Sri Lanka is continuing investigations into financial support given to a Tamil charity with alleged terrorist links by a US hedge fund manager who was arrested for fraud, a senior official said.
Sri Lankan Central Bank governor Ajith Nivard Cabraal told LBO the banking regulator was still investigating contributions made by Raj Rajaratnam, founder of the Galleon hedge fund, to the Tamils Rehabilitation Organisation (TRO).
A probe into violations of exchange control regulations was a separate case, he said.
The Central Bank in a separate statement said that "investigations are yet continuing in relation to the funding allegedly provided by Mr Raj Rajaratnam to the TRO."
The statement said: "Accordingly, any reports that suggest that such investigations are concluded or that Mr Rajaratnam has been cleared of possible involvement are incorrect and misleading."
The statement was apparently referring to comments made by the central bank's investigations unit chief, D.K. Wijesuriya, to a foreign news agency that the regulator had cleared the US fund manager of funding terrorism.
The central bank in September 2006 froze the bank accounts of the TRO which was operating as a charity in the country’s north and east.
The move at the time followed raids on the TRO's overseas offices and arrests of people connected to it which raised doubts about the use its funds.
The authorities suspect funds given to the Tamils Rehabilitation Organisation found their way to the Tamil Tigers, whose 30-year war for a separate state in Sri Lanka's north and east ended in May when they were defeated by government forces.
The central bank has said that the TRO in Sri Lanka had received large sums of money from its branches in several foreign locations through the island's banking system purportedly for humanitarian projects.
The TRO's accounts were frozen in 2006 under new law enacted at the time to counter terrorist financing after Sri Lanka signed the International Convention for the Suppression of Terrorist Financing adopted by the United Nations General Assembly.
US media has said investigators also probed Rajaratnam's contributions to the TRO to see whether the funds were channelled to the Tamil Tigers.
Rajaratnam's lawyers have rejected the charges of insider dealing and said his contributions to the TRO were meant to help people whose homes were destroyed by the Indian Ocean tsunami.
Source: Lanka Business Online
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