Some countries concerned over no-questions-asked forex deposits
At least three countries have expressed concern over the no-questions-asked Special Deposit Account (SDA) the government introduced in April to induce Sri Lankans living abroad to remit foreign money into the country.
Senior officials of the German Embassy and two other European missions have met the Central Bank (CB) last week to ‘clarify’ the so – called ‘no questions asked’ SDA, well – placed sources told the Business Times.
The CB had assured them that legislation pertaining to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) haven’t been changed and the banks are doing their due diligence when on boarding customers.
The Finance, Economic and Policy Development Ministry under Prime Minister Mahinda Rajapaksa in April announced that Sri Lankans or Sri Lankan expatriates could deposit funds in the special account for a period of six years or one year, offering additional interest rates. SDA is a fixed deposit with a minimum tenure of six months in any designated foreign currency or Sri Lanka Rupees. These which can also be opened as joint accounts, were introduced to entice foreign direct investments into Sri Lanka, especially targeted to deal with a huge foreign debt the country has to settle this year –more than US$4.8 billion in foreign loans.
Especially after Joint-Cabinet Spokesperson Minister Bandula Gunawardena recently said no questions would be asked or tax charged from the account holder in responding to questions raised by the media, the three foreign missions had expressed their concern to the CB. Sources said that the CB officials had categorically told the mission representatives that CB’s Financial Intelligence Unit (FIU) has not changed or relaxed any of the rules or regulations issued for banks on Customer Due Diligence (CDD). Accordingly, the banks are required to follow the CDD Rules issued in 2016, when opening and operating any account including the SDA, they had said.
They had also stressed that SDA is not a tax amnesty and was introduced only for a limited period of six months to a year with the intention of attracting foreign remittances (especially from Sri Lankan expatriates). A top bank CEO was adamant that his bank follows all due diligence when engaging SDAs. “We will do all we need to within the regulatory guidelines and within the FIU which implements the recommendations by Financial Action Task Force (FATF) on Money Laundering,” he said pointing out that if not they run the risk of losing their correspondent bank accounts. The SDA scheme’s timing couldn’t have come at a worse time. It was announced barely a year after Sri Lanka’s removal from the FATF’s list of jurisdictions with strategic AML/CFT deficiencies that are subject to increased monitoring, commonly known as the ‘grey list’.
Some senior government officials were upset with statements made by Mr. Gunawardena regarding the SDA saying that he is unaware of the repercussions the country will face globally with broad statements such as ‘black money‘. “The CB officials have to answer these questions and a politician should be more responsible,” another source stressed.