Editorial

After decades of turning a blind eye to casinos and betting centres operating, not just on the fringes of the law but also without any form of meaningful oversight, Sri Lanka is poised to pass a bill that will finally install a regulator for the industry.

But the legislation is so flawed that experts who delved into it are urging the government to withdraw it and start over. One of the key premises of their argument is that the law envisages the setting up of a regulatory authority that is so beholden to the Minister of Finance that it is practically toothless.

The Gambling Authority Act 2025, which has been gazetted by the Finance, Planning and Economic Development Minister, who is the President, will replace the Betting on Horse-Racing Ordinance (Chapter 44), the Gaming Ordinance (Chapter 46) and the Casino Business (Regulation) Act, No. 17 of 2010. Among its problematic clauses—and there are many—is Section 71, which states, “The Minister may give to the Authority in writing general directions as to the exercise of the powers, performance of the duties and the discharge of functions of the Authority. It shall (italics, ours) be the duty of the Authority to comply with such directions.”

The bill also binds the Authority to furnish the Minister “in such form as he may require” all its returns, accounts and other information with respect to the property and activities. Additionally, the Authority will have no representation from tourism; it exempts the lottery sector, lacks provisions for online gambling, has weak revenue oversight and inadequate penalties for violations. In short—without extending so far as to say one might as well not have a Regulatory Authority at all—the bill is eyewash. The word “independent” (or anything like it), an essential prerequisite to effective regulation of the gaming or any other industry, is nowhere in the text. That is a problem from which many other risks emanate.

Cash is the main method to buy chips in Sri Lanka’s casinos. Avenues for money laundering are ample. While casinos monitor transactions at the time of encashing the winnings, records relevant to each gaming activity a customer engages in are difficult to trace in the absence of tracking systems, as noted by the Central Bank’s Financial Intelligence Unit.

Whether the glaring shortfalls in the proposed new law are deliberate—or just misguided, ill-informed, unimaginative and slipshod drafting—is unclear. This is a country which, even after passing the Casino Business (Regulation) Act in 2010, did not promulgate regulations giving it effect till nearly 12 years after its enactment. Indeed, it was only in 2022 that the Finance Minister issued Casino Business Licensing Regulation No. 1 of 2022 to at least introduce a permit requirement for the trade.

If Sri Lanka is serious about oversight, this law will not do. Every country that has a gambling industry of some repute regulates it far better and more clearly and stringently than what the government intends doing. And once put in place, if the past is any guide, remedial action will necessarily have to be hard-fought with no guarantee (amidst inevitable industry pressure) of success. The time for course correction is before this bill—which sets up a Regulatory Authority that’s a proxy of the minister—comes to pass.

A welcome bill to make national audit probes meaningful

On the flip side, the Justice Ministry is poised to introduce a law that is a long time coming—one that will provide much-needed teeth to the National Audit Office (NAO). The Auditor-General (AG) is responsible for the audit of all public entities, including ministries, departments, local government bodies and public corporations.

A longstanding complaint in this country (one that even evokes mockery) is that, while the reports of the AG go a considerable distance in identifying fraud, corruption or misappropriation in state institutions, “nothing ever happens” thereafter.

Since the sittings of the Parliamentary Committee on Public Enterprises (COPE) started being broadcast, awareness amongst the public about just how much waste and malpractice occurs in the government sector has vastly improved. The meetings are rife with controversy and have introduced some degree of accountability to governance. But of what use is episodic drama—of which there is plenty in COPE sittings—if there is no tangible impact on the ground, including, but not limited to, criminal action and sanctions? The existing law goes so far as to constrain the Auditor-General from reporting information to enforcement agencies.

And not only does the prevailing National Audit Act (NAA) bar the AG from sharing information obtained during the course of an audit with law enforcement bodies in real time, it also creates an offence of sharing information other than “in (the very limited) circumstances” defined in this law. On the table now, however, is an IMF-recommended amendment to the NAA, which binds the AG to notifying the Chief Accountant of an audited entity to “immediately” complain to law enforcement if there are “reasonable grounds to believe” fraud, corruption or misappropriation has occurred.

And if the accused is the Chief Accounting Officer (CAO), the Cabinet Secretary must report it to law enforcement, states the National Audit (Amendment) Bill. The proposed law also envisages the creation of an external, independent, expert-based Surcharge Review Committee (SRC) that will directly receive recommendations from the AG to impose penalties.

These changes are not just welcome; they are essential and overdue. There are other issues to address. As the IMF, too, has pointed out, while legally the NAO’s mandate extends to all state entities, it repeatedly encounters obstacles in gaining access to records and cooperation where “powerful agencies” and state-owned enterprises are concerned. This must be remedied as a matter of priority.

As the IMF has observed, a key weakness in the existing environment is that “findings of internal and external audits are repeated regularly.” There is no change or improvement, and just no avoidance of reoccurrence. However, the proof of the pudding, as they say, is in the tasting. The proposed amendment, while welcome, will have to be implemented. Notwithstanding the weak Gambling Authority Bill, Sri Lanka—under the IMF programme—is putting in place legislation to strengthen accountability and governance.

What is on paper, however, must be implemented. If the NAA Amendment is further strengthened and operationalised on the ground, it, combined with other actions—such as the ongoing crackdown by the Commission to Investigate Bribery or Corruption in addition to criminal prosecutions—should go a long way towards fixing at least some of the ills that have long plagued the public sector at the cost of the taxpaying public.