An investigation has been launched into individuals and groups running fraudulent financial institutions under the names of cooperative societies, Deputy Minister of Cooperative Development Upali Samarasinghe has said.
Samarasinghe said such institutions had been registered by exploiting the regulations governing the registration of cooperatives, NewsFirst reported. A probe has been launched to track them down, he said.
The deputy minister did not say how many institutions are suspected, where they are operating, or how much money may be involved, and no arrests have been reported.
The registration route matters because cooperatives sit outside the licensing regime that governs banks and finance companies. Institutions supervised by the Central Bank must meet capital, reporting and governance requirements and their deposits fall within the regulator’s remit; a body registered as a cooperative does not automatically come under that supervision, which creates room for entities to present themselves as deposit-taking businesses without the accompanying oversight.
Unauthorised deposit-taking has been a persistent problem in Sri Lanka, where informal schemes promising high returns have repeatedly collapsed and left depositors without recourse. The Central Bank has issued periodic warnings against placing money with unlicensed entities and has moved against several operators in recent years, including cancelling the registration of a cooperative leasing company in June.
The cooperative sector itself has been under scrutiny on other fronts. A parliamentary committee reported a loss of more than Rs. 167 million in a cooperative fund earlier this year, and the government launched a national digital portal for the sector this month intended in part to improve oversight of registered societies.
