Sri Lanka braces for FATF-linked audit as president orders agencies to prove ‘good governance’
COLOMBO – President Anura Kumara Dissanayake has warned state institutions that Sri Lanka must demonstrate effective governance at home before seeking international confidence, as the country prepares for a high-stakes review of its anti-money-laundering and counter-terrorism financing regime.
Speaking at a meeting at the Presidential Secretariat earlier this week, the president addressed senior officials from financial-regulatory and security agencies ahead of Sri Lanka’s third mutual evaluation by the Asia Pacific Group on Money Laundering (APG), the regional affiliate of the Financial Action Task Force (FATF), scheduled for March.
The assessment, originally planned for last year but delayed by the 2024 elections, will scrutinize the country’s anti-money-laundering and counter-terrorism financing (AML/CFT) systems using a revised methodology focused on “effectiveness”, according to officials. Under the new approach, countries must demonstrate that laws and institutions actively prevent financial crime rather than merely exist on paper.
“Prior to demonstrating our integrity to outside entities, we as a government must first take responsibility for our actions and dedicate ourselves to good governance, while inviting all stakeholders to properly and responsibly fulfil their institutional duties toward that objective,” President Media Division (PMD) quoted the president as saying.
Sri Lanka has twice previously been placed on the FATF ‘grey list’, in 2011 and again in 2017, episodes that disrupted correspondent banking relationships, increased borrowing costs and weakened sovereign credit ratings. Those shocks compounded vulnerabilities exposed during the country’s 2022 economic crisis.
Officials said the looming review has sharpened concerns within government about institutional capacity. President Dissanayake ordered an immediate recruitment drive to strengthen the Financial Intelligence Unit and related agencies after noting that some officers were handling multiple roles.
He also directed that a special circular be issued to halt the routine rotation of trained personnel until the on-site phase of
the evaluation is completed in November, in a bid to preserve institutional continuity.
Analysts warn that a fresh grey-listing would undermine investor confidence and foreign direct investment flows at a time when Sri Lanka is seeking to consolidate its fragile economic recovery.
A Special Task Force appointed to oversee preparations has been given two weeks to submit a progress report on the readiness of key institutions, officials said.
-ENCL
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