Ajith Nivard Cabraal: Money laundering and terrorism financing
Speech by Mr Ajith Nivard Cabraal, Governor of the Central Bank of Sri Lanka, at the
AsiaPacific Group on Money Laundering Typologies Workshop 2008, Colombo, 27 October 2008.
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His Lordship, the Chief Justice, Hon Sarath N Silva, the Attorney General, other
distinguished guests from Sri Lanka as well as from abroad; my dear friends.
At the outset, I wish to extend to all of you a very warm welcome to this Asia Pacific Group
Seminar on Money Laundering and Terrorism Financing. It is indeed a pleasure to see all of
you here, from 34 different countries, and we hope that you will have a wonderful stay and
take back happy memories of your period here; not only as far as the Conference is
concerned, but also by experiencing our country.
Sri Lanka has been in the forefront of the worldwide efforts on the containment of money
laundering and terrorism financing. We have been associated with this effort in a special
way, not only to help the international effort, but also to fulfil our own local needs. That is why
we are very pleased to see such a large gathering of experts on this subject who are getting
together to develop ways and means by which this vexed problem could be dealt with. We
are also particularly pleased to have with us, His Lordship the Chief Justice who has graced
this occasion and by doing so has unambiguously displayed the commitment of Sri Lanka's
judiciary to this massive effort. Our effort against money laundering and terrorist financing
cannot be made by one or two persons only, or by one or two agencies only. It has to be a
co-ordinated and concentrated effort that needs the support of a wide range of people, both
nationally and internationally. In that context, Sri Lanka's commitment is clear to everyone,
and we are particularly pleased to have you with us, the Honourable Chief Justice.
My dear friends, the fight against terrorism cannot only be on the military field or battle
ground. In my view, the fight has to be on four different fronts simultaneously. Although it is
vitally important, one cannot defeat terrorism by a military effort only. To successfully deal
with terrorism, we need a diplomatic offensive also. Diplomatically, we need to ensure that
cohesive steps are taken so that, together, countries can meet this challenge. At the same
time, the fight has to be on the international media front as well. Therefore, a media
campaign in all parts of the world against terrorism is also very important. That is something
that the world has clearly recognized today, and internationally, we see a greater
coordination in the media in dealing with terrorism. The other important front in this war against
terror is the stopping of financing for terrorism. Without finance, terrorism cannot progress.
So, steps taken by countries to ensure that the funding lines to terrorism and money
laundering are cut off, that terror financing transactions are interrupted or stopped, and that
there is worldwide co-operation to track down persons who are suspected of being involved
in terror financing in whatever way, is of vital importance.
Just take a small example. If at the end of the month, you do not receive your salary, you will
find it difficult to comfortably progress with your next month's activities. In the same way, if
we can stop the funds going to terrorist activities, that will put a dampener on their activities.
It is very simple to understand. Therefore, not only should we deal with terrorists on a military
basis, but we should disrupt their progress by cutting off and interrupting their funding lines.
By doing so, we complicate their agenda.
In order to do so, and to continue to do so, we have to equip ourselves. The judiciary, the law
enforcement agencies, the regulators, the media, the bankers, the prosecutors, all of these
groups, have to equip themselves with whatever it takes, to meet with this challenge. We
have to learn from each other. We have already learnt many lessons during our own
activities in this field. But, it is important that we share such knowledge and experience with
others as well. If we do so, perhaps others too, could replicate some of those efforts which
have been proved to be successful. Hence, there is an urgent need for us to create the
awareness. We also have to enact the necessary laws. Sri Lanka has already passed the
necessary laws for this purpose: so have many other countries. That is very important.
Because, without the legal framework and the legal backing, our efforts will not succeed.
Then, we have to build our own capacities. We have to have people who are trained and
competent to deal with these challenges. Because, unless you have the competence, and
the ability to recognize certain disguised transactions, the ability to see through the clever
facades, and the ability to anticipate the next move of the terror financiers or money
launderers, we would not be able to progress. Therefore, we have to diligently follow rules
and detection principles. That is why this kind of conference is very important.
My dear friends, we have to realize that money launderers and terrorist financiers are also
smart. Your Lordship, they may also be having conferences of this nature, in their own way,
to see how best they can be a step ahead of all of us, to ensure that they will be able to
perform their own dastardly deeds more successfully. They will take advantage of calamities.
On many occasions we have seen how that has worked. Earthquakes, droughts, civil strife,
tsunamis, etc. can be useful breeding grounds for this kind of illegal financing efforts. These
terror financiers make use of unsuspecting bankers as their partners. Although sometimes,
certain bankers can be knowingly involved, on many occasions, they may even be
unknowingly involved. Sometimes these money launderers and terrorists use informal
systems. They by-pass the formal systems and have other parallel systems. I am sure that,
in your deliberations you would be discussing these matters and considering as to how these
can be addressed. If there is a parallel system, which is operating side by side with the
formal system, they can make use of such systems to do what they want. They also disguise
transactions. Certain transactions which are actually for laundering money or which are
financing terrorism would not be obvious, as they may be cleverly concealed. The
transactions will be packaged in such a way that unless you have a vigilant or trained eye,
you would not be able to spot it. Very often, the illegal financiers will also pretend to be very
respectable people in society, and indeed, may even be considered so by the world at large.
They may come in the guise of social workers, philanthropists, community workers, aid
workers, NGOs, etc. Therefore, we have to be alert. We have to be a few steps ahead. We
have to have bankers, media, regulators, prosecutors and a judiciary who will keep abreast
of the methods and the ruses that could be adopted by these unscrupulous people. We must
also have regular updates. Because in the same way that we are monitoring developments,
terrorists and money launders too, would be having their regular updates. So, the clear
message is; we have to be a step ahead. We have to work together. We need to share our
informational abilities, as well as our systems, with each other so that we can really put
together a concerted effort against money laundering and terrorism financing.
My dear friends, I have, with great interest, gone through your workshop session programme.
I have seen that it is very comprehensive. The topics range from legal frameworks to issues
relating to casinos and gambling. It covers crime investigations and prosecutions, and the
vulnerabilities caused by security situations. Sometimes, terror financiers and money
launderers use the security situation in a country to disguise transactions. I note that you will
be considering case studies on terrorist financing and also focus on studies on "following the
money", as well as consider the ways of "asset recovery". I remember many years ago, when
I was studying accountancy, one of the basics that we were trained in, was how to follow
through transactions to a finish. Then only, you see exactly how a transaction takes place.
That is very important. I was also particularly pleased that you are building up your own
capacities to follow through transactions and also have an overview of the methods of
cooperation between the Financial Intelligence Units. Because, today, there are millions of
cross border transactions taking place all the time, across boundaries. In such instances, we
need to have a close co-operation between the FIUs in order to ensure that we are able to be
ahead of those with criminal intent. Further, I was particularly impressed that all of you are
hoping to have an action plan to be implemented thereafter.
My dear friends, it goes without saying that we need to come out strongly in our efforts to
deal with all these matters. We have seen world economic frameworks being threatened, and
being under tremendous pressure during the past one month or so. We have seen
unprecedented chaos and turbulence. Nevertheless, we have been able to come through
because of the diligent work that we have done. In our own country, there were times when
we were encouraged to deregulate, deregulate and deregulate. Fortunately, we did not
deregulate as much as we were advised to, by certain quarters. Because of that, we had a
few fences around our economy; and those fences today are the important buffers that are
protecting us when the unparallel financial tsunami is hitting the entire world. When you have
fences, it is difficult for outsiders to come in. At the same time, however, when an external
disaster strikes, the fences come in handy, because the fences protect you. So, in a way, we
have been protected by some of the safeguards that we had installed in our systems. Even
when we opened out our economy, we were careful, and we opened out slowly. When we
removed one fence, we put in a different defence in some other way in order to make sure
that we are sheltered. Those protective steps are vital in all economies.
These then are the challenges that all of us are facing. All in all, we have to protect our own
economies from within as well as from outside. Let us therefore, look forward to the next
three days with enthusiasm, because I believe that what you are going to do over the next
three days will help the economies of the world to sustain and defend themselves, so that we
can all move forward with confidence.
Let me also wish you a happy Deepavali, and extend my warm wishes on the occasion of the
festival of lights. It is an important festival in Sri Lanka and we are happy that you are here to
celebrate the day with us. It is also a holiday. But yet, I am glad to see so many dignitaries
here today. I am sure that that is because all of you believe that this Conference is such an
important event. In particular, I wish to thank the Honourable Chief Justice, His Lordship
Sarath N Silva, the Attorney General, Mr Priyasath Dep, the Secretary, Ministry of Justice, Mr
Suhada Gamlath, the foreign dignitaries and our own Deputy Governors who have been very
involved in this process. I also wish to thank our own FIU, which has been a tremendous
source of strength to us to protect our own financial system. We hope that the next three
days will give you an opportunity to enjoy Sri Lanka, as well as to learn more about money
laundering and terror financing. I wish you a pleasant stay and a very useful and successful
conference.
Thank you very much.