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Govt to tighten money laundering law targeting virtual asset service providers
View(s):Sri Lanka has gazetted a Prevention of Money Laundering (Amendment) Bill that integrates virtual asset service providers into the country’s anti-money laundering laws but stops short of establishing a standalone operational regulatory framework for these entities.
The bill introduces and updates several definitions, including “beneficial ownership”, “criminal property”, “computer data”, “virtual asset”, and “virtual asset service provider”.
A virtual asset is referred to as a digital representation of value that can be digitally traded or transferred and used for payment or investment purposes.
Virtual asset service providers are any persons who provide, administer, manage or conduct one or more of the following activities or operations on behalf of another person: exchange between virtual assets and fiat currencies; exchange between one or more forms of virtual assets; transfer virtual assets; safekeep or administer virtual assets or instruments that enable control over virtual assets; and participate in and provide financial services related to an issuer’s offer or sale of a virtual asset.
The amendment updates the definition of an “unlawful activity” to include offences committed under any written law relating to cybercrime, blockchain technology, virtual assets, or virtual asset service providers.
By classifying these as unlawful activities, any property or proceeds derived from illegal operations involving virtual assets or their service providers can be formally prosecuted as a money laundering offence, and such assets can be subject to freezing and forfeiture.
The 2026 Prevention of Money Laundering (Amendment) Bill expands the scope of the money laundering offence to include anyone who uses, purchases, transfers or acquires “beneficial ownership” of property derived from unlawful activities. It introduces a comprehensive definition for “beneficial ownership” to the Act’s interpretation section, as the term was not explicitly in the original 2006 Act.
Under the new definition, “beneficial ownership” refers to the ownership or control of an entity, trust, or other legal arrangement by a natural person.
The bill has increased penalties and fines, including for failure to disclose information regarding properties connected to money laundering (up from Rs 50,000 to Rs 500,000). The fine for divulging information about ongoing money laundering investigations to prejudice the case is increased from Rs 100,000 to Rs 1 million. The punishment for violating a freezing order is increased to a maximum fine of Rs 5 million and up to two years of imprisonment. Maximum penalties for other offences, such as falsifying documents, are increased to fines of up to Rs 5 million and imprisonment for up to three years.
Once enacted, the law will allow Police to use special investigation techniques, including surveillance, undercover operations, video recording, listening devices, controlled deliveries and accessing computer systems. The Sri Lanka Police can also establish joint investigation teams with authorities in other jurisdictions.
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