you expect ( Now you expected Mr Mahendran to keep the assurances given to you). Was there any opportunity for you to verify whether these assurances were met with?

Prime Minister Wickremesinghe: Well this happened at the end of February and I did speak to him earlier in January and they told me that Aloysius was resigning from Perpetual Treasuries, which he had done.

He has resigned as a director. I was also told that he was going to spend his time developing the Mendis Distillery. He did once or twice and showed me some of the products and talked to me at some parties but not this. However that was all that I knew. Other than that I did not know he had shares. It was the same thing that Arjun Mahendran told me.

This conflict of interest is something which we raised because the sister of earlier governor was a member of Perpetual Treasuries and it was we who said there should not be any conflict of interests and we asked him to resign. When this happened I appointed the Gamini Pitipana Committee and the committee went for investigation. The Governor went on leave. If there was anything wrong against governor Mahendran he had to resign but there was nothing against him. However regarding other matters there were various issues that came up with regard to the issues raised by Mr Mahindananda Aluthgamage was about the Minister of Finance who was being questioned about his statement.

These documents tabled did not have anything like that but I did ask the minister and the minister (Ravi Karunanayake) said no. so I accepted that. Because with Mr Mahindananda Aluthugamage also there was an inquiry going on and the file had come to your department and you have to decide whether to prosecute him or not.(in a sarcastic manner)

AG Jayantha Jayasuriya Therefore there was no specific information that Mr Arjuna Mahendran in fact did keep those words about the assurances he gave?

Prime Minister Wickremesinghe: I had no information that he deliberately misled me and the Pitipana committee also did not have any information to that effect and I don’t think even the COPE, although it did make some comments, had any findings of that matter.

AG Jayantha Jayasuriya: So, in the backdrop of concerns being raised, did you at any stage consider whether it would be necessary to instruct Mr Mahendran to check how the ongoing issues should take place in the context of the allegations?

PM: Once I finished the Pitipana Committee I put to the hands of Parliament to tell me whatever it thinks wanted. The First COPE committee got Arjun Aloysius down and examined him, the second COPE committee did not get him down but examined Arjun Mahendran extensively. So once it came to Parliament I did not go to interfere again and I also wanted it done by the House as it had control over public finance. We wanted to establish the principle that Parliament has control over finance. We are now passing a legislation to give the House a budget office so that they will be in complete control in the new monitory law where there will be provisions for them to give the information from the Central banks. Therefore what happened earlier will not happen again in this country.

AG Jayantha Jayasuriya: In your affidavit of October 20 2017, answering questions 21 and 22 and the affidavit of the November 18 2017, answering question 33, you informed this commission that and the various steps that you took in relation to Pitipana report. You have detailed the fact that it has been referred to the Attorney General and also with regard to the reference to the House.
The Pitipana report, in paragraph 19, deals about serious concerns about Perpetual Treasuries securing 50 percent of the accepted bid (Rs. 5 billion out of Rs. 10 billion which was accepted at the auction).

Then paragraph 27 spels out a need of high level of integrity in the conduct of the officials of Central Bank which includes Deputy Governor and the Governor. Then in paragraph 38 of the committee report, the committee makes a humble request from you to take all necessary steps within the powers vested in you, taking further remedial measures that may be necessary. In that regard did you contemplate or have you taken any steps other than what you have described in the two affidavits, I referred to, by taking measures to ensure the integrity of the issuance of treasury bonds or under continuation of Mr Mahendran as the Governor?

PM: As I explained to you earlier, Mr Mahendran’s continuance as the Governor was dependent on the findings in Parliament because the Pitipana committee specifically did not make any recommendations. And when they handed over the report, I asked them is there anything for us to ask Mr Mahendran to resign. They said we can’t tell you that and this is all that we found. They told me kindly to go into the relationship between Perpetual Treasuries and the Bank of Ceylon as to how it could be obtained and what happened there. Pitipana Committee wanted to really to go into that relationship between Bank of Ceylon and Perpetual Treasuries. The question I think was whether this bond issue was in good faith or bad faith. So we had to establish bad faith. The matter came up and once it went into Parliament I left it there. With regard to remedial measures, Pitipana Committee had made certain recommendations. However since the mandate of the commission involved making recommendations we thought we will wait till the report comes out and then study those recommendations, the recommendations of the Pitipana report and some other recommendations that we have had and go ahead with whatever legislative measures we have to make because we are in the process of drafting a new monetary law, I have asked the Central Bank for its inputs and once that is there we will get the foreign consultants also take into account these views and bring it in.

AG Jayantha Jayasuriya: So in fact the Pitipana report of course confines themselves to the mandate that was given to them by you when you appointed the commission?

PM: Yes, but at the same time COPE was probing it. Mr D. E. W. Gunasekera was chairing it and therefore, I could not run a second inquiry parallel to it as they would have accused me of bad faith. However, COPE went into it. COPE issued a report but there was a big controversy whether they have done it officially or not. On the second occasion we told COPE to go ahead and Mr Sunil Handunetti was made Chairman and they went ahead. I think all the members came to a conclusion that further inquiry was required. They could not come to a final finding there.

AG Jayantha Jayasuriya: At any stage were you made aware of any policy decision to ask the state banks to coordinate and bid at low yield rate at the treasury bonds auction which was to be held on 29th March and 31 March 2016?

PM: No. There was no policy decision. State Banks were told don’t get into speculative bids and to discourage speculative decisions. Beyond that our principle was to be market friendly and let market determine the rates as far as possible.

AG Jayantha Jayasuriya: In your affidavit of November 18 2017, answering question 14, you referred to a meeting with Mr C. P. R. Perera and another official. So such policy decision was not disclosed even at that meeting, or fact that such instructions given to banks?

PM: No, we talked about the monetary affairs. The only thing that came out was that the bank supervision division was weak and with regard to the monitoring of non banking financial institutions were not existent and we should really go in for non banking institution supervision. Many of them were on the verge of collapse and now the present governor is taking steps. We still have some shaky institutions. (Shehan Chamika Silva, Yohan Perera and Hafeel Farisz) 

BBS HEAD GNANASARA THREATENS TO BOX JOURNALIST C.A. CHANDRAPREMA’S EARS!

Image: Galagodaatte Gnanasara Thera.

20/11/2017

The Island political correspondent, C.A. Chandraprema, was threatened on 19th Nov. by Galagodaatte Gnanasara Thera while the former was at the funeral of Ven. Medagoda Abhayatissa Thera’s mother in Narammala.After paying his last respects to the remains of the monk’s mother Chandraprema was speaking with a Nayake Thera when Gnansara Thera accosted him, demanding to know whether he was Chandraprema. When Chandraprema answered in the affirmative, Gnanasara Thera pitched into him, saying “thamusege mama kana palanawa” (I’m going to box your ears).

Thereupon, Chandraprema told Gnansara Thera that it was Ven. Abhayatissa’s mother’s funeral and if there was anything to be discussed that should be done outside the premises, but Gnanasara Thera kept telling Chandraprema “Mama dannawa thamusege Kolapata Samajaya gena … mata puluwan thamusege kana palanna.”

Some senior monks intervened and sent Chandraprema away. Chandraprema who counts over three decades in journalism says that he has never been threatened by any politician or anyone else in that manner.

The Island

Gintota, Politics & The Muslims

By Latheef Farook –21November 2017

It appears that racism and racist politics which brought endless misery to people have started rising its ugly heads again. This time it is at Gintota, a town close to Galle in the South of the island.

It was racist politics which divided communities, paved the way for the 30 year ethnic war which in turn virtually destroyed communal harmony, economic progress, caused political instability and the killing of innocent people from all communities while politicians and their sidekicks flourished on arms purchase.

On Tuesday 14, 2017 Minister Lakshman Kiriella said that the 30 year war might have cost Sri Lanka US Dollar 400 Billion. This is colossal amount of money which, if used for the development, the country would have been a paradise to the benefit of all.

 

However the disgusting racist politics since the end of the ethnic war in 2009 only point out that racist politicians and their mercenaries have not learnt any lesson .As a result communal tension continue to rise.

Sinhalese and Muslims in the Gintota area lived in peace and harmony for generations. However some racist mercenaries including Buddhist monks oppose peace.  

  

On Tuesday 14 November 2017, a Sinhalese teenage boy riding a motor bike knocked down around a 55 year old Muslim woman who was injured. It was purely an accident and nothing to do with communal hatred.

The woman was taken to hospital, given treatment and sent home. Later the two sides, relative of the Muslim lady and the Sinhalese motor bike rider, met and amicably settled the issue. The boy reported to have paid a sum of Rs 25,000/- as compensation to the lady who has in turn agreed not to complaint to the police about the accident.

The issue ended there peacefully.

 

On Thursday 16 November 2017, around 6.30 PM some Muslim boys who were returning home after playing football in the same locality were attacked by some Sinhalese. Muslims went home, brought people and attacked the Sinhalese who attacked them. In the process Muslims also attacked a Sinhalese house which they admit was a mistake.

However since then tension began to rise and Pradeshiya Sabha member Kayas who usually takes active part in community issues went to meet prominent Sinhalese in the area to settle the matter peacefully. Representatives of the two mosques and Sinhalese in the area met on Friday 17 and agreed to settle all issues amicably.

However the Buddhist  priest  in the temple in the area, supposed to be a close associate of racist outfit Bodu Bala Sena general secretary Galagoda Atte Gnanasara Thera, accused Kiyas of inciting  problem, got him arrested and refused for a peaceful settlement. Result was tension again which many Sinhalese and Muslims believe was uncalled for. 

In the midst around 7 pm two bus load of people, all of them outsiders and face covered, suspected to be armed, arrived at Gintota junction together with four Buddhist monks. In view of the rising tension there was increased police force and STF personnel at the Gintota junction. However police and STF personnel were withdrawn after Friday prayers at around 1.30PM. Now the people question why they were removed despite rising tension.

The mob started moving into less populated areas first. They threw stones at a small mosque in the Gentofte junction. From there they started stoning Muslim owned houses and shops. Some of these shops were robbed and emptied of goods.

They started their attacks in full swing around 8.30 pm and continued for one long hour until 9.30 pm. From 8.30 pm onwards the mob moved into areas such as Kurunduwatta, Maha Hapugala, Welipitimodera, Ukwattha and Piyadigama to continue their attacks.

They attacked in the darkness and people pointed out at Muslim houses and shops saying ‘meeka thmbigi ge, meka thambige kade’. While these attacks were continuing Muslims tried  to contact the police. All their frantic efforts failed as there was no response.

According to Muslims in the area the mobs attacked two mosques, 66 houses, 26 shops and 14 vehicles. Police said 19 persons arrested in connection with the clash were produced before courts and remanded till November 30.

Muslims in the area feel that the absence of police till 9.30 pm gave the mobs sufficient time to continue their attacks on Muslim houses and shops. While the mob went on rampage the two buses which brought the mob were parked in the Sinhalese areas.

Till the police arrived Muslims were at the mercy of mobs. They gathered near the mosque to see what they could do to protect themselves and their property .They now suspect that the mobs were hiding in the temple where the monk who refused peace talks live.   

Some Muslims claim that they had seen police vehicles using head light which facilitated the attacks while others said that they had seen police vehicles moving slowly while the mob attacked Muslim owned properties. However they didn’t make any attempt to stop the attack.

Muslims now begin to feel that this not an isolated attack but a planned and coordinated one.

Meanwhile in a special statement issued on Saturday 17 November 2017, Law and Order Minister Sagala Ratnayaka said “the tense situation that developed in Gintota on Friday night has  been brought under control and law and order restored.

He said that additional Police battalions, the Police Special Task Force, the Anti-riot Squad and the military were called in to bring the situation under control. A police curfew was imposed on the area until 9.00 am on Saturday. The curfew was reimposed yesterday from 6.00 pm to 6.00 am Sunday in the Gintota East and West, Maha Hapugala, Welipitimodara, Ukwatte, Piyadigama and Kurunduwatte areas.

Minister Ratnayaka said “I am aware that some political groups are now on a desperate mission to turn this minor brawl into a Sinhala-Muslim clash. I urge the public not to be misled by their false propaganda. The same elements are now in the process of disseminating false videos and news on social media platform to stir up communal sentiments. I reiterate that stern action will be taken against everyone, irrespective of their positions and political affiliations, who attempt to resort to racist propaganda. “The same will apply to the rumor-mongers trying to capitalize on the opportunity to achieve petty political gains”.

Countering this statement parliamentarian Wimal Weerawansa told the Parliament that communal violence is being aroused in Galle and surrounding areas by the government to divert public attention from the Treasury bond scam probe.

He added that: “a very insignificant incident had been snowballed into violence among Sinhala and Muslim communities. We call upon the Sinhalese and Muslims not to fall prey to these tactics. Do not give into emotions. These clashes are not natural incidents. They seemed to be well planned events staged by some groups at the behest of very powerful people.

“Their target is to grab public attention from the topics being discussed in the public discourse. Such events could change the news headlines from the current situation where all newspapers talk of the Treasury bond scam and its footnote gang. They want to create different headlines. No person could kill another or set another’s property on fire. The people do so only when they are assured of the backing of some powerful persons. There is a very strong hand behind these ugly incidents. The people should understand whose hand that is.”

UNP parliamentarian Mujibur Rahuman said: “Communal violence erupted in the Gintota area and nearly houses of Muslims have been set on fire. Their properties have been damaged. Vehicles had been set on fire. We are talking of human rights and war crimes today. We have been able to win the confidence of the international community in that regard with some positive actions. But unfortunately we failed to stop yesterday’s violence. 

Read More

Sri Lanka deploys troops to prevent communal riots

Muslims account for about 10 percent of Sri Lanka's 21 million people and are the second largest minority group after Tamils

By AFP-18 November 2017 

Sri Lanka deployed troops and ordered a night-time curfew in a southern town to end violent clashes between two ethnic communities, the government said Saturday.

Law and Order Minister Sagala Ratnayaka said the situation in Gintota in Galle province was under control, two days after a brawl degenerated into street violence between two groups -- one Sinhalese, the country's mainly Buddhist majority, the other from the Muslim minority.

"Additional police battalions, the police Special Task Force, the anti-riot squad and the military were called in last night to bring the situation under control," the minister said in a statement.

Six people injured in the clashes were admitted to hospital in Galle city, 115 kilometres (72 miles) south of the capital Colombo, according to local police who arrested 19 people.

It was not clear what triggered the clashes, with accounts varying between a road accident and a land dispute.

The government relaxed the curfew Saturday morning with a warning that police would arrest any instigators.

Ratnayaka blamed local politicians for attempting to exploit the unrest.

"Some political groups are now on a desperate mission to turn this minor brawl into a Sinhala-Muslim clash. I urge the public not to be misled by their false propaganda," the minister said.

Muslims account for about 10 percent of Sri Lanka's 21 million people and are the second largest minority group after Tamils. Sinhalese make up over 70 percent of the population.

Authorities said they were keen to avoid a repeat of violence seen in June 2014 when four people were killed and several injured in clashes between the two communities in the same region.

That unrest was blamed on a radical Buddhist extremist group whose leaders are currently facing several court cases for instigating inter-faith violence.

" What’s now being exposed is the mafia behind it "

• Relationships of this sort are found in white collar criminal gangs 
• It was clear that they were on the side of Aloysius during the process 
• The replacement of MP Velu Kumar by Sujeewa Senasinghe shows it was all organised
• I didn’t go to ask them if the phone calls were from their wives or from Arjun Aloysius, nor did we tell them to leave their phones outside when walking into deliberations
• In fact I had to leave the Committee in protest at how they conducted themselves. 
• The Bond scandal is symbol of a failed system 
• The attempt to derail the COPE report had few stages
• Tell me, what exactly is there to hide now?
• Now what has surfaced is the fact that these actions weren’t done in isolation. Rather they were actions which were committed by an organised group
• As we see now, the workings were wheels within wheels and all this was organised. They were hell-bent on scaling down everything that was to come out of it, but thankfully they could not do so
• You would remember how the Auditor General was abused

Committee on Public Enterprise (COPE) Chairman Sunil Handunnetti in an interview with the  said that the revelations of COPE members in constant contact with Perpetual Treasuries owner Arjun Aloysius was evidence of a “mafia” type organised crime ring. Following are excerpts of the interview done with Handunnetti.

    

QAs the Chairman of COPE, which investigated into the Bond Scam, what is your take on the recent revelations of phone calls between members of your committee and Arjun Aloyius?   

2017-11-21 

 I’m not surprised at all, really. If you look at the behaviour throughout the process and how they attempted to stall the process it was evident which side they were on. The only thing that has been revealed now is the evidence given regarding the side they were on throughout the process. The actions were clear and the evidence substantiates what was happening all along.   

QYou seem to be only focusing on the times that they were in contact which is during the period when the committee conducted hearings. These are times during which there is actual evidence of the contacts going above and beyond the times of COPE hearings. For instance, Sujeewa Senasinghe had been in touch 227 times out of which he was in touch only 63 times during the COPE hearings. Dayasiri Jayasekara was in touch 18 times out of which two were related to COPE hearings. Did these people explain their relationship with Arjun Aloysius to you at any point? 

None of them indicated of having any such relationship with the rest of the COPE members. What really is important here isn’t the number of times they had spoken to each other. What’s of real importance is what they had been discussing. During that investigation, which side they were on is the real question. Were they on the side of parliament or were they on Arjuna Mahendran’s side? These people were COPE members and are in parliament as representatives of the people. They aren’t in parliament because they were appointed by some individual right? The Mandate was that of the people.   

If anyone has any doubt as to where these people stood during the process, you must read the COPE report in which their representations are recorded verbatim. That is enough evidence to know how hard they tried to derail the entire process

QWhy this question was asked is because Dayasiri Jayasekara had admitted that he spoke to Aloysius twice and met him once, specifically going by what was publicized- which was that he was in contact twice during the time of the COPE hearings. What failed to receive much publicity was the fact that he had been in touch with Aloysius 18 times in total. What is your take on this?   

Again what I insist on isn’t to focus on the number of calls. Instead the focus really should be on the the contents of what was discussed which is why I have asked the Speaker to get a report on what was spoken during these conversations. Then we will know for sure what was discussed with whom and by whom. I called for these facts to be tabled in parliament, in writing.   

Q In the COPE you (All members) sat as judges throughout the entire issue. However what we witnessed was that many members were accused of collusion. This issue, conflict of interest, emerges due to the fact that they were known to each other or were in contact. How do you view this?   

Well, if you remember right, you would know that I was the first person accused of conflict of interest by the Leader of the House Mr. Lakshman Kiriella. The grounds on which this accusation was made was the fact that I was the first to make the revelation regarding the scam. That was how they tried to portray the issue of conflict of interest. Now I would like to know what he and the rest have to say about these conflicts? I would really like to know what Kiriella has to say now about members from his party who have acted like an organised gang of criminals ?    

The grounds on which this accusation was made was the fact that I was the first to make the revelation regarding the scam. That was how they tried to portray the issue of conflict of interest. Now I would like to know what he and the rest have to say about these conflicts?

QWhile the investigation was in progress, and while your deliberations were happening, did you feel like there was something larger going on? Did these people walk out in a suspicious manner to answer calls ?   

The members who are appointed to the COPE are appointed by their respective parties right? So they are deemed to be responsible enough to sit on this committee. For example, your editor won’t be checking your phone calls would he? He would assume that you are a professional and as such you are responsible enough to be writing for the newspaper.   

Similarly, I never checked on the phone calls received. I didn’t go to ask them if the phone calls were from their wives or from Arjun Aloysius, nor did we tell them to leave their phones outside when walking into deliberations. This is because there is a common trust which prevails upon anyone walking into these deliberations. I actually can’t ask these questions.   

This question arises after these revelations right? But if you ask me on which side they clearly were during these deliberations it was crystal clear that they were on Arjun Aloysius’ side and did everything in their power to stop the report from being presented. In fact I had to leave the Committee in protest at how they conducted themselves. You would remember how the Auditor General was abused.   

Now what has surfaced is the fact that these actions weren’t done in isolation. Rather they were actions which were committed by an organised group. Like for instance UNP Parliamentarian M. Velu Kumar had to resign and Senasinghe was appointed.   

QI want to stop you there. The data that was presented shows that MP Sujeewa Senasinghe was in touch with Arjun Aloysius even during the time of the DEW Gunasekara committee. The contacts were established on July 7, 2015. It was thereafter that he was appointed to your committee, following the resignation of MP Velu Kumar, also from the UNP. In hindsight do you think that this was all planned? 

We are able to know the difference between the sound of a drum and the sound of a door right? similarly, the fact that Senasinghe was appointed midway and the manner in which they all behaved, suggests clearly which side they were on. The attempt to derail the COPE report had few stages. The first was to stop the investigation from taking place. The second was to try and make a mockery of the investigation. Then came the attempt to stop the report. Thereafter they tried to make a mockery of the report itself. Finally when all attempts failed, the fact that they put ‘footnotes’ and the attempts made to absolve the wrongdoings highlight the different stages during which these people tried to scuttle the process.   

If anyone has any doubt as to where these people stood during the process, you must read the COPE report in which their representations are recorded verbatim. That is enough evidence to know how hard they tried to derail the entire process.I have no doubt, but anyone who is in doubt must read the representations made by the persons, who have now been exposed, to have been in touch with Arjun Aloysius. That would make it clear as to what they were doing in the committee.   

QNow you have called for the recordings to be provided. But we all know that giving such recordings are next to impossible due to the technicalities involved. In fact even Dayasiri Jayasekara has made the same call as you have and asked for the recordings to be tabled. Isn’t this a ruse to hide the entire thing behind the rhetoric of ‘give the recordings?

 Tell me, what exactly is there to hide here? Everything is out in the open. The fact that there was a scam where its loss to this country can’t be calculated, the interest rates were affected because of this scam and that the the Central Bank and State Banks and the EPF suffered incalculable losses as a result is crystal clear as daylight. There is really nothing more to be exposed. What’s now being exposed is the mafia behind it. What else is there to hide when everything has now been exposed. 

These sort of relationships are relationships which exist in criminal white collar gangs. Not in normal ethical industries and people. All of this is evidence that supports what we have said all along. This evidence substantiates what we really have been saying throughout this time

Q Arjuna Mahendran during his evidence said that he had no knowledge of a person by the name of Kasun Palisena, the CEO of Perpetual Treasuries, nor that he had intimate dealings with Saman Kumara, who was in the charge of the EPF, and Pathmanathan, a rather junior officer of the Public Debt Department. But now it transpires that he in fact was in constant contact with all of them during the period of the Bond issuance.   

Once you open a sack and see what’s within, you don’t need to tap it again and feel what’s inside, do you? This sack is open. Mahendran was the Governor of the Central Bank. Why does he need to speak to brokers? In fact Palisena is the only broker he had spoken to during his entire reign. Why? the reason is crystal clear isn’t it? These sort of relationships are relationships which exist in criminal white collar gangs. Not in normal ethical industries and people. All of this is evidence that supports what we have said all along. This evidence substantiates what we really have been saying throughout this time.   

Q Also about Karunanayake who during his evidence said that he only knew Arjun Aloysius as a family friend and that he had met him ‘occasionally’. It now transpires that he had been in touch over 350 times and his wife over 320 times during this period..   

 All I have to say is let us take Karunanayake’s testimony for a moment as true. Then he really must have some concern regarding the relationship between Aloysius and his wife. Isn’t that something he needs to worry about? The fact that she was in touch 320 times while he had admittedly not knowing Aloysius very well, is something a husband should be concerned about isn’t it? 

 
QFinally Mr. Handuneththi how do you view this entire scam in terms of the capitalist economic system? The fact that people with a few computers and phones were able to amass such a large amount of wealth without adding or contributing to the manufacturing or production process. How do you analyse it?   

Prior to that, I must say that I am proud to have been able to present the report to parliament despite the enormity of pressure applied to stop me from presenting the report. As we see now, the workings were wheels within wheels and all this was organised. They were hell-bent on scaling down everything that was to come out of it, but thankfully they could not do so. I wish to say that it was our report that gave rise to the Bond Commission. If it wasn’t for our report and the public outcry that followed, the commission would never have been appointed. It really was a victory for the people who oppose corruption. The dirt the people, who present themselves as Mr. Cleans, carry is now exposed and I am glad that I contributed to this expose.   

Secondly and more importantly to your question on the system, what we are witnessing now is not free market capitalism. Rather a crony capitalism, in which brokers and dealers rob wealth. It’s the stage of daylight robbery. What we see is the personification of greed. Capitalism now doesn’t exist in the manufacturing process, rather it exists today in the capital itself; where the capital robs the capital. That is what has happened. The industrial capital is being robbed of the owner of the capital.   

So to explain this further, what happens is the wealth taken in by Industrial Capital is first robbed by the Banks through the processes in place. It is that wealth thus taken in by banks that is being robbed by the brokers and the dealers. The entire bond scam is a symbol of the failure of this corrupt and dirty system.