Sri Lanka’s AML/CFT Evaluation Postponed Amid Economic Concerns
- 5opn1
- January 12, 2025
- Business News
- Behind the News
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Behind the News
Sri Lanka’s third evaluation of its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework, originally scheduled for March 2025, has been delayed by one year to March 2026, according to Central Bank officials. The delay stems from the two national elections held last year, which hindered timely preparations.
The evaluation, coordinated by the Asia Pacific Group on Money Laundering (APG), will assess Sri Lanka’s efforts to address money laundering and terrorism financing. The country is at risk of being placed on the Financial Action Task Force (FATF) grey list for a third time if it fails to meet global standards.
A grey-list designation could have severe economic repercussions, including reduced access to global financial markets, diminished foreign direct investment (FDI), higher compliance costs, and potential credit rating downgrades.
Behind the News The Central Bank has emphasized the need for Sri Lanka to align with FATF’s 40 recommendations and demonstrate the effectiveness of its AML/CFT measures. It has also outlined plans to strengthen risk-based examinations of financial institutions.
The reconstitution of Sri Lanka’s AML/CFT Task Force in December 2024 ensures that efforts to meet international standards continue through the evaluation process.
The country must pass new laws and implement policies to combat money laundering and terrorist financing before the next evaluation.
The FATF grey list has previously impacted Sri Lanka’s financial reputation, as it was placed on the list in 2017 before being removed in 2019. Failure to meet international compliance standards risks triggering another grey-list designation, potentially undermining Sri Lanka’s recovery from its recent sovereign debt crisis.
Sri Lanka is also working on amending key AML/CFT legislation, including the Companies Act, to enhance its compliance with international regulations. Additionally, the Financial Intelligence Unit (FIU) aims to improve cooperation with non-financial institutions and expand intelligence-sharing initiatives both domestically and internationally.
With the IMF’s $3 billion bailout package contingent on stronger AML/CFT measures, Sri Lanka faces significant pressure to strengthen its anti-money laundering and counter-terrorism financing framework. Continued failure to comply could see the country added to the FATF grey or even black list, further isolating its financial system
