Cabraal Suspects Money Used to Facilitate Drug Trade
By Rajiesh Seetharam
Sri Lankan migrant workers using informal channels to remit money, is the main reason for the drop in remittances, said Central Bank Governor Ajith Nivard Cabraal. “Last month, there was a drop of around US$ 300 million when compared with the same month in the previous year. US$ 300 million is Rs 72 billion, which is a huge amount. Such amount would have come into Sri Lanka last month through informal channels. We suspect this money is being used to facilitate the illegal drug trade,” said the CB Governor, speaking at a Media briefing on remittances.
The official exchange rate is Rs 203 per USD. “Informal channels may pay around
Rs 230 to 240. We have started the process of seriously monitoring suspicious banking transactions. Some might be caught immediately, some may be caught in a year or two and prosecuted. Their accounts would be frozen. We have all the technology to track suspicious transactions.
When using informal channels, an individual would be depositing money into the receiver’s bank account in Sri Lanka. If the individual depositing money is involved in any illegal activities, the person who received the remittance in Sri Lanka could also be in trouble. People should be aware that remittances through informal channels are illegal. Thus, I request everyone to use proper formal channels, the banking system for remittances.”
To encourage remittances through formal channels, the Governor said an extra Rs 10 per USD is being provided. Arrangements are being made to provide insurance schemes, pension, and increase the duty free allowance for Sri Lankan migrant workers who remit money through formal channels, said Cabraal.
The Governor said such measures are being taken, not only to increase remittance, but also to stop money laundering and illegal activities like the drug trade.
When questioned, instead of adopting an exchange rate based on market forces, how the Governor expects to curb informal remittances by offering Rs 10 incentives (Rs 203 + 10 = Rs 213), when still the rates (Rs 230 to Rs 240) received from informal channels looks attractive, the Governor replied: “Different segments like importers, exporters can have different opinions on what the exchange rate should be, however, CBSL has a methodology to calculate exchange rates and we want to stick by it. We don’t want to depreciate the rupee further, as it has already depreciated. We don’t want to go on an auction sale with hawala operators.”
The Governor further said on average two hundred and thirty thousand Sri Lankans go abroad to work per year. “That number has dropped in the last two years due to the COVID-19 pandemic. So far this year till November, only ninety six thousand Sri Lankans have gone abroad to work. There is a big rush at the Passport Office. Efforts have been taken to expedite work at the Passport Office.”
Sri Lanka received an average of US$ 7 billion in remittances during the last five years. However, remittances during the first nine months of this year was US$ 4.58 billion, down 9.3 per cent, compared to US$ 5.1 billion sent home during the corresponding period of last year.