Finance Minister Ravi K’s Money Laundering Case Postponed

January 30, 2015 

The Colombo High Court yesterday postponed the case against Finance Minister Ravi Karunanayake who has been charged with allegedly facilitating money laundering, for March 4.

The case as postponed by High Court Judge Devika de Livera Tennakoon when Defence Counsel Reinzie Arsekualaratne informed the judge that Minister Karunanayake was unable to be present before the Courts yesterday as he was due to present the 2015 interim budget before the parliament.

Finance Minister Ravi Karunanayake

As there was no objection from the prosecution, the case was postponed to March 4.

The Attorney General indicted Nexia Corporation, Linton Sirisoma and Karunanayake for allegedly facilitating money laundering in violation of Central bank regulations and the Exchange Control Act by depositing Rs. 390 million in a Standard Chartered bank account, which had been later used to purchase shares of the Union Bank. The transfer had been made by Sri Lankan American billionaire and hedge fund dealer Raj Rajarathnam.

During the hearings it was alleged that Karunanayake was directly involved in the fraud and that he intervened to collect the funds once the money was deposited in Sri Lanka.

“Exchange Control is the function of the Central Bank. The Central Bank is governed by the Monetary Board. The Secretary/Finance (Treasury) is a member of the Monetary Board. The Minister of Finance is the Boss of the Secretary/Finance. How nice to have a person charged with Exchange Control crimes as Finance Minister” a good governance activist told Colombo Telegraph.

Responding to the question above a retired secretary to the finance ministry said; “The Exchange Control offence as far as I am aware from a reading of the newspapers is a technical offence, namely the failure to inform the Exchange Controller of an inward remittance of foreign exchange. Actually Exchange control is generally reserved for outward payments and not for inward remittances since the rationale for Exchange Control is to control outward payments which can worsen the balance of payments. After the Money Laundering Act was passed the rationale for reporting of inward remittances above the threshold fixed by the Controller is to control money laundering and terrorist financing. So if the case falls under one of these two there would be a serious situation even if the case is pending and not proved. But if the case is merely for the failure to report to the Controller I think it is a technical offence.”

“The remittance came through the banking system and all such remittances are reported by the banks to the Central Bank in any case. While a departmental inquiry under the Exchange Control Act may have been necessary I am not sure whether it warranted a criminal case to be instituted. Of course I don’t know all the facts and would not want to comment since the matter is sub judice.”

“The late N.U Jayawardene would lament that the biggest mistake he made in his public office was to pass the Exchange Control Act. Exchange Control was introduced by the British colonial ruler to prevent enemy forces undermining Sterling since the British Government was no in a position to convert the pound sterling during the war and even for several years afterwards. There was the Sterling Assets Agreements with the colonies.

“With the end of the war the Defence Regulations lapsed and with it Exchange Control. There was no rationale for retaining Exchange Control as the county did not face any balance of payments problems then. NUJ lamented because he reproduced the Exchange Control Defence Regulations which included inward as well as outward remittances. The new Minister should review this outdated law and amend it suitably if he wants to attract foreign investment to the country. Of course being heavily indebted to foreign bankers and to China the country now needs all inward remittances to be able to repay the foreign debt as it falls due.” he further said.