Sri Lanka’s new government under President Anura Kumara Dissanayake is intensifying efforts to implement effective anti-money laundering and combating the financing of terrorism (AML/CFT) measures to safeguard the country’s economic recovery and financial stability.
These policies aim to combat money laundering (ML), terrorist financing (TF), and related crimes that undermine the integrity of the international financial system and pose threats to the domestic financial sector.
The country faces significant risks of being grey-listed by the Financial Action Task Force (FATF) for a third time, which could severely impact foreign direct investment (FDI), access to global markets, and overall economic confidence.
In response, the government has prioritized compliance with FATF recommendations to prevent destabilizing outcomes such as reduced investor trust, increased compliance costs, and possible credit rating downgrades.
In a key meeting led by President Anura Kumara Dissanayake, officials from the Central Bank’s Financial Intelligence Unit (FIU) presented action plans involving 24 institutions, emphasizing legal reforms, capacity building, and enhanced inter-agency collaboration.
The government has directed the formation of dedicated teams to monitor progress, ensure accountability, and secure favorable evaluations during the next FATF review in March 2025.
The urgency stems from Sri Lanka’s prior experiences with FATF grey-listing. The country was first grey-listed in 2010 but managed to comply with required reforms and was delisted in 2013 under an International Monetary Fund (IMF) program.
However, it was grey-listed again in 2017 before being removed in 2019 following efforts by the Central Bank and other institutions. Failure to act now could result in being grey-listed once more, with potentially severe repercussions for financial stability and economic recovery.
The IMF has tied its US $3 billion bailout package to Sri Lanka’s compliance with AML/CFT measures, making it imperative for the government to address issues such as bribery, corruption, and weak governance.
The recent economic crisis, which led to widespread protests and the ousting of former President Gotabaya Rajapaksa, has underscored the importance of robust financial systems to prevent such instability in the future.
The Central Bank’s FIU has been tasked with ensuring comprehensive adherence to international AML/CFT standards, including maintaining detailed records and fostering stronger coordination between regulatory bodies and law enforcement agencies.
These efforts are crucial not only for financial stability but also for restoring international confidence in Sri Lanka’s economy.
In addition to preventing grey-listing, the government’s reforms aim to position the country as a compliant and trustworthy player in the global financial system.
President Dissanayake has emphasized the need for robust measures to counter the economic effects of ML and TF crimes, protect financial markets, and maintain external stability. With a clear focus on legal, institutional, and operational reforms, Sri Lanka seeks to avoid reputational damage and bolster its chances of long-term economic recovery
