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Sri Lanka's ML/TF Risks: Extensive Trade, Real Estate, Finances

· 2 min read
Natalie Santiago
Anti-Bribery Specialist

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.