Thread by @ChayuDamsinghe

Let me try and explain the Uganda banknote mess as much as I can and how it relates to Sri Lanka and how it doesn't.

#SriLanka #SriLankaEconomicCrisis #lka (also tagging #GotaGoGama #OccupyGalleFace for the reach)

(1/22)

As I understand it, there are 2 separate issues here, which may be linked together in a way we don't yet know.

1. Uganda's own money laundering issues
2. De La Rue printing Ugandan money and SLA airlifting it

(2/22)

Lets start with Uganda's own issues.

Uganda has had money laundering concerns for a while, and especially terrorist financing issues. This is unfortunately true for some countries in Sub Saharan Africa.

(3/22)

So there's this organization called the Financial Action Task Force (FATF) that was made to for Anti Money Laundering/Combatting Terrorist Financing (AML/CTF) purposes.

One of the actions they do is provide guidelines for laws and processes countries should have.

(4/22)

Countries that have weaknesses in these areas, ie don't stand up to these standards, can get put onto a "Grey list". Think of this as being put on watch, and the teacher knows you're a bad boy, but you're not punished yet.

(5/22)

Uganda was put on this grey list sometime in 2012 mainly for money laundering reasons, and though the government put a new law in place in 2013, the implementation was considered lacking. It took until 2017 for the system to be considered upto standard

(6/22)

However, after getting out of the grey list in 2017, they got put back in in 2020, this time for more of the terrorist financing side it seems.

They haven't made sufficient progress, and the FATF has warned if not enough is done by May 2022, they risk being blacklisted.

(7/22)

Being blacklisted is like being seriously punished. So far, just Iran and North Korea are on the black list, so it's a pretty hefty threat.

(8/22)

Now it's important to realise that this process happens for many countries, and it's primarily driven by how good the laws, criminal processes, etc are against money laundering/terrorist financing, and not necessarily whether it's actually happening.

(9/22)

Sri Lanka was on the grey list for a few years as well, 2017/18-2019, until we fixed some of our criminal processes.

Pakistan, Myanmar, UAE, Albania, are all countries that are currently on the grey list.

(10/22)

Now, Uganda, in addition to having bad processes according to the FATF, also seems to have actual terrorist financing and money laundering issues.

But saying that Uganda has stolen billions of dollars has zero evidence for it.

(11/22)

Seen things like "Uganda's reserves increased, while ours fell" - that's unrelated. We know why our reserves fell, we used it to pay for imports and debt

Uganda's imports fell during Covid and their commodity exports grew in the following period=reserves growth

(12/22)

So while Uganda has money laundering issues, and while individually, politicians could be involved in that, that is not anywhere close to the magnitude of the economic trouble we're in. That's a separate accountability and theft issue.

(13/22)

So what about this De La Rue printing Ugandan money business?

To be honest, it looks quite standard. Not my expertise, but a minting company minting notes in 1 country, then taking them elsewhere seems quite standard. That alone shouldn't be cause for concern

(14/22)

But there are two things here that can cause suspicion, especially in the low-trust environment we are currently in.

The first is why DLR printed it here as opposed to in Kenya.

Second is why SLA was so goddamn fishy about it.

(15/22)

On DLR minting here, an obvious answer could be security. Given Kenya and Ugana share a land border and all the terror issues, not inconceivable it's safer to do it here and send to Uganda

But I don't know for sure - and in the low trust environment, this looks fishy

(16/22)

However, Occam's razor, it's probably just something like that or just like the order being sent here, office politics, or some mundane reason. Though I could very well be wrong.

(17/22)

SLA being suspicious is a whole other story. But from what I know, you're not supposed to divulge minting flows anyway for obvious security reasons. What's more surprising to me is why they TWEETED what happened of all things.

(18/22)

Again, we're in a low-trust environment. But the simplest explanation for me is: SriLankan Airlines is incompetent. I mean, this is the same airline that lost some 370 billion rupees and is now trying to lease planes.

Of course, I can be wrong here too.

(19/22)

There are other things of course, such as whether MR went to Uganda to stash money. That is very possible, but crucially, I think there is little evidence to suggest that the DLR or the FATF listing is related to that. So actually, 3 different issues.

(20/22)

The reason I thought to explain this is that while we protest and fight for our future, doing it based on incorrect information can easily backfire one way or the other.

If it's not real, who benefits from attention going there as opposed to what's really happening?

(21/22)

In the end, dealing with theft and corruption, though a definite part of Sri Lanka, isn't alone going to get us out of where we are.

We shouldn't fall for the trap of easy solutions. Fight against corruption, yes, but be realistic in what we can expect.

(22/22)

Sources: FATF, Reuters, WaPo, and my knowledge of SLA's stupendous track record