Friday Jul 24, 2026
Friday Jul 24, 2026
Friday, 24 July 2026 00:26 - - {{hitsCtrl.values.hits}}
The Central Bank of Sri Lanka’s (CBSL) Financial Intelligence Unit (FIU) repeatedly warned successive Governments from 2021 that advance import payments were being used for trade-based money laundering, years before investigations uncovered hundreds of millions of dollars remitted overseas for imports that never arrived, Parliament’s Committee on Public Finance (CoPF) heard this week.
FIU officials told the Committee that strategic analysis undertaken in 2021 identified trade-based money laundering as one of Sri Lanka’s highest financial crime risks. The finding was escalated through a series of communications to the Finance Ministry, Presidency, and CBSL’s Monetary Board, while banks were instructed to strengthen monitoring of advance payment transactions.
The disclosures came after the Criminal Investigation Department (CID) told the CoPF it had identified approximately $ 715 million transferred overseas through fraudulent import transactions between 2023 and 2026, with investigators linking part of the network to international money laundering and drug trafficking operations.
FIU officials said the Unit’s core mandate was to generate actionable financial intelligence through operational analysis of money trails and strategic assessments of emerging risks. Between February and June 2021, it repeatedly warned that advance payment telegraphic transfers (TTs) presented a growing money laundering risk and urged greater law enforcement attention.
Officials said the then CBSL Governor had written to the Treasury Secretary and Presidential Secretary on the issue, while members of the Monetary Board had also raised the matter directly with the then President.
Trade-based money laundering was subsequently identified as a key national threat in both the 2021/22 and 2024/25 National Risk Assessments.
The FIU also participated in an Asian Development Bank (ADB)-led regional initiative on trade-based money laundering involving several countries, including Bangladesh, Nepal, Indonesia, New Zealand, and Pakistan. As part of that program, workshops were conducted with Sri Lanka Customs and Treasury officials, while banks were required to submit suspicious transaction reports relating specifically to advance payment remittances.
Officials said intelligence compiled from those reports up to May 2024 had been shared with Sri Lanka Customs and Sri Lanka Police and updated regularly thereafter.
“We believe much of what investigators have uncovered today stems from intelligence generated through those reports,” FIU officials told the Committee.
Officials stressed that advance payments themselves were not unlawful, as they were processed within the legal foreign exchange framework. Criminal liability arose only where investigations established fraudulent documentation, deliberate collusion involving bank officials, or links to criminal proceeds.
They said that information was provided by law enforcement, it would enable the CBSL to carry out targeted examinations of bank branches where regulatory breaches were suspected.
Sri Lanka Customs officials said they had only been able to examine transactions dating back to 2023 because limitations in its digital systems prevented investigators from tracing historical records further.
However, they said there were grounds to suspect that the abuse of advance import payments may have begun much earlier, following the enactment of the Foreign Exchange Act in 2017, which decriminalised foreign exchange offences and replaced the previous enforcement regime with a predominantly civil framework.
The officials also pointed to the widespread use of shell companies in the ongoing investigations, arguing that the new beneficial ownership requirements introduced under amendments to company law would make it more difficult to conceal the individuals behind corporate entities.
From 30 September, companies will be required to disclose verified beneficial ownership information, including personal identification details certified by company secretaries, with criminal penalties applying for false declarations.
Officials said investigators frequently encountered companies whose legal owners could not be traced, complicating criminal investigations.
They warned that if Sri Lanka acquired a reputation as a jurisdiction where shell companies could be established with untraceable ownership, it could face adverse findings during future Financial Action Task Force (FATF) assessments of its anti-money laundering and counter-terrorist financing (AML/CFT) framework.
The Committee also heard that the Government has introduced additional safeguards requiring importers to make advance payments to register with Sri Lanka Customs as eligible importers, while banks are now required to collect and submit additional information before processing such transactions.
However, officials said compliance remained incomplete. Despite the new reporting requirements, some banks continued to process advance payment transactions without providing mandatory Tax Identification Number (TIN) information.
Officials acknowledged that coordination among enforcement agencies had historically been weak but said cooperation had improved over the past year. A National Coordinating Committee comprising 22 agencies is to be established to strengthen intelligence sharing and enforcement, while an existing working group already brings together the CBSL, FIU, Sri Lanka Customs, Sri Lanka Police, and other agencies.
Officials also said the proposed National Digital Identity program would strengthen customer identification and financial crime investigations.
CoPF Chairman MP Dr. Harsha de Silva thanked FIU officials for their presentation, saying their observations were consistent with the Committee’s own findings.
In a statement issued after the meeting, Dr. de Silva said the Committee had found multiple failures across banks, Sri Lanka Customs, and the Department of Import and Export Control in reconciling outward remittances with corresponding imports.
“The most disappointing finding was that reporting requirements on outward remittances by both State and private banks were not being strictly adhered to. That is precisely the gap fraudsters exploited,” he said.
Dr. de Silva said the Committee had approved amendments requiring importers to register with Customs before undertaking advance payment transactions but stressed that stronger enforcement, rather than additional regulation, remained the priority.
“The answer to poor enforcement is not to burden bona fide importers with more regulation. It is to implement the regulations we already have, so that rogues are caught,” he said.
The Committee has directed the establishment of a multi-agency group to submit a comprehensive report within two months.
