Cabraal denies claim of weak CBSL safeguards
Posted on January 8th, 2018

By Shamindra Ferdinando Courtesy The Island

Former Central Bank Governor Ajith Nivard Cabraal yesterday denied the allegation that the auditing process as well as other safeguards in place at the Central Bank of Sri Lanka (CBSL) at the time of 2015 February treasury bond scam were extremely weak and there is a need for new ones.

Cabraal said so in response to a query by The Island at a media conference called by the Patriotic Professionals Forum at Ramada in Colombo.

Cabraal was the CBSL Governor from July 1, 2006 to January 9, 2015.

Asked whether he accepted the assertion made by the Presidential Commission of Inquiry recommendations as regards the CBSL Cabraal insisted that there was absolutely no basis for that. He pointed out that he was responding to President Sirisena’s comments in respect of shortcomings at the CBSL. His response shouldn’t under any circumstances be construed as rebuttal of the commission report that hadn’t been released to the public, the former CBSL chief said.

Cabraal was flanked by Dr. Nalaka Godahewa, former Chairman of the CSE, who analysed the disastrous outcome of the treasury bond scams and posed specific questions the Sirisena-Wickremesinghe administration should answer without further delay.

President Sirisena, in a recorded address to the nation on January 3 quoted the commission report as having stated that there should be utmost supervision over the Public Debt Department of the CBSL. “As auditing at the Central Bank has not been conducted in a proper manner, the Commission recommended that the Audit Department must be reconstituted completely. A Legal Department must be established in the Central Bank and ensure that the Legal Department functions efficiently. The confidentiality, astuteness and auditing methods of the Central Bank of Sri Lanka were extremely weak. There were no tele-recording systems, electronic monitoring or even CCTVs. The current Governor of the Central bank has already taken steps to remove weaknesses and rectify these errors.”

Cabraal asked how the February 2015 bond scam had come to light within minutes of the closure of transactions of that day if the CBSL systems hadn’t worked. Within weeks, the first scam had become public knowledge, Cabraal said, adding that Singaporean Arjuna Mahendran, who was CBSL Governor from 2015 January 26 to June 2, 2016, for 578 days from the first scam and his political masters were answerable for the unprecedented crisis caused by those scams.

Asked for a clarification in respect of measures adopted by the CBSL to ensure transparency and accountability, Cabraal said that the institution was subjected to multiple auditing and examination processes. The CBSL Governor under the Rajapaksa government said in addition to internal audit, the Auditor General, an international audit firm, Compliance Officer, IMF ‘imposed’ safeguards and COPE (Committee on Public Enterprises) were involved in the process.

Dr. Godahewa underscored the pivotal importance of examining the assertion pertaining to shortcomings in auditing process in the proper context the allegations directed at the institution.

Asked by The Island whether the Patriotic Professionals Forum found fault with the Joint Opposition (JO) for not being focused on post-commission strategy thereby calling for a special meeting of Parliament to discuss the report instead of demanding the immediate release of the findings and recommendations of the report, Cabraal said that as a democracy Sri Lanka couldn’t sideline Parliament.

When asked again whether he believed a special session of Parliament would make a difference now, when the requirement was to demand immediate release of the commission’s findings and recommendations, Cabraal said that in addition to the parliament other relevant parties should take action. Cabraal named the Attorney General and the police as other relevant parties when The Island asked him to identify those responsible for pursuing investigations.

Dr. Godahewa alleged that so far absolutely nothing had happened since President Sirisena acknowledged that massive frauds took place in 2015 and 2016. The government certainly owed an explanation to the people as to how it intended to recover massive losses that had been caused to the national economy. Dr. Godahewa said that it would be a grave mistake to estimate the losses that had been caused by treasury bond scams at Rs 11 bn. The actual losses could be much higher, Dr. Godahewa said, demanding tangible measures to recover losses.

D. Godahewa said that explanations were needed as to why the CBSL had been brought under the PM with a Singaporean named as its Governor, the appointment of three-member committee comprising UNP lawyers to inquire into allegations and other controversial efforts to derail the bond investigations.

Cabraal denied that his sister had been on the directorate Perpetual Treasuries Limited (PTL) during the previous administration. When the media questioned Cabraal on his sister’s role in PTL, Cabraal said that had his sister done anything wrong at that time with his knowledge, the UNP would have surely thrown him behind bars. “My sister was with Perpetual Holdings for a year,” Cabraal said, challenging the government to prove impropriety on his sister’s part. He said those who wanted to investigate CBSL transactions during his tenure had conveniently forgotten Auditor General Gamini Wijesinghe’s report that dealt with that period. The AG prepared that report on the then Finance Minister Ravi Karunanayake’s request on Aug 19, 2016 and submitted it on January 16, 2017 Cabraal said, adding that the report posted on AG’s website was easily accessible.

A smiling Cabraal likened the government to a pickpocket running away after a botched attempt, shouting, ‘Pickpocket, Pickpocket’ to mislead the public.

Cabraal acknowledged that the Opposition needed a clear strategy to tackle the issue now that frauds of unprecedented magnitude were committed and the entire world knew about it.

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