Financial Crime World

Financial Crimes in Focus: Understanding Money Laundering and Terrorist Financing in Sri Lanka

In the intricate web of financial transactions, it’s essential to recognize the significance of money laundering and terrorist financing. These illicit activities, including their existence in Sri Lanka, pose significant challenges to nations worldwide.

Understanding Money Laundering and Terrorist Financing

  1. Money Laundering: The concealment of criminal origin of funds through legitimate channels.
  2. Terrorist Financing: The process of supporting terrorism through financial means while hiding the source and purpose.

Money Laundering: Stages and Processes

Stages

  1. Placement: Introduce criminal proceeds into the financial system.
  2. Layering: Disguise criminal origin through various financial transactions.
  3. Integration: Invest in legitimate assets or businesses, merging the funds into the lawful economy.

Processes

  1. Civilian Involvement: People launder money for a fee.
  2. Money Service Businesses: Transmit or exchange funds domestically/internationally.
  3. Financial Institutions: Facilitate banking transactions.
  4. Professional Services: Provide legal, accounting, registration services, and real estate services.
  5. Casinos: Launder money through gambling.
  6. Smuggling: Illicitly transport goods and money across borders.
  7. Trade Based Money Laundering: Use international trade to conceal origin of funds.

Terrorist Financing

While money laundering aims to conceal criminal origin, terrorist financing obscures both the origin and the intended usage of funds. Both illegal activities pose grave threats to national and international security.

The Role of Financial Intelligence Unit (FIU)

Sri Lanka’s Financial Intelligence Unit (FIU) is the central body accountable for:

  1. Receiving suspicious transaction reports.
  2. Analyzing information related to money laundering, related predicate offenses, and terrorist financing.
  3. Disseminating relevant information to appropriate law enforcement agencies.
  1. Conventions on the Suppression of Terrorist Financing Act No 25 of 2005 (CSTFA)
  2. Prevention of Money Laundering Act No 5 of 2006 (PMLA)
  3. Financial Transactions Reporting Act No. 6 of 2006 (FTRA)
  4. Amendments to the CSTFA, PMLA, and FTRA

Predicate Offenses and Penalties

  • Predicate Offenses: Underlying crimes generating proceeds.
  • Penalties: Fines equal to or more than the value of the property involved, imprisonment for a minimum of five years, and maximum of twenty years.
  • Asset Forfeiture: Forfeiture of assets derived from or involved in money laundering.

Collaboration with FATF and APG

  1. Financial Action Task Force (FATF): Global organization promoting policies and recommendations to combat money laundering and terrorist financing.
  2. Asian Pacific Group on Money Laundering (APG): APG’s counterpart for the Asian Pacific region, working towards similar goals.