Panama papers and the GFI report: Will the SL govt investigate?

Panama papers and the GFI report: Will the SL govt investigate?

Panama papers and the GFI report: Will the SL govt investigate?

Written by Tharushan Fernando

12 Apr, 2016 | 9:19 pm

The leak that came out of the Panamian law firm Mossack Fonseca named major political figurehead alongside other public figures and shined a light on a massive off-shore company industry, which was used to avoid taxes and keep massive amounts of money hidden.

The public outrage that was caused by this leak was showcased when the P.M of Iceland was forced to ‘stand aside’ and the British P.M scrambling to make amends.

The hidden network of money that was thrown into a mass state of public awareness meant that ordinary citizens around the world  are searching for answers. Yet the Panama Papers have been under scrutiny from major whistle-blowers like Wikileaks and Edward Snowden for using major media outlets to report the leak.

The leak which was headlining the world of news since its release has been accused of being filtered. However, the impact of it has been common ground for many and has set in motion major investigations in to the names linked to the data leak. Likewise, in the wake of the leak, Sri Lanka has been in the process of digging at any exposure of such offshore accounts since the revelation in the Panama Papers claiming the involvement of 3 Sri Lankan companies and 22 Share holders.

Illicit Financial Flows from Developing Countries: 2004-2013

A recent study titled Illicit Financial Flows from Developing Countries: 2004-2013 by the Global Financial Integrity (GFI) back in December has claimed that during this ten-year period, the developing world as a whole lost US$7.8 trillion. Even though corruption and the world of dark money is an obvious constant in the third world, the staggering numbers in the report by the GFI alongside the Panama Papers cannot be ignored.

“After a slowdown during the global financial crisis, illicit outflows have been rising, topping US$1 trillion since 2011 and reaching a new peak of US$1.1 trillion in 2013”

The report puts Asia on top as the largest contributor to gross illicit outflows, providing 38.8 percent of the developing world total from 2004-2013.



Sri Lanka: Off-Shore companies,tax evasion and Illicit Financial Flows

According to the GFI report 9.6 billion us dollars has been flown out of the country which is equivalent to 2.88 trillion Rupees



“The monetary board should be given notice of any one of these events before or after, open or closing an account”, said senior Attorney-at-Law, Gomin Dayasri who pointed out that one cannot open, close or maintain a foreign exchange account according to the laws of this country without the permission of the Central Bank.

Form 1 “Sale of foreign Exchange ” issued by the CBSL on the information required to release foreign exchange. The form which is split into two columns, should be filled by the applicant to the authorised dealer, while the other section is to be filled by the authorised dealer/ travel Agent/ or the bank.

According to the provisions of the Inland Revenue Act No. 10 of 2006 as amended, income tax is chargeable in respect of profits and income of persons which exceed stipulated norms as per the Act. According to the law, non-payment of income tax is deemed a criminal offence.

Gomin Dayasri explained that income tax is a profit and income, and the taxation is determined by the budgets by the finance minister and if they are not paid as per the law, there are inscriptions that have to be checked and if they fall in to a category a charge can be paid and unless a good reason is provided the courts will easily find if the law has been broken through evading the inland revenue act or the Exchange Control Act.

Arjun Mahndran

The government and CBSL have been maintaining a passive stance on the offshore accounts that are on the Panama papers.

The CBSL governor, during a press briefing expressed that some papers have been received and further information has been requested from ‘our counterparts around the world in terms of the central bank’ alongside investigative arms of various governments.

“I don’t want to jump to any conclusion in terms of names and facts that have been mentioned in the media”, said the governor who noted that all that can revealed is that investigation are ongoing in regard to the material and more material is being awaited.

The GFI reports claims that 1/3rd of the wealth flown out of the country was through illegal means and the Financial Intelligence Unit (FIU) must be notified by the banks with regard to this however, as explained by the CBSL governor, capital is flowing across borders timelessly and no country would not want to stand in the way of that because capital flows to where it feels there is a good return and Sri Lanka is not an exception to that principle.

“We don’t want to prevent people from sending money out or bringing it in”, said the governor who explained that around seven billion rupees came into the country and it is hard to believe that a similar amount left the country – since there is no evidence to suggest that money left the ground -and even if it did, it certainly did not go through the banking system…

When questioned if the Government of Sri Lanka and the CB would request for assistance or technical guidance given the alarming amount of money that has flown out of the country through illegal means and if the GFI put out a report claiming that such discrepancies occurred, would technical assistance from the GFI be requested or attained, the CBSL governor noted that such assistance would be welcomed.

“We would be interested to talk to them to understand how they came up with these numbers and that is something that we will certainly take up with the agency concerned. If you have a contact number or address please past it on”, said Governor Arjun Mahendran.


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