Trust Breached: The ‘Safe as a Bank’ Myth Shattered by the NDB Fraud

The simile “as safe as a bank” stands gravely undermined in the wake of the fraud reported at NDB Bank, where an alarming sum of LKR 13.2 million remained undetected over a prolonged period. This incident raises serious concerns about systemic lapses and institutional accountability within the banking framework.

How could such a significant fraud evade detection for years? This question inevitably directs scrutiny toward multiple layers of oversight and governance. The Board of Directors, including the Chairman Mr. Sriyan Cooray, must bear primary responsibility for ensuring robust internal controls and risk management systems. Their apparent failure reflects a serious lapse in fiduciary duty.

Equally concerning is the role of the Internal Audit Department. Questions arise as to whether this was a case of gross negligence or possible collusion with the perpetrator(s). The effectiveness and independence of internal audits must be reassessed in view of such failures.

The External Auditors, entrusted with providing an independent assessment of the bank’s financial integrity, also come under the spotlight. Were they misled by internal mechanisms, or did they fail to exercise adequate professional skepticism?

Furthermore, the regulatory oversight of the Central Bank of Sri Lanka (CBSL) is called into question. As the apex financial regulator, its role in monitoring and ensuring the soundness of banking operations is critical. This incident suggests potential gaps in supervisory vigilance.

The scale and duration of this fraud created the unsettling impression of a collective institutional slumber — only to awaken after substantial financial damage had occurred. Such failures not only erode public confidence,  but also pose a broader threat to the credibility of the banking sector.

who will ultimately be held answerable?

Mohamed Zahran

Colombo