Sri Lanka Fines 2 Banks, 3 Finance Firms for AML Failures

Source: Regulation Asia Duruthu E Chandrasekera, Regulation Asia 2020-07-30

Sri Lanka’s FIU has revealed that two banks and one finance company were penalised in 2019, and two other finance companies in 2020.

Sri Lanka’s FIU (Financial Intelligence Unit) on Friday (24 July) said it fined two banks and three finance companies for violating the Financial Transactions Reporting Act over the last two years.

In 2019, state-owned Bank of Ceylon was fined LKR 3 million (USD 16,000); and Nations Trust Bank and Commercial Credit and Finance were fined LKR 1 million each.

In 2020, Sarvodaya Development Finance and UB Finance Company were fined LKR 500,000 each.

In each case, the fines were handed out due to violations of customer due diligence rules, specifically in relation to third party deposits, obtaining approval for PEPs (politically exposed persons), sanctions screening and transacation reporting failures.

The FIU’s announcement comes after CBSL (Central Bank of Sri Lanka) said at its 1 July meeting that it would publish the penalties imposed on the financial institutions to improve AML/CFT compliance in the country.

This followed denials by CBSL on the potential money laundering risks associated with the SDA (Special Deposit Account) scheme launched in April. The scheme allows applicants to open 6- or 12-month fixed deposit accounts in any currency with any licensed bank in Sri Lanka, with a minimum tenure of six months, and was largely seen as a no-questions-asked deposit account designed to attract fund flows into the country and entice foreign direct investment.

In late April, Joint Cabinet spokesman and Minister Bandula Gunawardana suggested that applicants can bring ‘black cash’ into the country via the SDA, prompting concerns that banks were taking a lax approach to compliance with KYC and AML rules when accepting clients seeking to open SDAs.

“The CB wishes to categorically deny the views/concerns expressed/raised by few authorities and persons that the required due diligence processes are not followed by banks operating in Sri Lanka in opening and maintaining recently introduced SDAs,” CBSL clarified on 6 June.

The FATF (Financial Action Task Force had delisted Sri Lanka from its so-called ‘grey list’ last October, after placing the country in the list in 2017 due to deficiencies in implementing the AML/CFT regime. CBSL has been working to strengthen its AML regime to ensure Sri Lanka remains off the list.

FIU

AML

Sri Lanka Fines 2 Banks, 3 Finance Firms for AML Failures

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