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Users of informal money changers face legal action: CBSL

14 Dec 2021

 
  • CBSL warns the public amidst foreign exchange crisis
  • Says their hard-earned money contributes to country’s development
  • Members of the public mock new announcement
  By Madhusha Thavapalakumar After initiating legal action against four of the “errant” money changers last week, the Central Bank of Sri Lanka (CBSL) is now warning that legal action may be taken against people who use “unauthorised” channels to send remittances into the country in order to earn a bigger value for their foreign currency earnings, The Morning Business learns. The CBSL, publishing a notice on its official Facebook page yesterday (13), also noted that in addition to being in danger of facing legal action for being a part of a racket, people could also lose their money in the process. “Your hard-earned money not only contributes to your loved ones’ development, but also to the country’s growth. In the process of sending that money to your country, do not become a prey of racketeers. This will result in you losing the money while also being subjected to legal action for being part of a crime. Stern laws will be strictly implemented to prevent such crimes,” the notice added. However, this post on the CBSL Facebook page was ridiculed by many Facebook users with mocking comments. “Why do we have to give our hard-earned dollars to you? Do you think we still live under a stone? I advise people not to send money to Sri Lanka but to save them wherever they are,” one user stated. “I have been sending money to Sri Lanka for the past 10 years. Did I get a recognition or concession for that?” another user questioned. “Still the Central Bank rates do not match the black market prices. Unfortunately, we have to go through the same channels till you correct your mistake,” a user alleged. “People use illegal methods because they are not getting a fair rate for their earnings. It’s very sad to see the Sri Lanka economy collapsing due to politics. The Central Bank should act independently to stabilise the economy. When the Central Bank collapses, the economy collapses. Without addressing the issue we can’t get over this mess. Do the right thing for the sake of 20 million people. Don’t play with our lives. Let the market act independently,” another comment noted. “Give us USD at Rs. 230, we will send it through formal channels,” demanded another user. “Go for the IMF, everything will be solved,” the comments further added. In 2020, regardless of the initial two waves of Covid-19, Sri Lanka witnessed a worker remittance inflow of $ 7.1 billion. However, worker remittances have been recording a slump since June this year. In October, the monthly remittance inflow was recorded as $ 317.4 million. Economists blame the directive issued by then CBSL Governor Prof. W.D. Lakshman a few days before his retirement, advising the banks to keep the selling rate of the USD below Rs. 203. As a result, there is a significant difference between the selling rate of the USD in licensed commercial banks (LCBs) and a hawala agent. The difference is beyond Rs. 35-40, and Sri Lankans who live overseas mostly preferred these money changers instead of LCBs in order to earn extra rupees for their US dollars. Considering this loophole, the CBSL announced that it will pay Rs. 210 per US dollar that is being remitted through legal channels during the month of December, while also announcing that it will take legal actions against money changers who offer Rs. 235-240 per US dollar. Issuing a statement last week, the CBSL stated that in response to several complaints that certain authorised money changers are engaged in activities, notices have been issued to four money changers to comply with the relevant directives, within a specified time period. The four money changers that were issued notices are New Natasha (Pvt.) Ltd. and George Michael Holdings (Pvt.) Ltd. in Wennappuwa, and Royal Money Exchange (Pvt.) Ltd. and Prasanna Money Exchange (Pvt.) Ltd. in Colombo 6. The statement noted that they are not in compliance with the directives issued under the provisions of the Foreign Exchange Act No. 12 of 2017 (FEA), and as such, the CBSL is conducting a series of spot examinations at the places of authorised money changers, thereby strengthening the monitoring and supervision of authorised money changers. The CBSL is desperately attempting to attract remittances into the country with its foreign exchange reserves remaining at $ 1.5 billion, out of which a mere $ 1 billion are the foreign currency reserves. According to the CBSL, this amount is sufficient only for three weeks of import cover.


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