-By A LeN Investigative Journalist
(Lanka-e-News -30.Aug.2025, 10.00 PM) It began with a curious anomaly in the shipping records: luxury vehicles leaving Japanese ports, their documentation in order, their papers stamped with apparent authenticity. Yet when they arrived in Sri Lanka, the truth was stranger and far darker. Many of these “brand-new” cars were anything but new. Some were cut in half, welded together in workshops along the Colombo–Kandy highway, and then dressed up with falsified Japanese manufacturer certificates.
Now, more than four decades of corruption in Sri Lanka’s lucrative vehicle import business have exploded into an international scandal. Japanese prosecutors, Sri Lankan regulators, and—most alarmingly—U.S. Treasury officials are circling one of the country’s most prominent tycoons, a man whose fortune spans from spare-parts yards to blue-chip investments on the Colombo Stock Exchange. His name is not yet public. But if, as officials suggest, he appears on Washington’s Specially Designated Nationals (SDN) sanctions list, it would send a thunderclap through Colombo’s upper echelons and beyond.
“This is not just a matter of dodgy cars,” a U.S. investigator involved in the case told Lanka-e-News. “It’s about systemic fraud, money laundering, and criminal negligence that cost lives. The SDN listing is imminent.”
The mechanics of the scheme were audaciously simple. Since the 1980s, Sri Lanka’s crippling import taxes on vehicles—among the highest in Asia—have created irresistible incentives to cheat.
Rather than pay duties of up to 300 percent on new imports, Sri Lankan traders devised a workaround: import cars as “spare parts.” Vehicles were purchased in Japan, literally cut in two—sometimes at the firewall, sometimes across the chassis—and shipped as separate consignments. Once in Colombo, the halves were welded back together by mechanics in makeshift garages.
These reconstructed cars were then registered with the Department of Motor Traffic (DMT), whose officials, often bribed, obligingly produced logbooks declaring them “brand new.” The practice was not only fraudulent but lethal. Welding joints frequently failed, brakes misaligned, and airbag systems rendered useless. Road accidents involving these patched-up vehicles mounted over the years, though few dared connect the deaths to the island’s shadowy importers.
But the scam did not stop there.
In recent months, Japanese investigators uncovered evidence that the fraudsters were not merely hiding vehicles’ true condition but also falsifying manufacturer documentation.
According to officials at Japan’s Ministry of Land, Infrastructure, Transport and Tourism, inspection papers were counterfeited to show five-year-old vehicles as brand-new. Some documents were printed on forged letterheads of reputable Japanese manufacturers.
“It’s a deliberate subversion of our export certification system,” a senior Japanese customs officer told Lanka-e-News. “And it was orchestrated not only in Sri Lanka but through accomplices in Japan.”
The falsification was sophisticated. Entire batches of documents were replicated using printing presses in Colombo, then shipped back to Japan to accompany outgoing vehicles. Investigators believe a network of middlemen linked to Sri Lankan expatriates in Tokyo enabled the operation.
Why would the United States care about half-cut vehicles shipped between Yokohama and Colombo?
The answer lies in the money. U.S. officials believe profits from the vehicle scam were laundered into international networks that may have facilitated broader criminal enterprises—including narcotics trafficking. According to investigators, tens of millions of dollars flowed from Sri Lankan banks through correspondent accounts in New York, triggering red flags under America’s Patriot Act.
“The SDN list isn’t only about terrorism,” explained a former Treasury official. “It covers international trafficking, serious financial crime, and systemic corruption. When a Sri Lankan businessman launders money through U.S. financial channels, it becomes our problem.”
Documents reviewed by Lanka-e-News show that a handful of Sri Lankan banks opened Letters of Credit (LCs) for vehicle imports vastly out of proportion to the number of vehicles officially cleared through customs. In some cases, only a few dozen LCs were opened in a given year, yet thousands of vehicles were registered under the same importer’s name.
“How do you square 50 LCs with 3,000 cars on the road?” asked a senior compliance officer at a Colombo bank. “It doesn’t add up—unless someone is cooking the books.”
The story takes a darker turn. The tycoon at the centre of the affair, now in his 50s, first entered the trade as a student in Australia. According to police records unearthed by Sri Lankan investigators, he was involved in a fatal road accident during his student days in Colombo—an accident in which a pedestrian was killed.
He walked free after what police insiders now describe as a payoff. “It was swept under the rug,” said a retired officer. “He had money, connections, and the arrogance to believe he was untouchable.”
That arrogance may soon meet its reckoning. Over the years, his fortune mushroomed. From garages and showrooms, he diversified into real estate, hotels, and, crucially, the Colombo Stock Exchange. Billions of rupees flowed into high-profile acquisitions, some of which are now under scrutiny as potential laundering vehicles.
The timing of the investigations is politically explosive. Sri Lanka’s National People’s Power (NPP) government, swept to office on a wave of anti-corruption sentiment, has vowed to dismantle decades of graft. Vehicle importation, long considered a “cash cow” for politically connected businessmen, is at the top of their list.
“The public has been robbed for years through inflated duties, fake imports, and fraudulent logbooks,” said an NPP cabinet minister. “Now, with Japan and the U.S. involved, there will be nowhere to hide.”
For ordinary Sri Lankans, the scandal is galling. Imported cars cost three to four times more than in neighbouring India, largely due to taxes. Yet while honest buyers struggled, a handful of importers grew fabulously rich by gaming the system.
The investigations now stretch across three continents. In Sri Lanka, customs records are being combed for discrepancies between vehicles declared as parts and those registered as whole cars. The Department of Motor Traffic is facing a parallel probe, with several former officials already under interrogation for “systematic document manipulation.”
Banks, too, are bracing for fallout. Under international law, they are obliged to maintain records of all LCs and fund transfers indefinitely. U.S. officials have requested access to these records to track the flow of money. One major Sri Lankan bank is said to be “cooperating quietly” to avoid punitive action in American courts.
A senior banker in Colombo admitted: “We knew something was wrong. The numbers didn’t add up. But when powerful names are involved, compliance teams are told to look the other way.”
The prospect of a U.S. SDN listing has sent tremors through Colombo’s business circles. The list, maintained by the Treasury’s Office of Foreign Assets Control (OFAC), is one of the most feared instruments of American financial power. Those named find themselves locked out of the global banking system, their assets frozen, their business partners forced to cut ties.
“If this Sri Lankan tycoon is listed, it will be the first such case tied to vehicle imports,” noted a Washington-based sanctions expert. “It would signal that the U.S. is prepared to target corruption in Sri Lanka in the same way it has gone after oligarchs in Russia or drug barons in Latin America.”
The ripple effects could be enormous. Colombo’s stock market, already fragile, may see panic selling if major holdings are linked to laundered funds. International banks may re-evaluate their relationships with Sri Lankan institutions. And politically, the scandal could empower the NPP to push through long-stalled reforms—while terrifying other oligarchs with skeletons in their closets.
What began in the 1980s as a clever tax dodge may now culminate in one of Sri Lanka’s most significant corruption reckonings. For decades, half-cut cars rolled off ships at Colombo port, their welded seams concealed under fresh coats of paint, their forged papers waved through by pliant officials.
Billions were earned. Countless lives were lost on unsafe roads. And politicians of every stripe looked the other way.
Now, with Japanese prosecutors closing their files, American sanctions looming, and Sri Lanka’s own government eager to purge the rot, the game may finally be up.
“This case will be a test,” said a senior U.S. official. “If Sri Lanka’s elite can be held accountable, it will send a message far beyond cars. It will show that corruption—however entrenched—can still face justice.”
-By A LeN Investigative Journalist
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by (2025-08-30 16:26:25)
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