By: Staff Writer
April 04, Colombo (LNW): Sri Lanka is actively preparing for its third Mutual Evaluation (ME) of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework, scheduled for March 2026. The evaluation, conducted by the Asia/Pacific Group on Money Laundering (APG), will assess Sri Lanka’s technical compliance with the 40 recommendations issued by the Financial Action Task Force (FATF) and its effectiveness in implementing them.
In March 2025, a high-level APG delegation visited Sri Lanka to evaluate the country’s readiness and provide guidance ahead of the ME. The team included Mr. Mitsutoshi Kajikawa, APG Co-Chair from Japan’s Ministry of Finance, Ms. Mitali Tyagi from the APG Secretariat, and Mr. Takahiro Yamasaki, a Japanese counter-illicit finance official. They engaged with top officials including the Central Bank Governor, who also chairs the National Coordinating Committee on AML/CFT.
The APG, a regional body under the FATF, aims to ensure global adherence to standards that combat money laundering, terrorism financing, and proliferation of weapons of mass destruction. Member countries are required not only to comply with 40 FATF recommendations but also to demonstrate success across 11 “Immediate Outcomes,” which measure implementation.
Currently, 24 public institutions, financial bodies, and non-financial businesses are engaged in Sri Lanka’s AML/CFT operations, with the Financial Intelligence Unit (FIU) playing a leading role. The country has already started implementing institution-specific action plans to address previous evaluation gaps and recommendations based on its 2021/2022 National Risk Assessment.
The Central Bank has outlined steps to strengthen AML/CFT compliance through enhanced risk-based inspections of banks under the Financial Transactions Reporting Act (FTRA). A reconstituted AML/CFT Task Force, formed in December 2024, will guide implementation efforts until the evaluation concludes in July 2027.
Sri Lanka is under pressure to introduce new legislation and regulatory reforms to address identified gaps and align with international standards. A failure to do so could result in the country being grey-listed by FATF again. Grey-listing leads to significant economic setbacks, such as reduced investor confidence, higher compliance costs, and barriers to accessing global financial markets.
Sri Lanka was grey-listed in 2010, again in 2017, and only removed from the list in 2019 after corrective actions. The FIU is currently drafting amendments to three critical laws and contributing to legislative changes in company ownership disclosure to support AML/CFT goals. It also plans to update the National Risk Assessment in 2025, incorporating emerging threats like tax-related crimes and proliferation financing.
Furthermore, to enhance international collaboration, the FIU is expanding its network of Memoranda of Understanding (MOUs) with both domestic and foreign agencies. It also aims to boost stakeholder awareness to ensure effective AML/CFT practices, which are vital to national security, economic stability, and governance.
The International Monetary Fund (IMF), as part of its $3 billion bailout package, has strongly urged Sri Lanka to meet AML/CFT benchmarks to curb corruption and illicit financial flows. Failure to comply could see the country once again face reputational and financial consequences on the global stage.
