Lack of monitoring vs. loopholes in laws

By Maheesha Mudugamuwa

Minister of Internal and Home Affairs and Provincial Councils and Local Government Vajira Abeywardena raised many eyebrows in Sri Lanka after he recently claimed that there was no proper mechanism to monitor non-profit organisations, especially their fund inflow.

The question is not about the existence of non-government (NGOs) or non-profit organisations in the country, but rather the Government’s failure to establish a monitoring mechanism to ensure these organisations work for the development of the country and its citizen.

An ordinary citizen can witness organisations mushrooming all over the island, with some receiving funds from foreign countries without clear indications on the respective organisations’ objectives.

However, the Minister’s concern pertained to the non-profit organisations registered to bring money into the country, as he said it had become a serious problem in Sri Lanka. Further, he highlighted the fact that from 2012, a number of funding agencies questioned successive governments about its failure to monitor these organisations in the country.

Mushrooming NGOs

As explained by a senior lawyer, the issue was not only about the registered organisations, but also about the non-registered organisations. “For example, after the end of the war, so many organisations were formed for peace building, but no one knows what these organisations have actually done for the country. There was no evaluation of the projects carried out by them,” he told The Sunday Morning on the basis of anonymity.

“Likewise, there are so many organisations set up for environmental protection. Some organisations are actually working for the country, but some people misuse the money coming into the country. This is one of the most lucrative fields as donations continuously come in the form of either dollars or euros,” he went on to explain, extracting from his firsthand experience working very closely with NGOs over the last decade.

NGOs have become key actors in responding to poverty and related suffering. In Sri Lanka, NGOs play a leading role in providing healthcare and education, but NGOs also have their detractors who argue that although they receive growing amounts of donor aid, they aren’t the most suitable actors working towards the actual improvement of people’s lives.

In Sri Lanka, the non-profit sector continues to grow rapidly. At present, there are more than 3,000 NGOs in the country, out of which only around 1,500 are registered under the Companies Act or Voluntary Social Services Organisations (VSSO) (Registration and Supervision) Act, according National Secretariat for Non Governmental Organisations Director General (DG) Diluka Silva.

He told The Sunday Morning that the Secretariat at present had no powers to monitor these organisations or even make it mandatory for all NGOs to register with the Secretariat.

Revisions to NGO Act

Therefore, the necessity of a new act to empower the Secretariat by enabling it to monitor these organisations arose, and after efforts made over many years, the new amendment to the VSSO Act was brought in 2018.

Accordingly, the Cabinet of Ministers had granted approval in February last year, but the amendments had still not been gazetted, the DG explained.

The VSSO (Registration and Supervision) Amendment Bill has been prepared taking into consideration recommendations made by the Parliamentary Select Committee (PSC) which studied the operation of NGOs and its impact, as well as the views of relevant stakeholders including the Financial Intelligence Unit (FIU) of the Central Bank of Sri Lanka (CBSL).

According to the Ministry of National Co‑existence, Dialogue, and Official Languages, the objectives of making the proposed amendment were to provide for the registration of all NGOs, establish the National Secretariat for NGOs as the statutory body which would be the authorised institution for the regulation and supervision of NGOs, promote mutual co‑operation between the State and NGOs, recognise NGOs in their efforts to fulfil the common development requirements of the country, strengthen and empower civil society, facilitate the effective operation of NGOs, and ensure transparency and accountability on its financials, policies, and management.

Even though Cabinet approval was granted for the Bill to amend the existing laws on NGOs, it is yet to be gazetted and presented to Parliament as vehement opposition came from various civil society organisations (CSOs).

Civil society objects

The CSOs, inclusive of NGOs, saw the proposed amendment as an attempt to suppress civil society, allowing the Government to exert its power and control over them through the National Secretariat for NGOs by giving it more powers. As a result, the Ministry had to withdraw the Bill and allow the CSOs to submit their observations.

However, Silva explained that up to now, none of these organisations had expressed their observations.

“We will discuss the matter with the Minister and NGOs and take a final decision,” he said, adding that the Ministry was expecting to gazette the Bill within the next two to three weeks.

After the Easter Sunday terror attacks, the importance of monitoring these organisations was highlighted by almost all the law enforcement authorities, and therefore, the Secretariat had decided to expedite the procedure, Silva noted.

Speaking to The Sunday Morning about the proposed amendments to the VSSO Act, Transparency International Sri Lanka (TISL) Executive Director Asoka Obeyesekere said: “From the outset, it is essential that any new draft which is brought forward should not curtail the freedom of the association and other very basic freedoms which are associated with democracy. The idea that state entities have to almost operate in a way where line ministries are there for different civil society organisations is actually quite fundamentally anti-democratic.

“But on the other side, the Sri Lankan Government has to also be compliant with regulations of the Financial Action Task Force (FATF) among other things. What is clear from those authorities is that you have to do a risk assessment to evaluate whether there are any concerns from any particular kinds of non-profit entities. And only after that risk assessment are the hotspots identified,” he stressed.

“The idea of trying to put forward regulations that cover everyone is actually just a way to silence civil society,” Obeyesekere added.

Suspicious transactions

NGOs have been active in Sri Lanka for decades to the point that they are sometimes so deeply established in the country that their influence is magnified, and also because their financial aid comes in the form of foreign currency.

When it comes to foreign currency, laws related to foreign exchange play a big role.

In the aftermath of the Easter attacks, there is heightened attention on countering the financing of terrorism. Even though there was no evidence to show that the money flows into the country for terrorist activities through NGOs, experts believe that it would be better if the country had records of the money that comes in through all possible sources.

Last month, while testifying before the PSC probing Easter Sunday attacks, CBSL Governor Dr. Indrajith Coomaraswamy stated that nearly 600 “suspicious transactions” were recorded by the CBSL’s Financial Intelligence Unit in the days leading up to the attacks on Easter Sunday.

When further questioned on financial transactions related to Batticaloa Campus (Pvt.) Ltd., CBSL officials highlighted that the officials of the controversial Batticaloa Campus may have also escaped due to loopholes in existing legal provisions related to foreign exchange.

Explaining the legal provisions related to suspicious financial transactions, former Board of Investment (BOI) Chairman Upul Jayasuriya PC told The Sunday Morning that the issue was not related to the need for the required laws in the country but instead, the inability to use the existing laws to oversee illegal transactions.

“If the money is coming to the country to aid the committing of an offence, which we called ‘predicator offence’, the Money Laundering Act applies. The accounts can be frozen and the people involved can be taken into custody. It is probable that many are not aware about these Acts,” he said.

Elaborating on the fact that there were loopholes in the Foreign Exchange Management Act, Jayasuriya said that even so, the illegal monies coming to the country could be monitored and action could be taken against the culprits through the application of the Money Laundering Act or Commercial Transaction Act.

“The Foreign Exchange Act states that money can come through banking sources. But even then, if the FIU is suspicious of the transaction, they still have the power to check what it pertains to,” he stressed.

Foreign fund inflow to non-profit organisations