The Central Bank of Sri Lanka has directed National Development Bank PLC (NDB) to engage a leading international firm with overseas experts to conduct a comprehensive forensic audit into its internal fraud, CBSL said in a statement on Thursday.
The scope of the audit will go beyond the fraud itself to “fully address and assess any failures on compliance with regulatory requirements on control, oversight and governance during the period in which the fraudulent transactions took place,” the central bank stated.
Parallel governance review
In addition to the forensic audit, CBSL has directed NDB to take immediate measures to strengthen internal controls and governance processes. The bank must also commission an independent third-party review to assess the adequacy of its policies, procedures, systems, and internal controls.
The forensic audit is expected to commence shortly. Its progress, including interim findings and the final report, will be submitted directly to CBSL.
Depositor reassurance
The central bank emphasised that NDB continues to meet all regulatory requirements relating to capital and liquidity. “There is no evidence of any other regulated financial institution suffering any loss arising from the incident at NDB,” it stated.
The NDB fraud, first disclosed in early April, involves estimated losses of up to Rs. 13.2 billion. Four suspects have been arrested by the CID, with the primary suspect an assistant manager in the bank’s payments and settlements division. The case has prompted Fitch to downgrade NDB’s ratings and triggered parliamentary scrutiny of CBSL’s supervisory role.
