CBSL Chief urges banks to tighten controls as SL prepares for critical AML/CFT review

Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe urged the banking sector to prepare for Sri Lanka’s third Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) framework evaluation, warning that a negative listing in the assessment could severely undermine the country’s economic progress.

The evaluation, coordinated by the Asia/Pacific Group on Money Laundering (APG), is set to commence in the country in March 2026.

Given Sri Lanka’s active role in the APG, Dr. Weerasinghe stressed that a ‘Grey Listing’ by the regional intergovernmental organisation could have serious financial repercussions for the country.

These include negative impacts on the country’s correspondent banking relationships, increased global scrutiny on Sri Lankan customers, higher borrowing costs, and severe reputational damage.

“Given this situation, Sri Lanka has to showcase a strong performance based on a high level of technical compliance and effectiveness at the upcoming evaluations,” Dr. Weerasinghe said.

He made these remarks at the Compliance Symposium 2025, organised by the Association of Compliance Officers of Banks in Sri Lanka (ACOB) in Colombo this week.

Sri Lanka had already undergone two AML/CFT assessments in 2006 and 2014, both of which resulted in the country being labelled as a ‘jurisdiction with strategic deficiencies,’ which, according to Dr. Weerasinghe, led to significant economic and financial repercussions for the country.

To support Sri Lanka’s preparation for the upcoming Mutual Evaluation, he announced that renowned international AML/CFT expert Dr. Gordon Hook will conduct a mock evaluation in March 2025 to assess stakeholder preparedness.

President Anura Kumara Dissanayake, along with other senior authorities in Sri Lanka’s anti-money laundering task force, will be briefed on the mock evaluations by a high-level APG delegation, led by the Japanese Co-Chair, expected to visit Sri Lanka next month.

“In this effort, banks will have a major role to play by improving risk control mechanisms to prudent levels and ensuring high compliance levels in detecting and reporting high-quality suspicious transactions,” Dr. Weerasinghe said.

He went on to highlight several key initiatives undertaken by the Financial Intelligence Unit (FIU) of the Central Bank to strengthen the country’s preparation for the mock evaluation.

These include completing an updated National Risk Assessment (NRA) (set to be published in June 2025), implementing the second National Policy on AML/CFT, and executing institution-wise action plans aligned with APG requirements.

A five-member AML/CFT Task Force was also appointed in December 2023 to oversee all these measures.

Moreover, Dr. Weerasinghe shared that the Central Bank had proposed several amendments to key legislation, such as the Prevention of Money Laundering Act, the Financial Transactions Reporting Act, and the Convention on the Suppression of Terrorist Financing Act.

Two key amendments have been incorporated into the Banking Act of 2024, preventing companies from using ‘shell banks’ in their business transactions while mandating greater transparency in ownership structures.

“Failure to comply with AML/CFT-related regulations will result in money laundering risks, financial losses, and reputational damage for the country’s banking sector. A lack of compliance may also attract money launderers, leading to the indirect involvement of financial institutions in illegal activities, both locally and internationally,” Dr. Weerasinghe cautioned.

Source: Daily Mirror