Financial Crime World

Sri Lanka’s Economic Crisis Fuels Surge in Financial Crimes

In the midst of a political and economic crisis, Sri Lanka is facing a broad destabilizing effect on the country. Here are the main challenges and illicit activities that have emerged as a result of the economic stress:

The Widening Impact of the Crisis

  • Challenges to food security
  • Issues with law and order

A Surge in Financial Crimes

Despite these challenges, financial crimes have become a significant concern in Sri Lanka. Desperate individuals and organized crime groups are seeking to exploit vulnerabilities within the country’s financial system:

  1. Banking fraud: Over 1,200 cases reported between January and September 2022, an increase of over 50% compared to the same period the previous year. The total value of these cases amounted to nearly US$35 million.

  2. Money laundering: The Financial Action Task Force (FATF) has warned that Sri Lanka’s anti-money laundering and counter-terrorist financing frameworks are inadequate.

  3. Embezzlement: Corruption pervades various branches of government and state-owned enterprises.

Identified Issues

  • Central Bank of Sri Lanka reports over 1,200 cases of banking fraud
  • Money laundering concerns and inadequate frameworks
  • Embezzlement of public funds in various government institutions

The Global Response

Despite the challenges, there are signs of progress in combating financial crimes in Sri Lanka:

  • Government formation of a special task force to investigate banking fraud
  • Central Bank implementation of new regulations to strengthen the financial sector
  • FATF recognition of Sri Lanka’s efforts to improve its anti-money laundering and counter-terrorist financing frameworks

Ongoing Efforts

  • The Global Initiative Against Transnational Organized Crime is closely monitoring the situation and will continue to provide updates as developments unfold.

Summary

In summary, the economic crisis in Sri Lanka has led to a surge in financial crimes such as banking fraud, money laundering, and embezzlement. The country’s anti-money laundering and counter-terrorist financing frameworks are currently inadequate, and corruption remains a significant issue. However, there are indications of progress, and ongoing efforts are being made to combat financial crimes and restore stability to the country’s economy and society.