Investments slow in Special Deposit Accounts

By Duruthu Edirimuni Chandrasekera

Only US$ 86.9 million has been brought into the country through the Special Deposit Accounts (SDAs) announced in late April, Central Bank (CB) data showed. 
At the CB's Monetary Policy Review on Thursday, officials responding to a question by the Business Times noted that the 'trend' in garnering these accounts weren't 'that promising'.  
This came on the back of the CB dismissing concerns over potential money laundering activities linked to the recently introduced SDA while stressing that the exemptions granted from procedural requirements are provided under the provisions of the Foreign Exchange Act (FEA). 
The concerns were raised after Joint Cabinet spokesman and Minister Bandula Gunawardana in late April announced that Sri Lankans and non-nationals could deposit any amount of foreign currencies in the SDA free of foreign exchange regulations in any licenced commercial bank of the country. It was understood to be a no-questions-asked deposit account designed to attract diaspora funds into the country, and to entice foreign direct investment. Mr. Gunawardena at a media briefing in April said that applicants through the SDA can bring ‘black cash’. This was to say the least ‘disturbing’ as the Financial Action Task Force (FATF), the global policy setter on anti-money laundering and countering financing of terrorism (AML/CFT), last October delisted Sri Lanka from its ‘Grey List’ after placing the country in the list in 2017 due to deficiencies in implementing the AML/CFT regime. 
Applicants were invited to open six or 12-month fixed deposit accounts in any currency, with any licensed bank with a minimum tenure of six months.   
Certain foreign diplomatic missions had called on the CB last month 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 CB wishes to categorically deny the views/concerns expressed/raised by few authorities and persons that the required due diligence processes are not followed by banks (Authorised Dealers or ADs) operating in Sri Lanka in opening and maintaining recently introduced SDAs,” a CB statement, issued on July 3, said.  
It added that the government introduced the SDA with the consultation of Monetary Board of the CB in April with the view to seek assistance for the national effort to overcome the effects of COVID-19 outbreak by issuing regulations under the provisions of the Foreign Exchange Act (FEA).
“The exemptions from procedural requirements specified in the said Regulations allow an AD to directly credit funds to an SDA without routing such funds through an Inward Investment Account under normal circumstances. The said regulations cannot exempt ADs from complying with provisions of FEA,” the CB said.