Enhanced AML controls and law reform urgent priority for Sri Lanka

FIU Director Dr. Subhani Keerthiratne 

• Seminar on Proceeds of Crime Bill to be held tomorrow

The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. It sets international standards that aim to prevent these illegal activities and the harm they cause to society.

According to a recent Central Bank report “Sri Lanka will face its third Mutual Evaluation (ME) in 2025. Given the country’s past experience of two MEs which resulted in it being included in the FATF “grey list” and subsequent economic and financial repercussions, the upcoming ME will be a significant event in the country’s economic and financial progression.” Sri Lanka has been on the Financial Action Task Force (FATF) “grey list” twice, in 2011 and 2017, but was delisted in October 2019 after addressing strategic deficiencies in its anti-money laundering and counter-terrorism financing (AML/CFT) framework. 

The grey list is the public list of jurisdictions that are “actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.” It is the FATF’s black list that specifically identifies high-risk countries and calls for enhanced due diligence and/or countermeasures when dealing with these. But as the Basel Institute of Governance has pointed out “the distinction is important because not all grey-listed countries pose the same level or type of risk. Many are on a rapid path to improvement. Not all will require enhanced due diligence. And some countries that are not and never have been on the grey list may still present significant risks.”

Only Iran and Korea DR are on the “black list”. As to how jurisdictions such as the Philippines and South Africa were excluded from the grey list at some point of time remains a debatable issue. 

Out of Asian countries Nepal and Vietnam have been on the grey list. Not surprisingly in 2023 Lao PDR was also added to the grey list.

One of the key recommendations in the mutual evaluation report is that Lao must “significantly improve and update the understanding of risk by conducting further and more robust assessments of national and sectoral ML/TF risks (casinos, real estate, banks, transnational organised crime, corruption, environmental crime, human trafficking, etc.) and cross-border risks.” Despite impressive progress by the FIU during the past few years, a similar observation could equally apply to Sri Lanka.

The Proceeds of Crime bill is a measure in the right direction. It is due to be debated, and hopefully passed without amendments in early April. Its full enforcement, just as much as in the case of the Anti-Corruption Act (rules and regulations are yet to be adopted), will remain a formidable task. Consequential amendments to the Financial Transactions Reporting Act; the Prevention of Money Laundering Act; and the Companies Act are of importance.

The imminent changes to the AML regime will be the subject-matter of a speech by FIU Director Dr. Subhani Keerthiratne who will be the Guest of Honour at the forthcoming seminar on 3 April on the Proceeds of Crime Bill. An Australian expert is already in Sri Lanka to conduct assessment tests to ascertain the level of knowledge and awareness and practices by compliance officers and relevant staff. Directors too owe a duty to ensure that they themselves do not remain blissfully oblivious to the legal requirements. Time is short and there is much ‘catching up’ to do. 

A seminar under the above title will be held on 3 April at the NH Collections Colombo, Colombo 3. For any details and registration inquiries, please contact Jane on 0763666246 or [email protected] event is sponsored by Daily FT.