Financial Times

An inter-governmental body called the Financial Action Task Force (FATF) was recently established to set up standards and thereafter develop and promote policies to combat money laundering and terrorist financing, the Central Bank said in a statement.

FATF has outlined 40 recommendations as counter measures against money laundering covering the criminal justice system and law enforcement, the financial system, and international co-operation. The recommendations have been recognised, endorsed and adopted by most of the members of the international community. In addition to the above, FATF has also formulated a further nine proposals specifically directed to combat terrorist financing, the Bank said.

Money laundering is a process whereby proceeds of crime are converted into legitimate funds using complex transactions effected through financial institutions.

By obscuring the origin of the money, criminals can use the funds without raising any suspicion about its legitimacy. The impact of such activity is the distortion of resource allocation as laundered funds are generally used for non-profitable investments that do not bring any tangible benefits to a country.

“It is the practice of those involved in laundering of funds to bring in money for a short period into a country and then suddenly sending to another territory. This type of inflow to a small country can result in a surge of financial transactions, which when transferred out, can lead to economic as well as financial instability. Furthermore, Sri Lanka is faced with the grave concern relating to terrorist financing and there is an urgent necessity to arrest such activity,” the statement said.