A racket that siphons billions of rupees out of the country through Telegraphic Transfers by undervaluing imported goods.

Customs Media Spokesman Chandana Punchihewa stated that Sri Lanka Customs has launched a comprehensive investigation into several incidents of illegal money transfers carried out by third parties, where the value of goods was understated through advance payments and telegraphic transfers.

President Anura Kumara Dissanayake revealed in Parliament last month that authorities have identified a group of individuals who sent nearly one billion US dollars abroad as advance payments through several banks, without importing any goods into the island. Since the party that sent the money was not a registered importer, the incident fell within the investigative scope of the Financial Intelligence Unit (FIU) of the Central Bank of Sri Lanka and was not directly related to the Customs Department.

However, the Customs Department has now launched investigations to determine whether the said third party sent money for undervalued imports made by other importers. Mr. Chandana Punchihewa, speaking to the media, stated that it is believed that a portion of the money sent in this manner is connected to imports under Customs custody.

He stated that while it cannot be concluded that all of the money was used to undervalue goods, investigations are underway into several incidents suspected to be related to Customs imports. Although the individual concerned has not been directly questioned as he is not a registered importer, if money was sent on behalf of a registered importer, investigations can be conducted into that, and accordingly, a number of investigations have already been initiated.

It is also suspected that some parts of the money sent abroad in this manner may be linked to payments made for money laundering and drug trafficking. Due to the foreign exchange shortage that arose with the printing of money by the Central Bank since February 1952, trade controls and high import duties were imposed in the country, along with the implementation of exchange control laws.

The Customs Media Spokesman pointed out that this tendency to undervalue goods is more prevalent in the import of highly taxed items such as fruits, dairy products, and motor vehicles. To control such situations, Customs has initiated a method of summoning importers and questioning them about valuations by comparing their imports with other imports made at higher values.

If the summoned importers admit to their undervaluation and agree to pay the outstanding tax difference, they are given the opportunity to pay the arrears without being charged penalties.

Special incidents of undervaluation have also been reported concerning goods with low tax rates. Customs has revealed that several years ago, when importing Malaysian lumber, which had a low tax rate of 7.5%, the value was similarly understated. Importers have stated that the low value was declared at the request of the Malaysian exporter because a portion of the payment needed to be sent to another location.