‘Laws inadequate to deal with errant financial institutions’

by Lalin FERNANDOPULLE

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The Central Bank was aware that a bogus financial institution was in operation for over two years but could not do anything about it since the laws were inadequate to take the offenders to task, said Partner Gajma and Co. Chartered Accountants, N. R. Gajendran. He said education and a proper monitoring and regulatory mechanism was essential to curtail financial frauds in the country.

“People need to be educated on proper investments to avoid institutions which are not recognised offering large returns.The names of illegal financial institutions should be published”, he said. Sakvithi Ranasinghe wouldn’t have been able to swindle Rs. 500 million had the laws been in place to deal with such fraudulent operators.

Ranasinghe, a popular English tuition master in the Mirihana police division is believed to have left the country with the money of the depositors.

Finance and State Revenue Minister Ranjith Siyambalapitiya said new laws will be enacted soon to nab offenders of financial institutions and take action against institutions functioning without legal status.

He said the Central Bank publishes the names of all authorised financial institutions and also those operating illegally.

The present laws are not adequate to take action against offenders of financial institutions and there is an urgent need to introduce legislation to nab fraudulent operators.

Director, Department of Supervion of the Non Bank Financial Institution, Central Bank, Sepala Ratnayake said investigations on the fraudulent business proved that funds had been mobilised for various financial activities.

Ratnayake denied that the Central Bank was aware about the operation of the institution and said that they became aware of it only after a recent newspaper advertisement.

According to the Bank Act and Finance Company Act financial institutions cannot function without obtaining a licence from the Monetary Board of the Central Bank. The Central Bank educates people on authorised financial institutions due to the high risk nature of the financial business. Meanwhile, the Central Bank published the names of six unauthorised financial institutions on Thursday.