- Issues clarification assuring that banks receiving funds for Special Deposit Accounts will follow anti-money laundering and anti-terrorism regulations
- Says banks have to ask for documents on transfers, check for veracity and keep info for six years for CB monitoring purposes
- In late June Cabinet approval was given to amend SDAs Gazette to fall in line with Forex Act of 2017
The Central Bank yesterday clarified banks receiving foreign funds for Special Deposit Accounts have to follow anti-money laundering and anti-terrorism regulations and would be maintained in line with existing laws and regulations.
The Central Bank of Sri Lanka (CBSL) yesterday said it categorically denies the views raised by a few authorities and persons that the required due diligence processes are not followed by banks (Authorized Dealers – ADs) operating in Sri Lanka in opening and maintaining recently introduced Special Deposit Accounts (SDAs).
The Government of Sri Lanka in consultation with the Monetary Board of the CBSL introduced the SDA in April to seek assistance for the national effort to overcome the effects of the COVID-19 outbreak by issuing regulations dated: 08.04.2020, under the provisions of the Foreign Exchange Act (FEA).
“The exemptions from procedural requirements specified in the said regulations allow an AD to directly credit funds to an SDA without routing such funds through an Inward Investment Account, under normal circumstances. The said regulations cannot exempt ADs from complying with provisions of FEA,” the Central Bank said in a statement yesterday.
In this regard, section 7(6) of FEA requires ADs to request the person who engages in a capital transaction to provide information/documents or make any declaration when it is reasonably necessary to satisfy that the said transaction is in conformity with any other laws regulating such transactions, while section 9(5) of FEA requires ADs to keep required information on any foreign exchange transaction engaged in by such dealer for a period of six years for the purpose of statistical and monitoring purposes of the CBSL.
In view of the above, CBSL reiterates that the said exemptions in the Regulations on SDAs are not related to the requirements applicable under regulations, rules, guidelines, etc. issued by the Financial Intelligence Unit of CBSL on Anti-Money Laundering (AML)/Countering the Department of Foreign Exchange 3 July Financing of Terrorism (CFT) and the provisions of FEA.
Hence, SDAs are required to be opened and maintained strictly following such laws and requirements.
On 24 June Cabinet approval was given for a proposal presented by Prime Minister Mahinda Rajapaksa in his capacity as the Finance Minister to amend the gazette of the SDAs to fall in line with the Foreign Exchange Act No. 12 of 2017.