ECONOMYNEXT – Sri Lanka’s third analysis on its Anti-Cash Laundering and Countering the Financing of Terrorism (AML/CFT) framework is postponed by one-year and rescheduled to begin in March 2026, the Central Financial institution information confirmed.
The delay is because of the two nationwide elections held final 12 months, a Central Financial institution official stated.
Sri Lanka is going through a threat of falling into the gray checklist for a 3rd time if it fails to implement sturdy AML/CFT measures really useful by the worldwide physique. Such failure may dent the island nation’s financial restoration from sovereign debt default, analysts have stated.
Sri Lanka’s third Mutual Analysis on its AML/CFT framework, coordinated by the Asia Pacific Group on Cash Laundering (APG), was scheduled to begin in March 2025.
Nevertheless, this analysis has now been rescheduled to March 2026, the Central Financial institution stated in its Coverage Agenda for 2025 and past, launched on Wednesday (08).
“This analysis will assess the nation’s efforts to fight cash laundering and the financing of terrorism,” the Central Financial institution stated.
“Sri Lanka should guarantee compliance with the 40 suggestions of the Monetary Motion Process Power (FATF) and reveal the effectiveness of its AML/CFT framework beneath the FATF’s 11 Fast Outcomes.”
The Central Financial institution has deliberate to additional strengthen the conduct of risk-based AML/CFT examinations of banks when it comes to the Monetary Transactions Reporting Act (FTRA) and the suggestions of the Monetary Motion Process Power (FATF).
The excessive stage AML/CFT Process Power, reconstituted in December 2024 will stay operational till the profitable completion of the Mutual Analysis in July 2027.
The nation is obliged to meet a raft of measures together with passing new legal guidelines to adjust to stopping AML/CFT legal guidelines earlier than the following analysis.
When a rustic is positioned on the Monetary Motion Process Power (FATF) gray checklist, it faces a number of monetary, financial, and reputational challenges together with lowered entry to world monetary markets, decline in international direct funding (FDI), elevated compliance prices, and dangers of ranking downgrading.
TWICE IN GREY LIST
In 2019, Sri Lanka was eliminated for the second time from the gray checklist of FATF, a worldwide anti-money laundering physique, after the Central Financial institution took some actions mandated by the FATF.
Sri Lanka is liable to falling into the gray checklist once more if it fails to take stern actions in opposition to potential cash laundering and terrorism financing loopholes within the nation.
The Cupboard has already accepted 24 institution-specific motion plans, which have been ready based mostly on FATF standards and gaps, recognized in the course of the earlier Mutual Analysis performed in 2014/2015 and the Nationwide Danger Evaluation (NRA) performed throughout 2021/2022 on Cash Laundering and Terrorist Financing (ML/TF).
“They’re presently being applied by the related stakeholders and implementation progress is constantly reviewed by the AML/CFT Process Power,” it stated.
The Central Financial institution’s Monetary Intelligence Unit (FIU) with its stakeholders and dealing teams expects to conduct one other replace to the NRA by the second quarter of this 12 months.
“This evaluation will encompass an evaluation of tax crimes and proliferation financing dangers as new areas, along with updating the 2021/2022 threat evaluation.”
“So as to additional strengthen the cooperation between FIU and non-financial establishments and their regulatory authorities, FIU expects to kind a number of working teams.”
The FIU has been pushing for anti-money laundering and countering terrorism financing compliance obligations and has been engaged on the FATF’s compliance measures in step with a request by the Worldwide Financial Fund (IMF).
The IMF has urged Sri Lanka to adjust to the newest worldwide Anti- AML/CFT Compliance Obligations in return to its $3 billion bailout bundle.
Sri Lanka has already fallen to the gray checklist twice previously 14 12 months with cash laundering and terrorism financing posing critical dangers to the home and world monetary system, peace, and improvement.
“FIU is within the closing levels of drafting amendments to the three key items of AML/CFT laws to strengthen the authorized framework in alignment with worldwide requirements,” the Central Financial institution stated.
AMENDMENT TO COMPANIES ACT
“Moreover, FIU will help within the implementation of amendments to the Corporations Act on helpful possession necessities and can help with every other related legislative amendments or rules associated to AML/CFT.”
“So as to improve intelligence sharing and strengthen worldwide cooperation and compliance with world requirements, FIU goals to extend the variety of bilateral Memoranda of Understanding (MOUs), each domestically and with related international counterparts, as vital.”
“FIU will proceed to lift consciousness amongst stakeholders concerning the essential significance of efficient AML/CFT implementation. Strengthening AML/CFT-related frameworks would offer the nation with quite a few financial, social, and nationwide safety advantages, together with enhanced monetary system integrity, elevated international investments, elevated entry to worldwide monetary markets and enhanced help for the promotion of excellent governance practices.”
The IMF’s mortgage programme has emphasised the necessity of addressing bribery and corruption and Sri Lanka is required to fulfil a raft of obligations beneath the AML/CFT pillar, the central financial institution has stated.
Failure to fulfil them will end in Sri Lanka being recognized as a rustic with strategic deficiencies in its AML/CFT Framework and will likely be designated as a grey-listed/ blacklisted nation.
Sri Lanka was beneath the gray checklist for the primary time in February 2010 quickly after the landslide election victory of former chief Mahinda Rajapaksa following the island nation’s navy successful a 26 12 months warfare within the earlier 12 months.
Nevertheless, the federal government managed to adjust to among the AML obligations and was capable of get delisted in June 2013 beneath an IMF mortgage programme.
Nevertheless, Sri Lanka fell beneath the gray checklist once more in November 2017 earlier than being delisted in October 2019.
Although gray Itemizing is a warning, most nations deal with grey-listed nations as of ‘excessive threat’ and blacklist them. The European Union included Sri Lanka in its blacklist subsequent to Sri Lanka’s second grey-listing. (Colombo/January 09/2025)
