A potentially significant gap in the forensic audit into the Rs. 13.2 billion fraud at NDB Bank emerged before the Committee on Public Finance (COPF), prompting surprise from Chairman Dr. Harsha de Silva.
During proceedings, it was revealed that the formal Terms of Reference (TOR) for the forensic audit did not specifically identify the role played by the Central Bank’s Banking Supervision Department as an area requiring examination.
The revelation immediately raised questions given the scale of the fraud, the period over which it allegedly operated and the repeated questions already raised regarding supervisory oversight within Sri Lanka’s banking system.
Dr. de Silva expressed surprise at the apparent omission, particularly in light of earlier evidence suggesting that reporting mechanisms, supervisory processes and regulatory oversight may all require examination if lessons are to be learned from what is now regarded as one of the largest banking frauds in Sri Lankan history.
The issue is not whether Banking Supervision was responsible for the fraud.
The issue is whether every layer of oversight was subjected to the same scrutiny as the bank itself.
However, Central Bank Governor Dr. Nandalal Weerasinghe responded by pointing out that the Terms of Reference contained a broader “catch-all” provision, potentially allowing investigators to examine matters falling outside the specifically listed areas if deemed relevant to the inquiry.
That explanation may provide some comfort.
Yet the broader question remains.
When a fraud of this magnitude reportedly operated over several years, passed through thousands of transactions and escaped detection despite multiple reporting cycles, can any part of the oversight architecture realistically remain beyond examination?
The public is not merely looking for those who committed the fraud.
It is also looking for answers as to how the controls, audits, supervision systems and governance mechanisms failed to detect it sooner.
Be that as it may, the exchange at COPF highlighted an increasingly important reality.
Sri Lanka is no longer asking only who stole the money. It is also beginning to ask who was supposed to notice.
