Trusts Ordinance, Companies Act to be amended soon
Sri Lanka’s banking regulator, due to global issues such as money laundering, drug trafficking and financing terrorism, was compelled to bring in new legislation during 2005-2006 to deal with such criminal acts.
Additionally, Head of Compliance, Cargills Bank, Summaiya Macan Marker, speaking at a discussion held at the Ceylon Chamber of Commerce in Colombo last week on the topic of “Public -Private Policy Dialogue” on overcoming regulatory and compliance challenges in the banking sector said, that new laws were promulgated during this period for the prevention of money laundering and other financial crimes.
Meanwhile new legislation such as the FIU which is the apex body for prevention of financial crimes was introduced under the purview of the Central Bank (CB). During 2007 to 2015 numerous other regulations were also introduced for stock brokers, insurance companies and for securities, casinos, gambling houses and to other professionals as well.
In 2018 new laws were introduced under the FIU for non-finance and real estate agents, lawyers and notaries. Numerous laws have become part and parcel of the banking sector. “We need to know the customer and the customer’s customer who is behind the wheel .We need to know the sources of wealth and anticipated flows to the account. Therefore we need to have data.”
She said there are going to be amendments to the Trusts Ordinance and the Companies Act in the future. Senior Director, Non-Executive Director of Sampath Bank Plc Sanjiva Senanayake said the CB had informed all bankers to take a fresh look at risks in an unorthodox way that affects everybody. “We have to look at new trends that are constantly changing and where we are heading.” Referring to the practical side of banking, he said an awareness with regard to risks has to be created in banks.
“My view was that we should take a broader look at risks than relying on data and statistics as things are changing constantly.” He said credibility is the main factor in a bank or in a financial institution because when credibility is lost business too is lost.
CB Director Finance – D.M. Rupasinghe said that they are subject to international financial bodies that led to the creation of the FIU in 2007 to monitor money laundering and financing terrorism.
“We are planning to cover financial, non-financial institutions, and other professions under the provisions of the FIU.” CB Assistant Governor – Yvette Fernando referring to the new Foreign Exchange Act said that under the previous Exchange Control Act it was not possible to do anything without the prior approval of the CB. But over the years from 1950-2017 there had been relaxations to the old Act where certain capital transactions were relaxed. From 2016 it became possible to use foreign exchange currency outside Sri Lanka through authorised dealers like commercial banks or financial institutions.
| Trusts amendment laws to prevent money laundering, illegal funds | |
| Tough new laws have been included in Sri Lanka’s Trusts (Amendment) Act, no. 6 of 2018 which was recently approved by Parliament to prevent money laundering and illegal funds slipping in. The Act, gazetted on March 28, provides for stringent penalties on a trustee who acts in contravention of the “provisions of sections 6A, 19, 19A and 19B” and on being guilty of the offence shall, on conviction be liable to a fine not exceeding Rs.200,000 or to imprisonment for a term not exceeding two years or to both such fine and imprisonment.” “The trustee of any immovable or movable property in respect of an express trust, shall forward to the Registrar-General all such information relating to the trust and the Registrar-General shall, on a request made by the Financial Intelligence Unit, or by any other authority with the written sanction of the Financial Intelligence Unit, provide to the Financial Intelligence Unit (FIU – which operates in the Central Bank) or such other authority any information relating to any express trust, kept in the register. According to 19A (1), a trustee shall keep records of all such information as may be prescribed, on the identity of the following persons at the time of creation of an express trust under section 6: the trustee himself; co-trustees, if any; author of the trust; the beneficiary, to the greatest extent possible; and any other person engaged in the execution of the trust in the capacity of an agent, a legal representative, a manager, an investment advisor or a tax advisor, an accountant or otherwise. The information must be updated every three months, according to the amendments. “Where an express trust has been created for the benefit of a class of persons, all such information as may be prescribed, on the identity of every person belonging to such class of persons, to the greatest extent possible, shall be kept in record.” And, where an express trust has been created for the benefit of a person other than a natural person, the information on the identity of the natural person who is the beneficial owner of the trust, shall “be kept in record”. A trustee is required to maintain records of information of any person at least for a period of six years from the date on which such person’s involvement with the trust ceases to exist. According to 19B (1) (a), a trustee and a co-trustee, if any, of an express trust shall provide to any relevant authority, any information in the record maintained in respect of any person referred to in that section whenever such trustee is required to provide such information by such authority. The amendments said that “relevant authority” means – (i) any public authority assigned with the responsibility of preventing money laundering and suppression of terrorist financing; or (ii) any authority that performs the function of investigating and prosecuting money laundering and terrorist financing associated offences and seizing or freezing and confiscating assets relating to such offences. It said that under 115A (1), the Minister may make regulations in respect of all matters required by this Act to be prescribed or in respect of which regulations are authorized by this Act to be made. Every regulation made by the Minister shall be gazetted and as soon as possible be presented to Parliament for approval. “Every regulation which is not so approved shall be deemed to be rescinded from the date of disapproval but without prejudice to anything previously done thereunder,” according to the amendments. |