Sri Lanka’s hawkish stance on hawala tougher than ever before

Country lost USD 300 million worth remittances to ‘unlawful’ operatives in just one month

by Sanath Nanayakkare

About USD 300 million remitted by Sri Lankan migrant workers in the month of November 2021 alone appears to have been handled by hawala operatives that pay Rs. 240 per US dollar in highly suspicious unofficial transactions, Central Bank Governor Ajith Nivard Cabraal told reporters in Colombo on Saturday.

Hawala is a system of transferring money whereby the money is paid to an agent who then instructs an associate in the relevant country or area to pay the final recipient.

“If someone collected an amount of USD 300 million overseas from migrant workers there, and their associates here distributed an equivalent sum of Rs. 72 billion in just one monthy; we have to wonder how it happened and where all that money came from? Who had got that kind of money here to credit to various accounts? We are now observing this development which smells an act of money laundering. If someone credits or gives cash to individuals in such non-transparent transactions, and the Financial Intelligence Unit (FIU) of the Central Bank of Sri Lanka detects suspicious activity, it can freeze such accounts. The FIU will probe into such incidents along with the police and take necessary action. So, we request our migrant workers to send their hard-earned money through banks without using unofficial channels, We suspect that this parallel payment industry is mainly operated by cohorts of drug traffickers. Don’t get ‘addicted’ to sending your money through unofficial channels of this nature because at times when we investigate instances, the recipients also could face issues although we don’t like to see that happen,” Cabraal said.

“We will be paying an additional incentive of 8 rupees per dollar for workers’ remittances which are converted in the month of December, in addition to an existing offer of 2 rupees, when such funds are sent through licensed banks and other internationally accepted formal channels,” he noted.

“Such workers will also have access to pension and insurance programmes and duty free concessions. We are working on providing them with such rewards,” the Governor said.

Sri Lanka, which faces $1.5 billion of debt maturities next year, is looking for a revival in its Covid-hit tourism industry with the reopening of the country after extended lockdowns. It is also depending on increased remittances to tide over its liquidity issue.

The monetary authority is forecasting foreign reserves to increase to $3.5 billion by end-2021. Foreign reserves fell 16% to $2.27 billion in October, the lowest since July 2009.