Compliance takes centre stage as pillar of trust in modern finance

Central Bank Governor 

Dr. Nandalal Weerasinghe 

- Pic by Upul Abayasekara

• CBSL Governor Dr. Nandalal Weerasinghe at the FHA Compliance Forum redefines compliance as foundation for public trust and ethical leadership
• Says compliance today goes beyond regulation, focusing on culture, values, and long-term integrity
• Notes compliance officers now serve as strategic advisers, guiding institutions through regulatory complexity
• Highlights need for independence in compliance functions with direct Board access and transparent issue resolution
• Welcomes AI and analytics in compliance but stresses tech must support—not replace—ethical frameworks
• Warns recent penalties reflect deeper credibility risks and says such misconduct harms entire financial sector
• Identifies emerging challenges including ESG, cyber security, and third-party oversight that demand adaptive compliance
• Affirms compliance is shared institutional responsibility, not departmental task
• Calls on financial institutions to view compliance as opportunity to build resilient, trusted systems

By Janani Kandaramage

The Central Bank of Sri Lanka (CBSL) this week outlined a renewed vision for financial sector compliance, urging institutions to move beyond checkbox regulation and embrace compliance as a cornerstone of ethical leadership, institutional resilience, and public trust.

Speaking at the Compliance Forum of the Finance Houses Association of Sri Lanka (FHA), CBSL Governor Dr. Nandalal Weerasinghe highlighted the growing complexity of financial operations.

He noted that compliance is no longer about avoiding penalties or fulfilling minimum requirements, and must be viewed as a mechanism that strengthens public trust and institutional integrity in the long term.

“Compliance today is not just about regulation—it is about leadership, culture, and values,” he remarked, adding that modern financial institutions should prioritise ethics above obligation.

Acknowledging the growing dominance of digital finance and evolving global standards, the CBSL Governor stressed that compliance officers now serve as essential advisers to senior management and boards. He said these officers must not only monitor risk but anticipate it, guiding institutions through complex regulatory terrain with agility and foresight.

“Compliance officials are no longer just rule enforcers—they are strategic partners who help define the institution’s direction,” he said.

He also underlined the CBSL’s rising expectations for compliance functions, noting the need for independence, direct reporting lines to the Board, and unrestricted access to institutional data.

“These standards are designed to ensure compliance issues are escalated transparently and resolved efficiently, free from interference,” he observed, adding that, “Boards must take ownership. The tone has to be set at the top,” while calling on executive management to embed ethical governance and transparency across all levels.

Discussing technology’s role in spearheading compliance, the official welcomed the adoption of Artificial Intelligence (AI), analytics, and digital reporting to improve accountability functions but cautioned that technology alone cannot replace a strong ethical framework.

He noted: “Tech must complement—not replace—transparency, accountability, and ongoing staff training.”

He further pointed to several recent cases in which local banks and finance companies faced financial penalties for compliance failures. These penalties, he warned, serve not only as deterrents but also as reminders of the essential role compliance plays in protecting the integrity of the financial system.

“Misconduct is not just an internal failure—it undermines the credibility of the sector as a whole,” he warned.

Looking ahead, he outlined obstacles facing compliance professionals, from cyber security and third-party oversight to environmental, social, and governance (ESG) mandates. The pace of regulatory change and the pressure to maintain public confidence mean that compliance functions must evolve continuously to accommodate the latest technologies.

“Today’s compliance environment is more dynamic, data-driven, and demanding than ever before,” he said, adding that resilience in this space requires more than technical expertise. “It demands vision, adaptability, and an unwavering commitment to ethics.”

Dr. Weerasinghe underscored that compliance is a collective institutional responsibility, not the burden of a single department. Cultivating a strong compliance culture, he asserted, begins with leadership but must be sustained by every employee’s commitment to equity, even in the absence of moral oversight.

“Building a values-driven compliance culture doesn’t happen overnight,” he explained. “It requires sustained leadership, fairness in decision-making, and consistency in ethical conduct.”

He emphasised that the CBSL is dedicated to supporting institutions that demonstrate proactive, risk-aware, and ethical compliance frameworks. He called on all stakeholders to view compliance not as a constraint but as an opportunity to build stronger, more trusted financial institutions via effective controls enforced internally.

“This is not just about meeting rules—it’s about building a system the public can rely on, no matter what. Compliance is a shared responsibility, and together, we can use it to create a better tomorrow,” he affirmed.