THE CENTRAL BANK, SRI LANKA CUSTOMS AND JAAF: BLAZING A TRAIL TO DIGITALIZE THE ECONOMY WITH DIGITAL SIGNATURES

A national infrastructure enabling the widespread use of digital signatures has many benefits and different levels. It can offer higher security with superior encryption and transparency, thereby containing fraud and misappropriation, significantly reducing risks inherent in paper trails. It can foster paperless document transactions for remarkable savings in cost and time, not to mention the environment, and enable workflow automation, improve state and private sector entities’ interactions with their customers, and builds trust and credibility. A backbone and legal framework that enables digital signatures can elevate an economy, accelerating its digital transformation. Sri Lanka has both these in place, but now it is up to enterprises to adopt digital signatures.

Ananda Jayalath, Assistant Governor of the Central Bank of Sri Lanka, who was involved in setting up the regulatory framework for digital signatures, and Director of Customs Sudattha Silva and Sean Van Dort, the Chairman of the Joint Apparel Association Forum Logistics Sub Committee, discuss the potential of Digital Signatures to elevate industries and the Sri Lankan economy, and their efforts to promote the next step in Sri Lanka’s digital transformation.

Does the Central Bank use digital signatures, and why is it important?

Jayalath: Absolutely. We use them for the safety and security of our documentation and communication processes. Countries are digitalizing themselves, having understood its benefits. It’s cost-efficient, faster and more convenient. It is green, doesn’t require paper, and is energy efficient. Sri Lanka needs it to reduce costs for everyone and improve productivity.

Digital signatures solve two issues faced in digital transactions and communications. One is tampering with documents, and the other is impersonation. These two are critical to creating a reliable system. With digital signatures, people can be confident that documents or mail won’t be tampered with, and if they are, they can be recognized and traced to the source.

Just as these features build confidence in digital transactions among the public, the same is with the Central Bank. We need a secure communication link because of the privileged documents and emails we share, and a digital signature is a great way to build that confidence in security.

Sri Lanka Customs was one of the first state institutions to adopt digital signatures. As one of the critical border agencies standing between Sri Lanka and the outside world, how did you manage the transition?

Silva: It all started with Customs clearance introducing paperless processing. Being a border agency, we regulate the cross-border movement of goods and handle a lot of documents. One of the key developments we believed to facilitate trade better was to automate the process entirely.

We started the process back in 1993. During this, we realized that being able to clear goods without using physical documents or needing to be physically present would be the most ideal. In 2011, we started to accept customs declarations online, but the law required signatures in ink which was the biggest barrier to going paperless. However, we continued to develop our IT infrastructure significantly, and by 2019 we finally introduced paperless clearance after LankaPay helped us to establish a platform to receive online payments. But to sign and authenticate electronic documents for paperless processing, we would require a digital signature system. To implement this with LankaSign, we set up a pilot programme with a few volunteer companies, including MAS, before taking it to the rest of Sri Lanka in August 2021.

Are digital signatures legally accepted, and was the law changed to accommodate this transition?

Silva: Sri Lanka’s ICT Agency (ICTA) had completed the groundwork in advance. The 2006 Electronic Transactions Act enabled us to accept electronic documents, which also refers to implementing digital signatures. We were transitioning to a paperless system in 2017 and expedited the process when the pandemic hit.

As an exporter, MAS deals with global markets. What was your experience being part of the pilot programme using digital signatures with Sri Lanka Customs?

Van Dort: Based on the studies on our transactions, we realized that the time spent on pre and post-documentation consumed most of our time. Even with state-of-the-art manufacturing techniques and technology, we’ve had draconian laws with the customs. Many inefficiencies in pre and post-documentation were solved because of this technology.

The apparel industry must be responsible for tens of thousands of shipping containers heading out of the country. Did each of those containers require physical documents?

Van Dort: Whether it was one or a hundred containers, all the documents for these shipments had to be physically signed, and each customs declaration has about 18 copies. This reduced to eleven. Today, a physical copy is only needed if the enterprise needs it.

The transition has helped us immensely in becoming more efficient. The pandemic was a blessing in disguise. Although the initial resistance against this system came from within the customs because the officers feared the unknown, once people were trained it was a piece of cake.

How did Sri Lanka Customs navigate the challenge of adopting a completely new system after decades of using the same old method?

Silva: It’s all about enthusiasm. Fear of the unknown fades away once people are informed and educated. The Electronic Transactions Act supersedes the provisions of the Customs Ordinance, paving the way for anyone to sign a document electronically, enabling us to implement this change.

In one of my investigations, I came across a forged customs declaration. It seemed as if it was signed by a particular customs officer whose signature I was familiar with. He denied ever signing it when questioned, but he couldn’t differentiate between the forged signature and his own.

We managed to apprehend the culprit. While sharing this story with a group of new customs officers, I discovered a newly recruited customs officer who could duplicate my signature perfectly.

Having a digital signature minimizes the possibility of forgeries occurring, which creates greater trust and reliability

Van Dort: We’ve also had incidents of people importing contraband under our name. Being a reputed company, we have a green channel facility. Because these parties have our VAT and TIN numbers, plus forged signatures, goods had been passed.

Digital signature eradicates that possibility and gives us peace of mind, giving us confidence that no one can ruin the reputation of a reputed apparel manufacturer that is the backbone of this country when it comes to exports, and that’s the security we now have.

With thousands of transactions happening every hour, how would Sri Lanka and its financial sector benefit from using digital signatures?

Jayalath: To reap the benefits of digitalization, we must preserve the confidence the public has in us. This involves minimizing any errors, omissions or frauds that could take place. It’s essential to have secure communication, to have the reassurance that the documents you send aren’t tampered with and your emails aren’t intercepted or impersonated.

Digital signatures can guarantee this because they are traceable. Any forgery or tampering is identifiable. Similar to most vulnerabilities in cybersecurity being the result of people, a weakness in one element could infringe on the security of everything. Greater adoption protects everyone better.

Are all banks and financial institutions ready for this?

Jayalath: The Central Bank has issued guidance on cybersecurity and the security measures they should adopt, digital signature technology included. Most banks comply with these standards, particularly on payments, but it will take some time before finance companies update their systems.

Can you make the transition at the end of the year?

Jayalath: We are making quick progress, but there is still room for improvement in the user interface to create better convenience. We are constantly making improvements to enhance the user experience, and hopefully, we will be able to make a complete transition by the end of the year.

From a shipper’s point of view, how far do you think Sri Lanka is from fully realizing the benefits of digital signatures?

Van Dort: I believe even large companies are still not using digital signatures entirely because of the regulations in these companies. Other parties except for the BOI and Sri Lanka Customs lack the technical infrastructure necessary to use its full potential. It has hindered us since many of our buyers operate digitally entirely.

We need to have the political will to truly go digital, taking action to connect the government-run border agencies.

What lessons and best practices will encourage wider adoption?

Silva: I agree that if the political will exists, officials will be motivated to take action. Also, other border agencies related to customs clearance should implement the digital signature, but before doing so they need to implement automation processes.

The best place is to start small by automating business processes. People have to realize the value of digitization and implement digital platforms. We have set the example for this and are always ready to help in guiding this.

Jayalath: The same is true for the financial world. Awareness and willingness are the two defining elements. We are entering a completely digital world, and we must adapt or risk becoming irrelevant. If we want to survive, we need to change how we function, reduce costs and improve productivity.

What must be done to elevate Sri Lanka to a more digital era?

Van Dort: I believe digital signatures and digitalization of all private and government institutions should be made mandatory by law, with a deadline. I doubt any substantial positive move will take place without powerful enforcement. The apparel sector is always willing to embrace new technology and ways to improve efficiency. We must embrace change.

Silva: We should have a national-level eGovernance Policy. We must take initiative to integrate all government agencies, linking everything to the same platform. A national-level approach is essential, implemented with proper guidance from experts.

Jayalath: I believe that although it is necessary as a government to have this initiative, the private sector should be free to operate at will. But, we still need to create more awareness by communicating the convenience, efficiency, security and productivity we can achieve by moving away from how we’ve done things in the past.