Sri Lanka is seeking to strengthen its financial crime defences after a new national review highlighted emerging threats from terrorist financing, digital financial channels and global proliferation risks.
The latest National Risk Assessment, completed by the Financial Intelligence Unit, examined the country’s vulnerabilities to money laundering, terrorist financing and proliferation financing.
The assessment, which involved 86 institutions and nearly 200 experts, represents the most extensive national review yet of Sri Lanka’s financial crime landscape.
Officials say the initiative was conducted under the guidance of the National Coordinating Committee on Anti‑Money Laundering and Countering the Financing of Terrorism and analysed risks across 15 core sectors.
For the first time, the review included a national assessment of proliferation financing the funding of activities linked to weapons proliferation reflecting growing international concern over such financial networks.
The report concluded that Sri Lanka’s proliferation financing risk currently stands at a medium level, shaped by a challenging global environment and domestic regulatory vulnerabilities.
Terrorist financing risks were assessed as medium-high, marking an increase from the previous medium rating.
Investigators attribute this shift to evolving extremist and separatist networks, as well as the potential influence of diaspora funding, online radicalisation and cross-border financial flows.
Emerging financial technologies are also becoming part of the risk equation.The assessment identified vulnerabilities linked to virtual assets and virtual asset service providers an area receiving growing attention from financial regulators worldwide.
Although the risk associated with these platforms was rated between low and medium, authorities say monitoring digital financial channels will become increasingly important as technology reshapes financial transactions.
The study also examined risks associated with legal entities and ownership structures.
Money laundering risks related to legal persons were rated medium-high, highlighting the importance of transparency around beneficial ownership to prevent shell companies being used to conceal illicit financial flows.
In contrast, risks associated with non-profit organisations, financial inclusion products and certain financial services were rated between low and medium.
Experts say these findings illustrate the delicate balance policymakers face between expanding financial inclusion and preventing financial systems from being exploited by criminal networks.
The report recommends stronger institutional coordination and more targeted regulatory oversight to address these challenges.
Authorities have already outlined plans to update Sri Lanka’s national anti-money laundering and counter-terrorism financing strategy for the 2026–2030 period.
Financial institutions and other organisations governed by the Financial Transactions Reporting Act No. 6 of 2006 have also been advised to integrate the report’s findings into their internal risk assessments.
Analysts say the next phase of reforms will determine how effectively Sri Lanka can align its regulatory framework with global standards while safeguarding financial stability.
With financial crimes becoming more sophisticated and increasingly digital, maintaining strong monitoring systems and international cooperation will remain central to protecting the country’s financial sector.