ECONOMYNEXT– Sri Lanka’s parliamentary Committee on Public Finance (CoPF) grilled top Central Bank officials, including Governor Nandalal Weerasinghe, over severe regulatory blind spots and oversight failures that allowed a catastrophic Rs. 13.2 billion internal fraud to go undetected at National Development Bank PLC (NDB).
The high-stakes hearing exposed vulnerabilities in the island’s banking infrastructure, drawing critical attention from international lenders, including the International Monetary Fund (IMF).
The IMF has already mandated an urgent, comprehensive overhaul of operational risk management and Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) frameworks across the state’s entire regulatory network.
The multi-billion-rupee scam marks one of the most sophisticated, long-running insider financial crimes in Sri Lanka’s corporate history.
Operating as a low-level “inputter” within NDB’s transaction reconciliation unit, a single perpetrator systematically siphoned billions out of the system over nearly a decade.
The insider masterfully exploited legacy technical gaps to manipulate NDB’s internal general ledgers against the LankaPay Sri Lanka Electronic Fund Transfer network.
The massive financial leak went unnoticed by both internal audit committees and the Central Bank’s off-site supervision division until the siphoned sum accumulated to an impossible Rs. 13.2 billion, structurally masked on NDB’s balance sheet under the ambiguous line item “Other Financial Assets/Receivables.”
During an intense parliamentary session led by CoPF Chairman and opposition legislator Harsha de Silva, lawmakers targeted the leadership of the Central Bank of Sri Lanka (CBSL), demanding accountability for what they termed a systemic regulatory failure.
Committee members questioned the competence of the Bank Supervision Department, demanding to know how such massive capital variances evaded regulatory radars, why the accused bank was allowed to dictate the initial scope of the probe, and whether potential corporate conflicts of interest are compromising the integrity of the ongoing forensic investigation.
Integrity Questioned
A central flashpoint occurred when R. R. S. De Silva Jayatillake, the Director of the Bank Supervision Department, revealed that NDB had collaborated with the regulator to draft the investigative boundaries.
“Is the accused asked to draft the scope of the investigation?” CoPF Chief Harsha de Silva questioned, slamming the regulator’s choice to give the targeted bank an active hand in designing an inquiry into its own internal fraud.
Governor Nandalal Weerasinghe defended the process, countering that while the initial preliminary draft was prepared by NDB, the “final say” regarding the mandate rested strictly with the Central Bank.
To conduct the probe, the Central Bank has retained Deloitte India. Six analytical experts are currently deployed on the ground in Colombo, with an interim report expected within two weeks and a definitive final report due by July 18.
“The audit is progressing, though auditors have brought a few challenges to light,” Jayatillake noted, adding that the regulator will defer formal punitive enforcement until the forensic report is concluded.
However, Harsha De Silva raised sharp concerns over a potential conflict of interest within the external audit team, pointing out that a current NDB board director was a senior partner at PricewaterhouseCoopers (PwC) Sri Lanka, whose local practice was subsequently integrated into Deloitte.
Undue Influence?
“The question is, could there be any sort of undue influence?” De Silva asked. “We need a certain answer, with absolute certainty, that this former senior employee holding a seat on the board of NDB has zero influence on this matter.”
Central Bank officials assured the committee that they had secured guarantees from Deloitte India stating that its forensic team would operate completely independently from its local Sri Lankan partner network for the duration of the assignment.
The technical debate at the hearing focused on how NDB’s balance sheet managed to sustain an artificial Rs. 13.2 billion asset log.
When pressed by the committee, the CEO of LankaPay admitted that because interbank netting cycles clear and settle every two hours, it is structurally impossible for an organic, legitimate clearing cycle to accumulate a residual balance of that magnitude.
CoPF members criticized the Bank Supervision Department, noting that NDB’s historical statements showed this specific line item fluctuating anomalously from Rs. 1.5 billion to Rs. 4 billion, before expanding to Rs. 13.2 billion.
Lawmakers argued that such volatile variations should have instantly triggered off-site supervision red flags.
Jayatillake explained that because the perpetrator’s tenure as an inputter spanned nearly ten years, the investigation’s historical scope had to be expanded into a decade-long audit to map the exact modus operandi of the fraud.
The committee also accused the Central Bank of behaving like an un-critical “post-box,” signing off on NDB’s public market debenture issuances to raise Tier 2 capital without verifying the core accuracy of the underlying financial statements.
While Central Bank officials argued that their in-principle approval was strictly restricted to checking baseline capital adequacy compliance and structural rules under Securities and Exchange Commission (SEC) guidelines, CoPF rejected the explanation.
The committee ordered the Central Bank to formally table all official endorsement and approval letters issued to NDB before the parliamentary committee for independent legal and regulatory scrutiny. (Colombo/June 13/2026)
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