UN Convention Against Corruption

• As per Financial Transactions Reporting Act No. 06 of 2006 customer identification is mandatory (Sec. 2).

• Financial Intelligence Unit is responsible for receiving Cash Transactions Reports (CTR), Electronic Fund Transfers (EFT) and Suspicious Transaction Reports (STR) from all reporting institutions and for analyzing data collected to identify financial trails to support prosecution.

• FIU also issues rules to the financial and other reporting sectors on customer identification and record keeping.

• The Act does not recognize the concept of high value accounts but Regulation No. 1555/9 of 25th June, 2008, specifies that any financial institution under the Act needs to report to FIU every electronic fund transfer made at the request of a customer, where the amount of such transfer exceeds Rupees One Million (Rs. 1,000,000) or its equivalent in any foreign currency.

• As per section 5 of the Financial Transactions Reporting Act No. 06 of 2006, institutions are mandated to conduct ongoing due diligence and scrutiny of customers.

• Sections 59 and 60 of the Financial Institutions (CDD, Customer Due Diligence) Rules No. 01 of 2016 requires enhanced scrutiny of people who are deemed politically exposed persons, their family members and close associates. Rules 30 –31 provides for the identification and verification of the identity of beneficial owners of all accounts maintained in financial institutions under the Act.

• The rules also provide for money-laundering risk management and internal controls, know-your-customer (KYC), customer due diligence (CDD), enhanced scrutiny for persons and accounts, correspondent banking, wire transfers and record keeping.

• FIU also created Guidelines on Identification of Beneficial Ownership for Financial Institutions No. 4 of 2018 that explains amongst others what beneficial ownership is, the importance of recognizing the beneficial owner, manner in which such ownership can be hidden, and identification and verification of beneficial ownership.

Link to Link to Rules issued by the Financial Intelligence Unit http://www.fiusrilanka.gov.lk/rules_directions.html

Link to Regulation No. 1555/9 http://www.fiusrilanka.gov.lk/docs/Regulations/1555-9/1555_9(E).pdf

Link to the Guidelines on Identification of Beneficial Ownership for Financial Institutions No. 4 of 2018  http://fiusrilanka.gov.lk/docs/Guidelines/2018/Guideline-04-2018.pdf

Link to Financial Transactions Reporting Act  http://www.fiusrilanka.gov.lk/docs/ACTs/FTRA/Financial_Transactions_Reporting_Act_2006-6_(English).pdf

• Financial Intelligence Unit is responsible for strengthening the money laundering and countering financing of terrorism regime in Sri Lanka. FIU supervises suspicious transactions.

• It has created rules relating to enhanced scrutiny of certain types of persons and accounts commensurate with their risk profile.

Link to Financial Transactions Reporting Act http://www.fiusrilanka.gov.lk/docs/ACTs/FTRA/Financial_Transactions_Reporting_Act_2006-6_(English).pdf

Link to Link to Rules issued by the Financial Intelligence Unit http://www.fiusrilanka.gov.lk/rules_directions.html

• No mechanism to notify financial institutions of the identity of particular persons to whose accounts enhanced scrutiny should be applied.

Link to the Country Review Report under the Second Review http://www.unodc.org/documents/treaties/UNCAC/CountryVisitFinalReports/2018_09_03_Sri_Lanka_Final_Country_Report.pdf

• As per Part V of the Rules for Financial Institutions (Customer Due Diligence) Rules, No. 1 of 2016 – Extraordinary Gazette No 1951/13, January 27 of 2016, institutions are expected to keep records for 6 years minimum from completion of a transaction or the date on which the business relationship was fulfilled.

• Financial Institutions are mandated to retain the above records for a longer period where transactions, customers or accounts are involved in litigation or required to be produced in a court of law or before any other appropriate authority (rule 93).

• No PEP database is created.

Link to Rules for Financial Institutions (Customer Due Diligence) Rules No 1951/13 http://fiusrilanka.gov.lk/docs/Rules/2016/1951_13/1951_13_E.pdf

• As per section 2 (1) of the Banking Act No. 30 of 1988 banks with no physical presence are prohibited. A license issued by the Monetary Board with the approval of the Minister is required.

• As per Rule 67 under the Financial Institutions (Customer Due Diligence) Rules, No. 1 of 2016, no bank can enter into or continue banking relationship with a shell bank. The Rules also mandates the financial institutions to follow special precautionary measures to make a distinction between formal money transmission services and other alternative money or value transfer systems (Rule 88).

• As per Rule 64 under the Financial Institutions (Customer Due Diligence) Rules, No. 1 of 2016, financial institutions must take necessary measures to ensure that the risk of money laundering and terrorist financing through the accounts of the respondent banks are managed.

• Banks are mandated to apply enhanced Customer Due Diligence measures when entering into or continuing banking relationship with banks or Financial Institutions which are located in high risk countries (Rule 66).

Link to Banking Act http://www.dfe.lk/web/images/downloads/acts/bankingAct.pdf

Link to Rules for Financial Institutions (Customer Due Diligence) Rules No 1951/13 http://fiusrilanka.gov.lk/docs/Rules/2016/1951_13/1951_13_E.pdf