📈 Sri Lankan Banking Sector Vulnerable to Frauds Amid Systemic Gaps

A comprehensive review by a former veteran banker highlights critical structural weaknesses across four key stakeholders in the banking & finance sector, driving recent financial frauds and malpractices. • Internal Bank Vulnerabilities: A negative shift toward "target-oriented credit" to chase supernormal profits has degraded credit quality. Operational risks are elevated due to 8–10 fragmented IT systems operating in silos, weak internal controls, downsized audit teams, and a critical lack of specialized forensic auditors. Cost-cutting measures, such as over-reliance on inexperienced interns and appointing apex leaders based on connections rather than competence, have demotivated middle management. • Regulatory & Oversight Gaps: The Central Bank of Sri Lanka (CBSL) and SEC need heightened vigilance over aggressive competition, suspense accounts, and ultimate business ownership in CSE transactions to prevent money laundering. There is an urgent need for CBSL to collaborate with global bodies like the World Bank to implement a unified, centralized core banking system for real-time fraud alerts. • Role of Auditors & Customers: External auditors fail to robustly challenge bank directors or verify qualitative annual disclosures against high staff turnover. Meanwhile, low financial literacy among customers and poor digital hygiene (e.g., sharing PINs/passwords) leave the public highly susceptible to cyberattacks. _Note: Based on published industry commentary and analysis._