Import of goods on advance payment terms lawful

• Lawyer points out said imports fall under Special Import Licence and Payment Regulations No. 1 of 2011
• Counsel for AY Investments tells President Anura Kumara Dissanayake that banks, import control or exchange control accountable for monitoring 2011 Regulations have not reported violations 

The widely publicised so-called ‘phantom’ transfers of payments made to overseas manufacturers and exporters by Sri Lankan licensed commercial banks had been made under the ‘Special Import Licence and Payment Regulations No. 1 of 2011, in operation in Sri Lanka for over 15 years.

This was revealed by President’s Counsel M.M. Zuhair in a letter dated 1 August 2026 addressed on behalf of his clients AY Investments Impex Ltd., of Bankshall Street, Colombo, to President Anura Kumara Dissanayake.

“All such payments tendered to banks by his clients and its associated companies had been effected within the legal framework set out in the Regulations, with the remitting banks being responsible for due compliance under the supervisory monitoring of the Controller of Imports and Exports and the Head of Department of Foreign Exchange, the latter exercising powers vested in the Central Bank of Sri Lanka,” according to the letter to the President. 

“There had been no complaints during the past several years in respect of the operational services rendered by AY Investments and its associated companies between the banks and the importers. AY Investments is not an importer but renders operational services for a nominal commission. They receive advance payments from importers’ brokers for payment to overseas exporters all in rupees and pay the licensed commercial banks also in rupees. Licensed banks after due diligence convert the rupee deposits into foreign currencies and transfer the payment to the overseas exporters,” it added.

Zuhair, PC has urged the President to direct the investigators, in the interest of justice as well as to ensure just and fair investigations, to verify the shipments to Sri Lanka made by the overseas companies which had received the funds. It is an essential part of any genuine investigation to verify the relevant exports done to Sri Lanka by the companies which received the advance payment, with reference to the bills of lading and the Customs clearance of the goods upon arrival in Sri Lanka. 

Without doing this vital verification, unfounded and highly exaggerated versions have been publicised, causing tremendous damage to AY Investments and its associated companies resulting in huge negative publicity, due also to the uninvestigated gaps in the investigations.

Overseas investigations have been done in other cases such as in Australia in the SriLankan Airlines case, in the UK in the University of Wolverhampton investigation, and in France in the Azad Maulana case, all in the recent past.

The President’s Counsel’s letter to the President also states as follows:

“Licensed commercial banks in Sri Lanka, which include both State and private banks, some headed by retired judges of the Supreme Court, would never have permitted even a dollar to be sent out if the transactions were not lawful. It is equally foolish to imagine that Sri Lankan business entities were regularly sending out billions of dollars, invariably borrowed from banks, as pure ‘gifts’ to unknown Chinese exporters without getting any goods in return.

We are instructed that the relevant importers, the banks, the Head of Foreign Exchange, and the Controller of Imports and Exports are responsible for ensuring that the overseas exporter had exported the goods to the importer, particularly in terms of Regulation 18 and 22. This responsibility rests squarely on the said State organisations as per the Regulations, though in this case, there has been no violation of the 2011 Regulations by anyone.

Rule 3(2) of the 2011 regulations states: ‘The choice and technicalities of the ‘Payment Terms’ to be adopted in respect of any particular import is a matter to be decided as between the person who is the supplier and the importer of the goods and the relevant licensed commercial bank.’

The stipulated period after advance payment for the goods to arrive in Sri Lanka, under these Regulations, ranges from six months to two years.

We submit that licensed commercial banks have a responsibility and accountability to the Controller of Imports and Exports and the Head of the Department of Exchange, who are required to monitor the payments made in terms of Regulation 3 to Regulation 17. 

It is apparent that even after nearly six months of investigations by the current investigators, no one from the accountable State authorities, particularly the banks, have been brought before justice, mainly for the probable reason that no violation of the regulatory framework has been found against anyone.

In such circumstances, it must be presumed that all parties have acted within the legal framework set out in the 2011 Regulations as amended on 18 June 2026. It is equally implicit that no importer can violate the Regulations without the complicity of the relevant commercial bank and those mandated to monitor the payment process.

Even non-nationals holding a valid visa to reside in Sri Lanka are eligible to import goods into Sri Lanka under these regulations. We note that the provisions of the said Regulations No. 1 of 2011 are still in operation.

We write to Your Excellency urging that the Controller of Imports and Exports, as the responsible authority, be directed to seek comprehensive information, either directly or through diplomatic or other valid channels, from all the foreign entities who had received the remitted sums through banks to furnish copies of the bill of lading of goods in respect of each of the payments received and to ascertain from Customs the clearance of the goods at the Sri Lanka end. 

We note on behalf of our client that he is presumed innocent in terms of the fundamental rights provisions of the Constitution.”