ECONOMYNEXT – Facing a risk of falling into the grey list for a third time, President Anura Kumara Dissanayake and officials including from the Central Bank discussed measures to be implemented to prevent falling into the grey list which could dent the island nation’s economic recovery from sovereign debt default.
The country is obliged to fulfil a raft of measures including passing new laws to comply with preventing money laundering and countering terrorism financing (AML/CFT) laws before the next evaluation starts in March 2025.
When a country is placed on the Financial Action Task Force (FATF) grey list, it faces several financial, economic, and reputational challenges including reduced access to global financial markets, decline in Foreign direct investment (FDI), increased compliance costs, and risks of rating downgrading.
In 2019, Sri Lanka was removed for the second time from the grey list of FATF, a global anti-money laundering body, after the Central Bank took some actions mandated by the FATF.
Sri Lanka is at risk of falling into the grey list again if it fails to take stern actions against possible money laundering and terrorism financing loopholes in the country.
The meeting between President Dissanayake and officials including from the Central Bank’s Financial Intelligence Unit (FIU) focused on preventing money laundering and countering terrorism financing.
“The FIU highlighted the urgent implementation of cabinet-approved action plans involving 24 key institutions, including regulatory bodies and law enforcement agencies,” the President’s Media Division (PMD) said in a statement.
MORE REFORMS NEEDED
“These plans prioritize legal reforms, capacity building, enhanced inter-agency cooperation, and maintaining comprehensive records to meet the Financial Action Task Force (FATF) recommendations effectively.”
“President Dissanayake directed the establishment of dedicated teams to ensure compliance and closely monitor progress. He emphasized the importance of collaboration and accountability in strengthening Sri Lanka’s AML/CFT framework.”
“He underscored the need for a robust and effective system to secure favourable evaluation outcomes, maintain financial stability, and bolster international confidence in the country’s economy.”
Sri Lanka Central Bank’s Financial Intelligence Unit, which has been pushing for anti-money laundering and countering terrorism financing compliance obligations, has been working on the FATF’s compliance measures in line with a request by the International Monetary Fund (IMF).
The IMF has urged Sri Lanka to comply with the latest international Anti- AML/CFT Compliance Obligations in return to its $3 billion bailout package.
Sri Lanka has already fallen to the grey list twice in the past 14 years with money laundering and terrorism financing posing serious risks to the domestic and global financial system, peace, and development.
The FIU under the central bank has been tasked to ensure the compliance with a robust AMF/CFT Framework in place, with inter-agency coordination.
The IMF’s loan programme has emphasized the need of addressing bribery and corruption and Sri Lanka is required to fulfil a raft of obligations under the AML/CFT pillar, the central bank has said.
Failure to fulfil them will result in Sri Lanka being identified as a country with strategic deficiencies in its AML/CFT Framework and will be designated as a grey-listed/ blacklisted country.
Sri Lanka was under the grey list for the first time in February 2010 soon after the landslide election victory of former leader Mahinda Rajapaksa following the island nation’s military winning a 26 year war in the previous year.
However, the government managed to comply with some of the AML obligations and was able to get delisted in June 2013 under an IMF loan programme.
However, Sri Lanka fell under the grey list again in November 2017 before being delisted in October 2019.
Though grey Listing is a warning, most countries treat grey-listed nations as of ‘high risk’ and blacklist them. The European Union included Sri Lanka in its blacklist subsequent to Sri Lanka’s second grey-listing.
The IMF in return to its $3 billion Extended Fund Facility (EFF) has urged Sri Lanka to implement strong measures to prevent bribery and corruption.
Lack of strong AML/CFT has been seen as one of the reasons for the island nation’s unprecedented economic crisis last year which later forced out the then leader Gotabaya Rajapaksa to flee the country amid strong public protests. (Colombo/December 24/2024)
