Fight against money laundering amidst international pressure
Ahead of the 2025 review by the Financial Action Task Force (FATF), Sri Lanka is toughening its anti-money laundering system, spurred by fresh legislation and international pressure.
Although money laundering investigations had been going on for some time, with the enactment of the Anti-Corruption Act No. 09 of 2023, this task was formally given to the Commission to Investigate Allegations of Bribery or Corruption.
According to the Commission, it has formed a special unit to conduct money laundering cases with the available officers and new recruits.
These anti-money laundering efforts in the country have drawn interest from the International Monetary Fund which has called for further streamlining investigative and prosecutorial processes.
The Central Bank of Sri Lanka has since stepped up efforts to curb the vice, signing MoUs with various national and international agencies, bringing the total number to 16 local and 45 international arrangements.
A central focus of this effort has been non-governmental organisations, with the specific aim of preventing abuses of foreign funds. Sri Lanka has 1,851 registered NGOs, but only about a third is considered to be active, some of which are suspected of questionable financial dealings.
Considering that money laundering and illicit financing continue to pose grave concerns, the 2021-2022 National Risk Assessment (NRA) pinpointed drug trafficking, corruption, and customs offenses as leading threats, each posing a medium to high risk. Other lesser but significant threats involve fraud, environmental crimes, and human trafficking.
Among the identified risks, for example, are informal value transfer systems, like hawala, which have been pinpointed as very risky areas since they are more often than not used in the transfer of black money. Other areas of worry are real estate, banking, and casinos.
In addressing these concerns, the Financial Intelligence Unit has advocated for stricter regulations and closer monitoring, as well as the Central Bank.
The IMF has recommended: to create databases; speed up prosecutions, as well as an improvement in interagency coordination and cooperation in trying to prevent money laundering and terrorist financing. Proposals include: increasing monitoring of Designated Non-Finance Businesses and Professions such as real estate agents, casinos, and dealers in precious metals.
In the lead-up to the 2025 FATF review, current efforts will be scrutinised to determine whether more needs to be done to crack down on illicit financial transactions.
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