By: Staff Writer
August 11, Colombo (LNW): Sri Lanka’s new beneficial ownership regime is facing a critical test as the country prepares for its Third Mutual Evaluation on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), with authorities warning that having laws on paper will not be enough to avoid another international grey listing.
Central Bank of Sri Lanka (CBSL) Financial Intelligence Unit (FIU) Director General Dr. Subhani Keerthiratne has placed the responsibility squarely on both regulators and the private sector, stressing that the effectiveness of the new framework will be judged by whether it works in practice.
Sri Lanka is currently undergoing a national review and preparation process ahead of an assessment by the Asia/Pacific Group on Money Laundering (APG), with international assessors expected to visit the country during the last week of October and first week of November. The team will meet public and private sector stakeholders, including companies, to determine whether AML/CFT requirements are actually being implemented.
According to Dr. Keerthiratne, beneficial ownership transparency is the only Financial Action Task Force (FATF) recommendation on which Sri Lanka remains non-compliant. The issue has therefore become a particularly sensitive point ahead of the evaluation.
The concern is not simply whether companies disclose ownership information, but whether authorities can identify the natural persons who ultimately own or control them.
Sri Lanka’s latest national risk assessment identified private limited companies as a concentration point for money laundering risks. Dr. Keerthiratne pointed to investigations involving advance payments for imports, where substantial sums were allegedly transferred overseas without goods being received in Sri Lanka.
In some cases, companies were reportedly registered in the names of labourers, drivers and other individuals, while the actual controllers remained concealed behind corporate structures.
That creates a serious investigative problem. When authorities cannot immediately determine who controls a company, investigators must first unravel the ownership structure before pursuing the underlying offence.
The new regime is intended to close that gap by making beneficial ownership information readily accessible to law enforcement and other authorities.
But implementation could prove more complicated than legislation itself. Company Secretaries and other professionals have already raised concerns over practical difficulties in complying with the requirements. Dr. Keerthiratne has urged stakeholders to work with the Registrar to resolve those obstacles rather than allow them to undermine implementation.
The stakes extend beyond corporate compliance.
Dr. Keerthiratne warned that another FATF grey listing could place correspondent banking relationships under pressure, increase enhanced due diligence by foreign financial institutions and potentially affect borrowing costs, sovereign ratings and foreign investment.
For a country recovering from a severe economic crisis, the consequences could be significant.
The coming assessment will therefore test more than Sri Lanka’s legal reforms. It will test whether the country can prove that corporate ownership is transparent enough to prevent legitimate companies from becoming shields for criminal activity.
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