Sri Lanka is bracing for a pivotal moment in its financial regulatory landscape as it prepares for its third Mutual Evaluation on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). This assessment, coordinated by the Asia Pacific Group on Money Laundering (APG), will determine the country’s compliance with international standards set by the Financial Action Task Force (FATF). With global scrutiny intensifying, Sri Lanka’s ability to meet these standards will have far-reaching implications for its economy, foreign investment prospects, and international reputation.
The Stakes Are High: What’s at Risk?
The upcoming Mutual Evaluation is not just a routine check—it’s a litmus test for Sri Lanka’s commitment to combating financial crimes. The country must demonstrate technical compliance with FATF’s 40 recommendations and prove the effective implementation of these measures through 11 immediate outcomes. Failure to meet these benchmarks could result in Sri Lanka being placed back on FATF’s “grey list,” a designation that carries significant economic consequences.
Being grey-listed can deter foreign investment, increase the cost of international transactions, and damage the country’s credibility in global financial markets. For a nation already grappling with economic challenges, the stakes couldn’t be higher.
Government Steps Up: A Comprehensive Action Plan
Recognizing the gravity of the situation, the Sri Lankan government has taken proactive steps to address regulatory gaps and strengthen its AML/CFT framework. The Cabinet of Ministers has approved a detailed action plan aimed at rectifying deficiencies and ensuring compliance with international standards. This plan has been disseminated across key institutions, including:
- Attorney General’s Department
- Sri Lanka Police
- Sri Lanka Customs
- Commission to Investigate Allegations of Bribery or Corruption
- Ministry of Justice
- Ministry of Defence
- Ministry of Foreign Affairs
- Ministry of Finance
- Department of the Registrar of Companies
- Inland Revenue Department
- Department of Excise
- Legal Draftsman’s Department
- Registrar General’s Department
- Securities and Exchange Commission of Sri Lanka
- Insurance Regulatory Commission of Sri Lanka
- Construction Industry Development Authority
- National Gem and Jewellery Authority
- National Secretariat for Non-Governmental Organisations
- Department of Import and Export Control
This multi-agency approach underscores the government’s commitment to creating a robust and cohesive AML/CFT framework.
High-Level Task Force Takes the Lead
To oversee these efforts, the government has reconstituted a high-level AML/CFT Task Force, initially established in 2023. The task force, now operating under the direction of President Anura Kumara Dissanayake, includes top-tier ministerial representation and is chaired by Justice Buwaneka Aluwihare, PC – a retired Judge of the Supreme Court. Other key members include:
- Justice Minister Harshana Nanayakkara
- Labour Minister and Economic Development Deputy Minister Prof. Anil Jayantha Fernando
- Finance and Planning Deputy Minister Dr. Harshana Suriyapperuma
- Central Bank Senior Deputy Governor Dr. Nelumani Daulagala
- Finance, Planning, and Economic Development Ministry Additional Director General A.K.D.D.D. Arandara
At its inaugural meeting on 29 January, the task force emphasized the strategic importance of the Mutual Evaluation and called for full cooperation from all stakeholders. The goal is clear: to ensure Sri Lanka passes this critical assessment with flying colors.
Why This Evaluation Matters
The Mutual Evaluation is more than just a compliance exercise—it’s a reflection of Sri Lanka’s commitment to transparency, accountability, and good governance. By adhering to FATF’s recommendations, the country can:
- Boost Investor Confidence: A strong AML/CFT framework reassures foreign investors that Sri Lanka is a safe and reliable destination for their capital.
- Facilitate International Trade: Compliance with global standards reduces the risk of transactional delays and enhances the ease of doing business.
- Combat Corruption: Strengthening AML/CFT measures is a critical step in the fight against corruption, which has long plagued Sri Lanka’s economy.
- Protect Financial Systems: Effective AML/CFT frameworks safeguard the integrity of the financial system, preventing it from being exploited by criminals and terrorists.
Challenges Ahead
While the government’s efforts are commendable, challenges remain. Sri Lanka’s AML/CFT framework has historically faced criticism for weak enforcement and regulatory gaps. Addressing these issues requires not just legislative changes but also a cultural shift towards greater accountability and transparency.
Moreover, the sheer complexity of coordinating efforts across multiple agencies poses a significant challenge. Ensuring seamless collaboration and information sharing will be critical to the success of the action plan.
The Road Ahead
As Sri Lanka prepares for the Mutual Evaluation, the focus must be on sustained and coordinated action. The government’s action plan and the reconstituted task force are positive steps, but their success will depend on effective implementation and unwavering commitment from all stakeholders.
The international community will be watching closely, and the outcome of this evaluation will have far-reaching implications for Sri Lanka’s economic future. By rising to the occasion, Sri Lanka can not only avoid the grey list but also position itself as a leader in the fight against financial crime.
Conclusion
Sri Lanka’s upcoming Mutual Evaluation on AML/CFT is a defining moment for the country. With global scrutiny intensifying, the government’s proactive measures and high-level task force demonstrate a clear commitment to meeting international standards. However, the road ahead is fraught with challenges, and success will require sustained effort, collaboration, and transparency.
By passing this critical assessment, Sri Lanka can strengthen its financial systems, attract foreign investment, and enhance its global reputation. The stakes are high, but so are the potential rewards. The world is watching, and Sri Lanka has the opportunity to prove its mettle on the global stage.
