NDB Bank fraud comes under COPF scrutiny as Central Bank officials are questioned over audit failures and weak banking safeguards.
NDB Bank fraud has come under sharp scrutiny after the Parliamentary Committee on Public Finance questioned Central Bank officials over how multiple layers of oversight failed to detect the financial irregularity.
The committee asked why the bank’s internal audit committee, external audit firm, board audit committee, and the Central Bank’s Bank Supervision Department had failed to identify the fraud while it was taking place.
The committee, chaired by Dr. Harsha de Silva, met recently in Parliament and conducted a detailed inquiry into weaknesses in the banking system.
Central Bank officials informed the committee that the financial fraud had directly contributed to the decline of NDB Bank’s share price and the downgrading of its ratings.
Officials also admitted before the committee that it was a serious concern that no such irregularities had been reported during the period in which the fraudulent activity occurred.
The committee further noted that it was problematic that the same audit committee members who served during the period of the fraud remain in their positions and are now involved in investigating themselves.
The urgent need to strengthen transparency in external auditing was also highlighted during the discussion.
The committee also examined outdated security standards currently followed across the banking sector.
It emphasized the importance of introducing a common minimum technical regulatory framework for all banks to prevent similar frauds in the future.
A proposal was also made to introduce modern technology, including artificial intelligence systems, for fraud detection.
Central Bank officials said the Central Bank is now considering new regulations to strengthen fraud management systems in banks, and that discussions are already underway.
