LAWS TO STEM LAND FRAUDS LANGUISH ON THE BACKBURNER

Following the expose headlined ‘Politician involved in acquiring property’ that appeared in the February 21 edition of Daily Mirror, it has now emerged that the country’s legislature has failed to pass laws the Justice Ministry had drafted nine years ago to prevent fraudulent land sales and mortgages. 

The then Justice Minister Milinda Moragoda appointed a high-powered committee in 2010 headed by Justice Ameratunga and thereafter by Nihal Jayamanne PC and consisted of senior officials of the Justice Ministry, members of the Bar Association of Sri Lanka (BASL), the Deputy Registrar General and representatives from notaries to draft amendments to the existing Notaries Ordinance to prevent land frauds that are taking place unabatedly. However, to date, the law that was suggested has not seen the light of day as people’s representatives have deliberately failed to grant approval to implement the drafted amendments. 
According to a senior official at the Justice Ministry, all attempts taken to get the suggested amendments to the Notaries Ordinance were unsuccessful as the respective governments failed to get Cabinet approval and thereafter passed in Parliament. 
However, individuals who wished to remain anonymous said the Justice and Home Affairs Ministers submitted a joint Cabinet memorandum a few weeks ago to approve the new amendments to the Notaries Ordinance. 
“MinistersThalatha Athukorale and Vajira Abeywardena have submitted a joint memo. The Cabinet of ministers is said to have asked time for observation and hopefully will receive the all-important affirmation to go ahead with the proposal. Once approval is granted, it will be referred to Parliament to get it passed for implementation. Hopefully, we can get these amendments implemented before the end of the year,” sources said. 

Although these amendments are essential as all land transactions are notarized and registered as per the Notaries Ordinance of 1907 and the Registration of Documents Ordinance of 1927 which are colonial laws, there are loopholes to enable forgery. It is unfortunate that the country has not been able to get these laws passed by successive governments since 2010. According to the Notaries Ordinance of 1907, illegible signature of an owner is sufficient to transfer lands and houses and there are no obligatory rules for notaries.  
It is the same with the Registration of Documents Ordinance of 1927. The land registry is obliged to register all deeds – whether valid or invalid – under the 1927 law. Section 7 of the Registration of Documents Ordinance states that the registrar is not responsible for the validity of deeds. However, according to the drafted amendments, it requires to follow the international standards for deeds relating to identification of owners, it is a must to retain photographs of owners and all identification documents with the thumb impression on deeds. A duly attested photograph and thumb impression of the owner must be annexed to deeds by the lawyers. 
“Politicians in successive governments had not wanted to bring in these amendments as such legislation could prevent them from grabbing properties fraudulently. When taking most of these land grabbing cases into consideration, there is evidence to prove politicians are involved in most of them. If they could pass Bimsaviya, why couldn’t they pass these amendments? Section 33, Act No 21 of 1998 of Bimsaviya says ‘those affected by fraud cannot have their fundamental rights to access courts to get their lands back from fraudsters’ This alone shows why people’s representatives did not want to pass the amendments recommended by the then JusticeMinister and all other law enforcement agencies,” sources from the Justice Ministry told Daily Mirror.

Speaking to Daily Mirror, Keerthimala Gunasekera, attorney specialised in electronic transactions and registration methods, said the draft amendments that contain several important methods to identify/verify legal owners before attesting deeds to prevent fraudulent sales were yet to be implemented to put a complete stop to land frauds in the country. She said the registry had the responsibility to register the photographs and identification documents as the law was already in operation for trust deeds under Act No. 06 of 2018. However, she queried as to why lawmakers considered including only trust deeds as money laundering was taking place via land sales. In fact, land registry registered fictitious names given in land deeds as owners, she said.  
“Since it is said that a Cabinet memo has been submitted a few weeks ago, we can have hopes to get this law implemented soon. It had been suggested that the photograph and thumb impression of the legal owner, the buyer, attesting notary and the witnesses should be duly attested and have to be placed on deeds. In case of a forgery, the investigators can easily track down who the fraudsters are as evidence of parties who participated in the transaction is well recorded,” she said. 

"The new law says all identification documents and correspondence should be retained for a period of six years from the date of transaction"

According to her, it is astonishing as to how the old laws relating to land transactions have not been updated to go with the requirements given in the statutes of the Central Bank though when opening a bank account, the bank takes the photograph of the accountholder in order to comply with financial transaction legislation. 
“It appears that land transactions are not considered transactions that should be administered effectively under the functions of the Financial Intelligence Unit (FIU) of the Central Bank. Fraudsters have been given a free hand to make cash payments and to execute deeds with illegible signatures of owners when owners are not even aware of it. To comply with the said regulations and gazette notifications, strict identification laws have come into operation in banks. The banks take a photograph to be retained when opening an account. They consider the National Identity Card (NIC) to be unreliable as some of them are old and could easily be forged. But it is disheartening to know that neither the notaries nor the land registry comply with financial transaction legislation. In Section 29 read with Section 7 of the Financial Transaction Reporting Act No. 07 of 2006, the purpose of this is to bring under Section 33 of the obligation of lawyers and notaries to identify legal owners,” she said. 

At a conference held on February 9 by BASL, matters pertaining to land frauds have been discussed. On this occasion, the learned counsel discussed as to how records of all land transactions should be retained at least for six years by notaries with the identification verification documents of owners, witnesses and brokers who participated in the transaction together with a photograph depicting all parties present at the time of signing deeds. 
It was also revealed at this conference that the law to identify parties and the law to be satisfied that cash transaction was genuine before the land transactions under Suppression of Terrorist Financing Act No: 25 of 2005, Prevention of Money Laundering Act No: 5 of 2006 and Financial Transactions Reporting Act No: 6 of 2006 to prevent money laundering and fraudulent transactions. 

However, Keerthimala Gunasekera queried as to why lawmakers still ‘consider’ land transactions should be exempted from such mechanisms. 
“Under the existing Notaries Ordinance of 1907, it is not obligatory for the notaries to identify owners. Hence, the Valuation Department of the Provincial Council which confirms the valuation of lands is carried out without processing the identity of owners. Owners are unaware that their lands are valued by a government department, the land registry, when registering land sales and mortgages relating to land; enjoy immunity from identifying owners as per Section 7 of the Registration of Documents Ordinance of 1927, as it states that the registrar is not responsible for the validity of deeds. The old law of 1927 relating to the land registry has to be revised immediately to go with the requirements given in the statutes of the Central Bank,” she said. 

Meanwhile, Registrar General N.C. Withanage too confirmed to  how frauds were taking place when attesting and registering land deeds and stressed the need of enacting the amendments drafted to the Notaries Ordinance as there were loopholes in existing laws. 
“It has now been proven that 40-50% of registered land deeds have been forged. As a remedy, measures have to be taken to bring the new laws implemented at the very earliest. My attempts to introduce national birth, marriage and death certificates to prevent frauds have now become successful and likewise I am in the process of introducing a standard paper to be used by all notaries when attesting land deeds. This paper will have a watermark and no one will be allowed to use his or her own papers to attest deeds in the future. Once the standard paper is introduced with a security quick response (QR) code, we can stop the frauds,” he said. 
According to him, though there are 45 land registries countrywide, it is difficult to ascertain as to what the fraudulent documents were, as there are a few employees who aid and abet fraudsters. 

"All attempts taken to get the suggested amendments to the Notaries Ordinance were unsuccessful as the respective govts failed to get Cabinet approval"

“There are cases where our own employees have taken screenshots of the legal deeds and their extracts. Once this is given to imposters, they forge the deeds and get the extract removed from the file. A new extract with the forged deed is then replaced. Unless a forensic audit is carried out, it will be impossible to establish what the forged documents are. Stern action should be taken against these employees,” he said. His views should be noted by the Bar Association as a notary is essential to attest such deeds. 
When asked his opinion on the delay in implementing the new amendments to the Notaries Ordinance of 1907, he said though the drafted amendments had received approval from the Attorney General and the Legal Draftsman, there were still loopholes in the amended drafts. 

“When these amendments were sent for my perusal, I noticed one particular clause which is not practicable. It said when a deed was executed the notary should take the thumb impression of the owner which is a very good idea. But considering our history as a country that faced a ruthless war where lot of people lost their hands and limbs due to bomb explosions, I suggested that in such cases, the land owner should be present before the notary and express his willingness to permit his spouse/if unmarried one of his parents or any person known to him, to execute such deed or instrument on his behalf, provided they are personally known to the attesting witnesses who shall produce affidavits to that effect at the time of execution of such deed. The notary shall attach them to the protocol of such deed and state in his attestation that the executant was personally present and expressed his willingness for such person to execute the deed on his behalf. The reason for the delay in presenting to the Cabinet was because of these clauses that had to be amended over and over,” he said. 
Under the Financial Transactions Reporting Act No. 06 of 2006, it has classified ‘land transactions’ as financial transactions thus making it an offence to register illegal documents and register money laundering documents in the land registry. 

"They allow deeds to be attested, valued and notarized without identification of owners. Illegible signatures of owners and witnesses are the basic manner in execution of deeds. Should the land registry"

“The government has taken efforts to prevent fraud during financial transactions. The Financial Intelligence Unit (FIU) of the Central Bank has directed the country’s Designated Non-Finance Businesses (DNFBs) to report any suspicious financial transaction to them. Therefore, real estate agents, lawyers/notaries are among those who have been requested to report any fraudulent financial transaction by the DNFB as it had been made mandatory for them to implement proper policies and procedures under the Financial Transactions Reporting Act, No.06 of 2006 (FTRA),” sources said. 
Sources further said the identification and verification of land owners before land transactions, the customer identification for land registries and valuation officers in the provincial councils have been requested to report any fraud. 

Records of transactions, correspondence relating to transactions and all reports of owners and the manner in which money is passed to buy land need to be furnished by notaries and registrars to the FIU. The new law says all identification documents and correspondence should be retained for a period of six years from the date of transaction. 
“They allow deeds to be attested, valued and notarized without identification of owners. Illegible signatures of owners and witnesses are the basic manner in execution of deeds. Should the land registry, valuation officers in provincial councils and notaries be allowed to function under the old laws without checking the identity of owners or without checking the consideration? Despite the laws introduced by the Central Bank, criminals can easily channel and launder illicit funds to purchase real estate using cash as deeds certify the money transaction had taken place well before the signatures are put on the ‘deed.’ As per the old laws, the laws are optional for notaries. In Section 33 of the Notaries Ordinance of 1907, it says even if the notary has not observed the rules of the ordinance, all deeds are valid. Under Section 7 of the 1927 Registration of Documents Ordinance, the registrar is not responsible for the validity of deeds. These laws create divine loopholes for those who want to forge signatures. In contrast, when collecting stamp duty on the value of the land belonging to its rightful owners, the bank does not look for the ID number of the land owner on the instructions of the provincial councils as long as his or her name is entered in the form given by the bank. For them, it is immaterial to know whether the owner is disabled or out of the country. Hence, the owners will never know that their lands are being processed through the valuation department of respective provincial councils, banks and land registries and are being readied to be sold,” Keerthimala Gunasekera said. 
This decline in notary documents is mainly because of the disinclination of authorities to recognize that land sales and mortgages at the end of the day lend themselves for money laundering and other criminal activities. 

“As the land registry moves on to electronic methods without owner identification laws to check the identity of the owners and buyers and their signatures, the speed of registration of forged deeds will increase. Fictitious sales, money laundering transactions and forged deeds will get registered even within a day in the land registries. As a result, millions of rupees could be laundered in cash before the transaction is signed by a notary, as the notary and the land registry have no obligation to check the legality of the consideration,” sources said. 
Meanwhile, a senior police officer in the fraud bureau on condition of anonymity told this newspaper how the police department had received complaints related to land grabbing where powerful politicians in the previous and present regimes have engaged. “In most of these cases, we have received complaints against politicians in the previous regime and there are a few against the representatives of the ruling party as well,” police sources said. 

According to sources, the State Lands (Special Provisions) Bill was tabled in Parliament on June 28 where all government lands which were lease hold interest are to be given as outright grants to the poor. “Can the poor sustain the land ownership given with laws that help fraudsters and the Bimsaviya law where court has no jurisdiction to hear fraud cases under Section 33 of the Act 21 of 1998,” sources queried. 
Attempts were taken to contact Justice and Prison Reforms Minister Thalatha Athukorale and Home Affairs, Provincial Councils and Local Government Minister Vajira Abeywardena for a comment, but to no avail. Although text messages were sent requesting them for comments, none of the ministers responded till the paper went for publication.