Financial Crime World

Title: Sri Lanka’s Financial Intelligence Unit Releases 2021/22 National Risk Assessment Report on Money Laundering and Terrorist Financing

Overview

The Financial Intelligence Unit (FIU) of Sri Lanka, in collaboration with the Central Bank of Sri Lanka and various public and private sector stakeholders, has published a report on Money Laundering and Terrorist Financing (ML/TF) threats and vulnerabilities in the country.

Key Findings

  • Sri Lanka faces several ML/TF risks and vulnerabilities.
  • Extensive trade sector provides opportunities for ML activities.
  • Real estate sector is another significant ML/TF risk area.
  • Some financial institutions lack adequate systems and controls.
  • Charities and non-profit organizations could be used as covers for ML/TF.
  • Hawala and other informal value transfer systems pose ML/TF risks.
  • Potential risks of ML/TF being used to fund terrorist activities.

Noteworthy Risks

1. Trade-based money laundering

  • Extensive trade sector provides opportunities for ML activities.
  • Cash transactions are commonplace, with lack of regulatory oversight in some sectors.

2. Proceeds of crime in real estate

  • Few checks in place to prevent proceeds of crime from being invested in real estate.

3. Financial institutions

  • Despite improvements, some financial institutions lack adequate systems and controls to detect and prevent ML/TF.

4. Charities and non-profit organizations

  • Complex sector with lack of regulatory oversight poses ML/TF risks.

5. Hawala and other informal value transfer systems

  • Lack transparency makes these systems ML/TF risks.

6. Connection to terrorism financing

  • Potential risks of ML/TF being used to fund terrorist activities in the region.

Recommendations

  • Enhance regulatory oversight.
  • Strengthen financial institutions’ anti-ML/TF measures.
  • Promote public awareness.
  • Collaborate with international partners to prevent cross-border ML/TF.

Progress and Challenges

  • Implementation of a new AML/CFT law.
  • Use of technology for risk assessment and detection.
  • Increased public-private sector collaboration.
  • Challenges include addressing the extensive use of cash transactions and lack of regulatory oversight in some sectors.

International Attention

  • Significant international attention on ML/TF risks in the region.
  • Financial Action Task Force (FATF) to review Sri Lanka’s progress later this year.