The international and domestic industry is shocked as to how foreign companies are not required to comply with mandatory requirements by Acts of Parliament to obtain licenses, or laws designed to provide reinsurance broking services in Sri Lanka. They are also exempt from taxation, regulatory controls, regulatory costs and levies.
One such corrupt entity was welcomed and granted a contract by a government body, with State sponsorship.
Watch the video (above) , of Mr Indrajith Fernando of Strategic Insurance Brokers explaining the circumstances of his complaint to the Bribery and Corruption Commission.
“In bribery and corruption it is well spelled out that there is always a perpetrator and a receiver or beneficiary. In a regime that has a zero tolerance policy toward bribery with commitment to bring to book and penalize the receivers of bribes, they should take constructive action to prevent and prohibit the bribers. This will be the only way to safeguard optimum utilization of limited national resources in the public interest, by ending corruption,” a shocked industry expert said.
A foreign company, a maker of a bid in Sri Lanka, was recently granted a NITF (National Insurance Trust Fund) contract. This Company had paid millions of dollars in bribes to Ecuadorian government officials in order to induce them to engage in insurance and/or reinsurance business with the Company. The Department of Justice (DOJ) of the United States, Criminal Division, Fraud Section, had filed a case in February against the Company. The Company has agreed to settle the bribery charges by paying a fine and forfeiting its assets.
The U.S DOJ reported: “The defendants engaged in a multimillion-dollar bribery scheme to influence Ecuadorean government officials into doing business with their companies.” The state institution NITF has gone out of the way to make these entities welcome, holding out even after court orders, without appointing a registered legitimate broker to pay premiums. This is ostensibly to protect the people of Sri Lanka with reinsurance coverage in vital areas such as Civil Riots and Terrorism.
This situation has prompted a concerned local Company to complain to the Bribery and Corruption Commission in the interests of transparency and good governance. Meanwhile, there is also a criminal complaint filed in Court against the aforementioned foreign Company which was recently granted a contract. Appeals have been made to his excellency the President and the Hon Prime Minister and who have assured that this matter is being investigated. They have assured there is no sponsorship for corruption from the leadership of the zero tolerance new regime.
The aforementioned foreign company Tysers has been already compelled to off loaded the Credit and Political risk classes of business, due to exit of senior officers from the Company, international insurance industry sources said. How is a zero capacity Company now going to service their contract in Sri Lanka, industry sources ask?
The position now is that elite reinsurance panels from all over the world have in hand void contracts with the NITF, due to an unregistered illegitimate party in the re-insurance contract. There is therefore a high risk of claims and any disputed claims that would arise being completely shut out due to the illegality of the contracts, industry sources said.
Justice prevailed in a previous similar case of a Court imposed ban on a foreign unregistered Company offering reinsurance in Sri Lanka, with both the District Court and the High Court affirming that such foreign companies cannot function in Sri Lanka. These Judgements were affirmed in Supreme Court which did not grant leave to proceed on Appeal. The cabinet and the State concurred, and NITF was forced to appoint a registered legitimate broker.
The Attorney General too had given a clear opinion against these Companies, and the IRCSL had issued guidelines reconfirming that only registered brokers can provide services in Sri Lanka while affirming that only legitimate registered brokers can participate in tenders. Meanwhile the NITF, as stated above, has shown an urgency to transfer funds by way of paying premium without rectifying the illegal appointment with a legitimate, responsive broker as a replacement, as a way making the reinsurance contract legitimate.
Tysers the foreign entity recently recognized by a procurement committee, was appointed as an insurance broker on record by NITF by concealing the actual party bidding. However the tender was awarded to them. This foreign insurance broker has contrived to not register with IRCSL, the local insurance Regulatory Authority, allegedly perpetrating a further fraud. This Company is not eligible to be registered with the ICRSL due to the aforementioned bad track record. Industry watchers surmised they constructively avoid registering, to perpetuate their actions in developing countries, and in Sri Lanka.
