Financial Crime World

SRI LANKA’s KYC Procedure: A Closer Look

Understanding the Regulations Surrounding Customer Due Diligence in Sri Lanka

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As countries around the world strengthen their financial regulations, the importance of knowing your customer has never been greater. In this article, we will explore the specifics of the KYC (Know Your Customer) procedure in Sri Lanka, its requirements, and the repercussions of non-compliance.

Introduction

The Know Your Customer (KYC) procedure is an essential part of financial regulations designed to mitigate money laundering, terrorist financing, and other financial crimes. This article delves into the details of the KYC procedure in Sri Lanka and its implications for financial institutions.

Background: International Regulations and Sri Lanka

  • Establishment of the Financial Action Task Force (FATF)
  • FATF Recommendation No. 19: Customer due diligence
  • Sri Lanka’s KYC regulations through the Central Bank of Sri Lanka (CBSL)

Sri Lanka’s KYC Regulations

The Central Bank of Sri Lanka (CBSL) has implemented the following key aspects related to the KYC procedure:

  1. Identification and Verification: Financial institutions must identify and verify the identity of their customers using valid identification documents such as a passport, national identity card, or driver’s license.
  2. Ongoing Monitoring: Financial institutions must monitor transactions of their customers, scrutinize any unusual activities, and report suspicious transactions to the authorities.
  3. Risk assessment: Financial institutions must assess the potential risks associated with their customers and transactions based on their customer risk profile, transaction history, and other relevant factors.
  4. Record keeping: All customer information and supporting documents must be kept for a minimum of 5 years.

Penalties for Non-compliance

Non-compliance with the KYC procedure in Sri Lanka carries severe consequences for financial institutions:

  1. Criminal Offenses: Non-compliance can lead to criminal offenses under the Money Laundering (Prohibition) Act No. 48 of Sri Lanka.
  2. Monetary Penalties: The CBSL can impose monetary penalties on non-compliant financial institutions. The penalty amount depends on the severity of the violation.
  3. Suspension or revocation of licenses: Serious violations can result in the suspension or revocation of a financial institution’s license to operate.

Conclusion and Call-to-Action

The KYC procedure is a vital aspect of financial regulations worldwide. In Sri Lanka, financial institutions must adhere to the Central Bank of Sri Lanka’s KYC regulations. Failure to do so may result in severe penalties, including criminal offenses, monetary penalties, and the suspension or revocation of licenses. By implementing robust KYC policies and procedures, regularly reviewing and updating them, and investing in technology and training, financial institutions in Sri Lanka can effectively protect themselves and contribute to global efforts to combat financial crimes.

References

  • FATF (Financial Action Task Force)
  • Central Bank of Sri Lanka (CBSL)
  • Money Laundering (Prohibition) Act No. 48 of Sri Lanka.