Sri Lanka braces for 2026 AML/CFT Mutual Evaluation as Central Bank warns of high stakes

CBSL Governor Dr. Nandalal Weerasinghe

- Pic by Lasantha Kumara

• CBSL Chief Dr. Nandalal Weerasinghe says country is well positioned, but warns of severe risks from an adverse outcome
• Cautions failure could lead to FATF grey listing, raising costs, slowing growth and hurting investor confidence
• Evaluation will assess compliance with FATF’s 40 Recommendations and 11 Immediate Outcomes

By Charumini de Silva 

Central Bank Governor Dr. Nandalal Weerasinghe yesterday said Sri Lanka is well positioned to achieve a favourable outcome at its upcoming Mutual Evaluation on anti-money laundering, countering the financing of terrorism and countering proliferation financing (AML/CFT/CPF), but cautioned that any adverse result would carry serious economic and reputational consequences.

“Sri Lanka’s third Mutual Evaluation on its AML/CFT/CPF framework, coordinated by the Asia Pacific Group on Money Laundering (APG), will be a major milestone in 2026,” he said delivering the annual policy address at the Central Bank.

He said the country enters the evaluation process from a position of strength, following significant reforms and institutional strengthening carried out in recent years. “The successful outcome of the Mutual Evaluation will depend on demonstrating a higher level of technical compliance with the 40 Recommendations of the Financial Action Task Force (FATF) and effectiveness against 11 Immediate Outcomes,” he added. 

The Governor explained that the Mutual Evaluation is a coordinated effort, involving both public and private sectors, including key ministries such as the Finance, Defence, Foreign Affairs and Justice and other key agencies such as the Attorney General’s Department, Sri Lanka Police, Sri Lanka 

Customs, etc. 

“The highest political will and commitment, effective inter-agency coordination and close collaboration of relevant stakeholders will be vital in successfully facing the Mutual Evaluation,” he stressed.

He noted that the Financial Intelligence Unit (FIU) will mainly focus on coordinating the mutual evaluation by leading national preparations, monitoring stakeholder action plans, and facilitating submissions and engagements with assessors.

However, he said if Sri Lanka’s AML/CFT/CPF regime is found to have strategic deficiencies, then Sri Lanka would be placed in the FATF’s International Co-operation Review Group (ICRG) list of jurisdictions under increased monitoring, known as the “Grey list”. 

“Grey listing would result in increased scrutiny of cross-border financial transactions, higher compliance costs, delays in international payments, and reduced access to correspondent banking relationships,” the Governor warned, adding that it could also adversely affect foreign direct investment (FDI), capital inflows, export-oriented sectors, remittance flows, and overall economic growth, while increasing borrowing costs for both the public and private sectors.

Dr. Weerasinghe said reinforcing the national urgency to elevate the Mutual Evaluation preparation as a top-tier priority and strengthening stakeholder commitment and accountability would be critical to securing a successful Mutual Evaluation outcome.

In 2025, the FIU further reinforced the national AML/CFT/CPF framework through enhanced collaboration with key stakeholders. He said major achievements during last year included stronger mechanisms to monitor stakeholder action plans, progress in amending core AML/CFT/CPF legislation, expanded analysis and dissemination of Suspicious Transaction Reports, and targeted capacity-building programs aimed at improving institutional effectiveness and national readiness.