News
NDB unable to reveal full scale of insider financial fraud
View(s):By Kapila Bandara
The National Development Bank (NDB) has informed the financial market that a Rs 380 million fraud has been pulled off by some staff and others and warned that “the final amounts could be substantially greater’’.
The Norwegian government-run Norwegian Investment Fund for Developing Countries, NORFUND, is the bank’s largest shareholder with a 9.94% interest. The Employees Provident Fund is the second biggest with 9.46%. Employees Trust Fund and Sri Lanka Insurance Corp are also among the top 20 investors.
NORFUND’s nominee on the NDB board is Sanjaya Mohottala, a senior adviser to Boston Consulting Group. He is a non-executive, non-independent director of NDB. He replaced former NORFUND nominee Fay Piyachatr Chetnakarnkul, who resigned.
In a statement just half an hour before market close on Thursday, NDB, a commercial bank with a healthy balance sheet, reported to the Colombo Stock Exchange that it is “unable’’ to disclose the precise scale of the ripoff by the insiders and third party or parties.
NDB said it had initial “indications” of a fraud of about Rs 380m and was awaiting “ongoing criminal investigations and the internal inquiries”. The bank said the Central Bank of Sri Lanka has been informed. CBSL is the bank regulator ensuring prudential norms are in place and is also the payments systems watchdog.
Under Section 46 (1) of the Banking Act, No. 30 of 1988, as amended (Banking Act), CBSL can issue directions to banks on their business.
But a bank’s board is ultimately responsible and accountable for the bank’s affairs, including financial soundness and risk management.
Directors must make “objective decisions in the interest of the bank’s depositors, creditors, shareholders, and other stakeholders. Any decision taken by the directors shall be presumed to be a decision taken by the board of directors collectively, except for a director who expressly dissents for any such decision”, according to regulatory requirements on corporate governance.
The board shall exercise “duty of care” and “duty of loyalty” to the bank, regulations say. The board also has the responsibility to identify the “principal risks’’ and “ensuring implementation of appropriate systems to manage risks prudently”.
NDB assured depositors that their funds are “safe and fully secure’’.
As with most commercial banks, more than 80% of NDB’s funding is from deposits.
NDB is headed by Sriyan Cooray, who has served at HSBC Sri Lanka and Maldives. NDB’s Chief Executive Officer is Kelum Edirisinghe, who came to the role in February 2024.
Just weeks earlier, NDB reported Rs 11 billion post-tax profit, which the bank said was the highest in its history, largely supported by core operations. Profit was higher by Rs 2bn from the year before.
The bank has healthy capital levels with a Common Equity Tier 1 ratio above the regulatory minimum, rising to Rs 67.7 billion. The total capital adequacy ratio is 15.9% versus the 12.5% regulatory minimum. Total assets grew to Rs 935.8 billion due to higher lending. The bank also reported “strong’’ liquidity levels for the rupee and all currencies.
On March 17, at an investor webinar on 2025 earnings, Vice President and Chief Risk Officer Alex Perera, addressing cyber risk and threats from the standpoint of their unknown nature, said that a number of controls have been put in place across multiple layers of defence. He noted it is difficult to guard against because the risks evolve and the advances that criminals make.
NDB always monitors the dangers “as a moderately high risk level’’, he said.
Mr Perera said there is “a large amount of preparedness, guardrails that are being placed. However, given the dynamic nature of cyber risk, it is an ever-evolving threat landscape that we will continuously try to defend ourselves against”.
Fraud is not a one-off event in commercial banks, and it increases liability. Considering complex products, services and ever-evolving technologies, some financial institutions use data analytics to flag perpetrators.
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