December 09, Colombo (LNW): Sri Lanka has made remarkable progress in the global fight against money laundering and terrorist financing, earning a place among the top ten countries showing the greatest improvement, according to the latest 13th Basel Anti-Money Laundering (AML) Index for 2024.

The country achieved an impressive 27 per cent enhancement in its efforts to tackle financial crime, as evidenced by the substantial reduction in its risk score, which fell from 5.42 in 2023 to 5.28 this year.

This improvement has moved Sri Lanka up the rankings, with the nation now sitting at 80th place among 164 jurisdictions, compared to 62nd in the previous year’s assessment, which included 152 countries.

This notable shift highlights Sri Lanka’s ongoing commitment to strengthening its anti-money laundering (AML) and counter-terrorist financing (CFT) frameworks.

Sri Lanka’s success in these areas reflects the positive outcomes of its recent reforms.

The Basel Index, which is a comprehensive, data-driven tool assessing global risks related to money laundering and financial crimes, recognises the significant strides made by countries that were once regarded as high-risk due to insufficient technical compliance with international standards.

Sri Lanka, which had previously been grey-listed by the Financial Action Task Force (FATF), is now widely seen as an example of how such designations can serve as a catalyst for necessary and transformative changes.

The Basel Index evaluates countries across five key domains that are critical in understanding money laundering risks: corruption, financial secrecy, public transparency, the effectiveness of AML/CFT measures, and overall governance.

These areas are assessed through data collected from 17 publicly available sources, allowing the Basel Institute on Governance to determine risk scores for each country.

Following its removal from the FATF’s grey list, Sri Lanka has made continued progress in aligning with FATF’s rigorous standards. The latest ranking confirms that Sri Lanka is not only a leader in South Asia but also stands out globally for its enhanced compliance efforts.

Notably, Sri Lanka remains the only South Asian nation to score above the global average in the Basel Index, even though both India and Nepal have been included in this year’s Public Edition due to improved data availability.

However, despite Sri Lanka’s positive strides, the broader South Asian region still faces significant challenges in several key areas. The report noted that issues related to public transparency and accountability remain a concern across the region, with the average regional scores in these areas still trailing behind the global average.

Globally, the 2024 report also highlighted a troubling trend in the Domain 2 category, which assesses corruption and fraud.

The risk scores for this domain rose from 5.02 in 2023 to 5.12 in 2024, a reflection of changes in both the inclusion of new fraud-related indicators and shifting performances on existing corruption and bribery metrics.

High-income nations with major financial hubs, such as New Zealand, Switzerland, and Singapore, were particularly affected by this increase, as nearly 44 per cent of countries saw higher risk scores in this domain.

Nevertheless, Sri Lanka emerged as one of the countries benefiting from the revision of indicators in Domain 2. Approximately half of the countries, including Sri Lanka, saw lower risk scores, positioning the island nation among the top twenty beneficiaries of this methodology change.

Looking ahead, Sri Lanka’s improved standing in the Basel Index provides a strong foundation for its upcoming Mutual Evaluation (ME) in 2025.

By: Staff Writer

December 08, Colombo (LNW): Sri Lanka Customs is set to launch a motor vehicle verification system to combat fraudulent vehicle imports and safeguard the country from revenue loss.

By accessing the Customs website and entering a vehicle’s chassis number, users can verify if the vehicle was legally imported.

This initiative aims to restore public confidence in vehicle transactions and address a significant tax evasion scandal.

The system’s introduction follows the discovery of a major fraud involving over 200 luxury vehicles.

These vehicles were falsely registered in the Motor Traffic Department (MTD) database as having been imported before 2005 to evade customs duties.

The scam, which involved high-end models like Jeeps, Land Cruisers, and Monteros, has caused the government an estimated loss of Rs. 3 billion in unpaid taxes.

The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) initiated an investigation after receiving a tip-off about 400 vehicles registered without paying duties. Customs records for 51 of these vehicles were missing, prompting immediate legal action.

 On April 5, 2024, Colombo Chief Magistrate Prasanna de Alwis issued an interim order suspending ownership changes of the 51 vehicles in question.

At a press conference, Customs Media Spokesman Additional Director General Seevali Arukgoda highlighted the benefits of the new system.

 Users will be able to verify vehicle import details from anywhere in the world, ensuring transparency and reducing fear among buyers about unknowingly purchasing illegally imported or assembled vehicles.

Additionally, Customs has implemented a new data and tracking system to facilitate smoother import-export processes. The system enables importers to track the location of containers worldwide, addressing congestion and inefficiencies in customs clearance.

Legal action has been swift, with the Colombo Chief Magistrate’s Court issuing summons to six individuals, including a Deputy Commissioner of the Motor Traffic Department, a software developer, clerks involved in vehicle registration, and two importers.

They face charges under the Anti-Corruption Act of 2023, the Bribery Act of 1994, and the Customs Ordinance. Twenty seized vehicles have been handed over to Customs for further investigation.

The fraudulent activity reportedly stems from a loophole exploited during the pre-2021 period, before the government imposed a vehicle import ban due to the economic crisis. With restrictions on imports set to be lifted in February 2025, concerns about systemic vulnerabilities persist.

 CIABOC has pledged to take strict legal action to address the financial losses and ensure accountability.

Investigations into the remaining 349 vehicles continue, with the Bribery Commission working to bring all perpetrators to justice. Sri Lanka Customs hopes that the new verification system and stricter monitoring will prevent future incidents of corruption and bolster the integrity of the import-export process.

By: Staff Writer

December 08, Colombo (LNW): The Sri Lankan government is preparing a comprehensive relief scheme targeting small and medium enterprises (SMEs) as a suspension of parate executions (foreclosures) ends on December 15.

Deputy Finance Minister Harshana Suriyapperuma revealed that the government, in collaboration with the Central Bank, is devising mechanisms to support SMEs in financial distress.

Speaking in Parliament, Suriyapperuma noted that the administration has analyzed debt data to assess the scale and nature of SME challenges. “We are finalizing a system to deliver maximum benefits to the largest number of SMEs, which will soon be submitted to the Cabinet for approval,” he said.

The analysis revealed that many bad loans date back over five years, including those incurred before the 2019 Easter Sunday bombings and during subsequent economic crises.

The country has provided multiple debt moratoria in the past, starting after the Easter Sunday attacks, followed by relief during the pandemic and the economic fallout from the currency collapse.

However, SMEs have continued to face difficulties due to reduced consumer demand, inflation, high production costs, and elevated interest rates.

The government is prioritizing SME relief through high-level discussions involving the Finance Ministry, Central Bank, and commercial banks.

The President’s Media Division (PMD) reported that a meeting chaired by Senior Additional Secretary for Finance and Economic Affairs G.N.R.D. Aponsu explored ways to support SMEs as the temporary suspension of debt recovery nears expiration.

The meeting also considered preparing a comprehensive report on SME loans to guide future relief measures.

Central Bank and commercial banks are reviewing options for extending the temporary suspension of parate executions.

This comes as SMEs, which account for 70% of Sri Lanka’s 1.3 million businesses and over 50% of GDP, struggle for survival. Many are burdened with unprecedented levels of debt, leading to operational shutdowns and financial crises.

According to former State Finance Minister Shehan Semasinghe, the 2024 budget proposal has allocated Rs. 50 billion for SME rehabilitation, emphasizing their importance to the national economy.

Of this, Rs. 30 billion will support SME recovery, while Rs. 50 million will be used to establish a facilitating institution under the Ministry of Finance in January. Another Rs. 50 million is earmarked for subsidized financial facilities to alleviate high borrowing costs.

However, Mahendra Perera, President of the National Trade Protection Council, cautioned that many SMEs are trapped in debt from earlier low-interest loans. He stressed the need for clear criteria in selecting eligible SMEs for the new relief scheme, noting past misuse of financial facilities. Perera also highlighted the impact of debt moratoria, which accrued interest on interest, leaving many SMEs vulnerable to parate executions.

The government’s new measures aim to balance SME recovery with prudent financial management, providing much-needed relief to stabilize Sri Lanka’s economy.

By: Staff Writer

December 08, Colombo (LNW): Sri Lanka’s government plans to introduce new legislation aimed at combating financial crimes and modernizing its legal framework. Recognizing the need for updated laws in a rapidly evolving financial system, the government is taking proactive measures to align with global regulatory standards.

Justice and National Integration Minister Harshana Nanayakkara announced the government’s intent to present three significant Bills in Parliament early next quarter. These include the Proceeds of Crime Bill, the Rescue, Rehabilitation, and Insolvency Bill, and amendments to the Audit Act.

“These laws are critical for reinforcing the integrity of our financial systems, ensuring economic stability, and promoting fairness for both creditors and debtors,” Nanayakkara stated during an adjournment debate on the President’s policy statement.

The Proceeds of Crime Bill is a key component of this legislative effort, targeting financial and criminal misconduct. It aims to trace and recover stolen assets, deter money laundering, and curb proceeds from drug trafficking and other crimes.

The Rescue, Rehabilitation, and Insolvency Bill seeks to modernize insolvency laws, boost creditor confidence, and protect debtor rights by establishing a framework for financial recovery and business stability.

Meanwhile, amendments to the Audit Act focus on promoting transparency and trust in Sri Lanka’s financial ecosystem.

“These reforms are not only about recovering stolen assets but also about creating deterrents for future financial crimes,” Nanayakkara emphasized, adding that they would bolster economic stability and align the country with global best practices.

The government has long prioritized combating financial crimes, particularly in light of the country’s history of addressing terrorist financing. Over the years, Sri Lanka has implemented measures to strengthen its financial regulations and is now collaborating with the Financial Action Task Force (FATF) to enhance laws and prevent such crimes further.

While significant progress has been made, challenges remain. Ensuring robust financial inclusion at the grassroots level while maintaining global compliance standards is a delicate balance. The government acknowledges the importance of integrating with the global financial architecture to provide accessible finance to all sectors of society.

The proposed Bills are expected to enhance Sri Lanka’s legal arsenal for tackling financial crimes and securing economic justice.

 As the government continues to amend existing regulations, it remains focused on building a resilient financial system capable of withstanding evolving challenges. Nanayakkara highlighted that staying ahead of financial crime trends is essential but demanding, requiring ongoing adaptation and vigilance.

 By implementing these legislative reforms, Sri Lanka aims to strengthen its legal and economic framework, ensuring a fair and transparent financial system while fostering global trust and economic stability.