In a decisive move to bolster its financial security framework, Sri Lanka has reconstituted its High-Level Task Force on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). This initiative comes as the nation prepares for its third Mutual Evaluation by the Asia Pacific Group on Money Laundering (APG), a critical assessment that will gauge Sri Lanka’s adherence to international standards in combating financial crimes.
Composition of the Task Force
The reconstituted task force is chaired by Retired Supreme Court Judge Buwaneka Aluwihare and comprises key figures from various governmental sectors:
- Justice Minister Harshana Nanayakkara: Overseeing legal frameworks and judicial processes.
- Deputy Economic Development Minister Anil Jayantha Fernando: Focusing on economic policies and development strategies.
- Deputy Finance Minister Harshana Suriyapperuma: Managing fiscal policies and financial regulations.
- Senior Deputy Governor of the Central Bank, Nelumani Daulagala: Ensuring monetary stability and regulatory compliance.
- Additional Director General of the Ministry of Finance, Planning, and Economic Development, A.K.D.D.D. Arandara: Coordinating financial planning and economic policies.
Mandate and Objectives
The primary objective of this task force is to ensure Sri Lanka’s compliance with the Financial Action Task Force’s (FATF) 40 Recommendations, which serve as the global benchmark for AML/CFT measures. The upcoming Mutual Evaluation will assess both the technical compliance and the effectiveness of these measures, focusing on 11 Immediate Outcomes that reflect the desired results of a robust AML/CFT system.
Strategic Importance
During its inaugural meeting on January 29, 2025, the task force underscored the strategic importance of the Mutual Evaluation. Members emphasized the need for full cooperation and coordinated assistance from all stakeholder institutions to successfully navigate this critical assessment. The evaluation’s outcome will significantly influence Sri Lanka’s financial reputation and its ability to engage in international financial markets.
Potential Consequences of Non-Compliance
Failure to meet the required standards could result in Sri Lanka being designated as a country with strategic deficiencies in its AML/CFT framework. Such a designation, often referred to as “grey-listing” by the FATF, can lead to several adverse consequences:
- Reduced Access to Global Financial Markets: International banks and financial institutions may impose stricter due diligence measures or limit transactions with Sri Lankan counterparts.
- Decline in Foreign Direct Investment (FDI): Investors may perceive increased risks, leading to a decrease in investment inflows.
- Increased Compliance Costs: Domestic financial institutions may face higher costs to implement enhanced compliance measures.
- Reputational Damage: The country’s financial system may be viewed as vulnerable to illicit activities, affecting its global standing.
Historical Context and Future Outlook
Sri Lanka has previously faced challenges in this arena, having been grey-listed twice in the past 14 years due to vulnerabilities in its AML/CFT framework. Recognizing the serious risks that money laundering and terrorism financing pose to both domestic and global financial systems, the government is taking proactive steps to address potential loopholes.
The reconstitution of the High-Level Task Force signifies a renewed commitment to strengthening the nation’s defenses against financial crimes. By aligning its policies and practices with international standards, Sri Lanka aims to enhance its financial integrity, attract foreign investment, and ensure sustainable economic development.
As the Mutual Evaluation approaches, the task force’s efforts will be pivotal in demonstrating Sri Lanka’s dedication to maintaining a secure and transparent financial environment. The outcomes of this assessment will not only reflect the country’s current capabilities but also shape its future strategies in combating financial crimes.
