By Maheesha Mudugamuwa Economic uncertainty looms large after officials of the Central Bank of Sri Lanka (CBSL) made a shocking revelation while testifying before the Parliamentary Select Committee (PSC) probing the Easter Sunday attacks. Highlighting the loopholes in the existing legal provisions related to foreign exchange, the CBSL officials alleged that those responsible for financial crimes revealed by the Panama Papers leak had gotten away due to the legal loopholes while officials of the controversial Batticaloa Campus may have also escaped as a result. CBSL Governor Dr. Indrajit Coomaraswamy, Financial Intelligence Unit (FIU) Director D.M. Rupasinghe, and CBSL Department of Foreign Exchange Director R.R. Jayaratne testified before the PSC. They were summoned before the PSC to provide information with regard to financial transactions related to Batticaloa Campus (Pvt.) Ltd. as well as any financial transactions related to any group or any person connected to the Easter Sunday attacks. Responding to a question imposed by one of the committee members as to whether the CBSL had any legal provisions to investigate financial transactions of the Batticaloa Campus, Jayaratne noted that currently, the CBSL did not have provisions and was in the process of amending the laws, adding: “The existing provisions do not even define the term ‘offence’ properly.” Powers revoked Elaborating on the gravity of the issue, former CBSL Governor Ajith Nivard Cabraal stressed that the country was in a terrible state as the accounts and transactions were under suspicion and the people now know that Sri Lanka didn’t have the legal provisions to investigate. “These comments will also go very much against Sri Lanka. Internationally, these comments will be picked up by different investors and I don’t think anybody is happy about this. The Financial Action Task Force (FATF) has now put Sri Lanka down to the ‘grey list’ (countries that are considered safe havens for supporting money laundering and terror funding are within this list) along with Ethiopia, North Korea, and a few other countries as such,” he told The Sunday Morning. Comparing the legal provisions before and after the amendments made two years ago by the current Government, Cabraal noted: “They brought the Foreign Exchange Management Act in 2017. Earlier, we had the Exchange Control Act and that had certain powers given to the Central Bank to examine certain accounts and transactions, and if there were any irregular transactions or those which imposed danger to the economy, the Central Bank could take action. “There were certain sanctions that the Central Bank could impose. But all of that was removed by the introduction of the new Act, which they hailed as a ‘great Act’ put forward. After that, the powers were removed from the Central Bank and there were no sanctions available. There is nothing which is called a wrongful act or an offence. Without having an offence, you cannot prosecute anyone. So, as Dr. Coomaraswamy said, there was no offence stipulated in the new Act. If that is the case, what is the regulation that he could do? So, he was articulating that and he did it very well,” Cabraal further explained. Asked who should take the responsibility for not implementing laws against illegal transactions, the former Governor noted that the Government should take responsibility for the passage of the new Act with loopholes. Only excuses Explaining the situation during his tenure in office as the CBSL Governor, Cabraal said: “During my time, if the Government brought forward any Act to infringe on the powers of the Central Bank or was going to make supervision difficult, I would have talked about it and there would have been no way the Government would do it without hearing from the Central Bank.” Justifying the CBSL’s statement made to the PSC, the former Governor added: “The Central Bank is now giving excuses to defend itself, which I suppose is necessary for them. They are in a huge mess. Now, the Central Bank is saying they have nothing to do with this Act, but I’m sure it’s true as it’s not the Central Bank’s business to pass laws. It is the Parliament’s as well as the Finance Ministry’s business.” Raising concerns over the two higher positions held during the time the laws were formulated, Cabraal questioned: “Who was there, and who is the Prime Minister? Those are the questions the people will have to ask. If everything went right, they would have said the Central Bank did it. Now, when everything is going wrong, they said the Central Bank didn’t tell (them).” Highlighting the measures he had taken when similar incidents occurred during his tenure, Cabraal stressed that when the Tamil Rehabilitation Organisation (TRO) went out of line during his time, he suspended and froze their accounts. So, the CBSL dealt with thousands of people whose accounts were suspected, he said. However, when The Sunday Morning contacted the Department of Fiscal Policies at the Ministry of Finance, a director stressed that the necessary amendments to the current Act should be implemented by the CBSL as once the bill is converted into an act, it was up to the relevant authority to take care of any shortcomings. When contacted, Department of Foreign Exchange of the CBSL Director R.R. Jayaratne told The Sunday Morning that the CBSL was currently in the process of preparing necessary recommendations to amend the present Act as a support mechanism for the Government, which is the responsible authority to form or amend the necessary acts. “We’ve had several discussions over the past few months. Anyhow, we are working to bring in the amendments as soon as possible,” he added.