Sri Lanka’s central bank has identified informal money remitters who transfer money through hawala and undiyal possessing high-risk in the island nation’s money laundering activity, while real estate agents, banking sector, and finance companies are identified as possessing medium high risk, a report showed.
The Financial Intelligence Unit (FIU) under the Central Bank of Sri Lanka in its latest Sanitized Report of the Second National Risk Assessment (NRA) on Money Laundering and Terrorism Financing (ML/TF) said the overall money laundering terrorist finance risk for the country was assessed as Medium.
Sri Lanka has identified money laundering as one of the key issues that has led to deprive tax revenue to the government. Government officials say the recent tax hikes in line with the IMF conditions for a $3 billion loan has not raised the tax income as expected.
The assessment highlights the most significant ML/TF threats, vulnerabilities, and risks faced by Sri Lanka.
“The NRA is an important step for any jurisdiction to identify, assess and understand its threats and vulnerabilities exposing the country to ML/TF risks and the offences generating the most proceeds of crime,” the Central Bank said in a statement.
“This Assessment is an important resource available to both the public and the private sectors to understand the current illicit finance environment and to educate them of risk mitigation strategies.”
“Further, by better understanding the current risk environment, respective stakeholders, from now onwards can effectively allocate more resources to the high-risk areas to safeguard the integrity of Sri Lanka’s financial system.”
The NRA has identified Drug Trafficking, Bribery and Corruption, Customs related Offences including Laundering of Trade-Based Proceeds, as the most prevalent predicate offences, where ML threat was rated as medium high.
Fraud, Robbery, Environmental and Natural Resource Crimes recorded as having a medium level of ML threat. Human Smuggling/Trafficking, Tax Offences, Illegal, Unreported and Unregulated Fishing related unlawful activities were assessed as having a medium low ML threat while lower ML threat was observed for Counterfeiting of Currency, it said.
Analysts say Sri Lankan authorities are jointly working with the IMF and World Bank to minimise these risks and raise the government’s tax revenue as well as improve the doing business index to attract more foreign investment into the country.
The island nation declared sovereign debt default last year after facing an unprecedented economic and debt crisis.
The central bank said some of the recommendations made in the NRA includes bringing necessary amendments to relevant laws, introduction of new laws, strengthening institutional framework, capacity building for investigators, prosecutors, judiciary, supervisors and increasing supervision of Designated Non-Finance Businesses and Professions, such as Real Estate Agents, Dealers in Precious Metals and Stones, Casinos, Accountants and Lawyers.
“Further, the need for development of comprehensive databases and taking actions to expedite the prosecutions and convictions on ML/TF were also identified, while improving the interagency co-operation in the fight against ML/TF, was also recommended,” it said.
The assessment covers the period from 2016-2022 and relevant data and statistics were sourced from all stakeholder agencies, some of which were represented in the core working groups. Sri Lanka received technical assistance and the tool kit from the World Bank to carry out the NRA. (Colombo/September 14/2023)