PM to introduce new Law to regulate foreign exchange

Last Tuesday, the Cabinet of Ministers gave approval for a new Bill for “the promotion of and regulation of Foreign Exchange: To vest the responsibility for promoting and regulating foreign exchange in the Ministry of Finance; to designate the Central Bank of Sri Lanka as the agent of the Ministry; to provide for the repeal of the Exchange Control Act (Chapter 423); and to provide for matters connected therewith or incidental thereto.” Approval for this was sought by Prime Minister RanilWickremesinghe in his capacity as the Minister of National Policies and Economic Affairs. The Central Bank now comes under this Ministry. Here are some highlights of the Bill which is to be gazetted shortly: The Minister assigned the subject of Central Bank shall be responsible for implementation of the provisions of this Act, to ensure proper promotion and regulation of foreign exchange in Sri Lanka. The Secretary to the Ministry of the Minister assigned the subject of Central Bank, may from time to time with the concurrence of the Minister, issue such directions as may be necessary for the implementation of the provisions of this Act. The Central Bank shall act as agent on behalf of the Minister assigned the subject of Central Bank and be responsible for implementing the provisions of this Act, in accordance with such directions as may from time to time to be issued in that behalf in terms of this section. NOTE: The existing Exchange Control Act (Chapter 423) states that the Central Bank of Sri Lanka shall, as agent of the Government, …………. Save as otherwise provided in this Act, no person shall deal in foreign exchange within or outside Sri Lanka by any act which involves the conversion of Sri Lanka rupees or assets within Sri Lanka to foreign exchange or the conversion of assets outside Sri Lanka, otherwise than through an authorised dealer, or to the extent specified in the permit, through a restricted dealer. Any person in or resident in, Sri Lanka, who (a) holds foreign exchange in a bank account in Sri Lanka or outside Sri Lanka; or (b) owns any foreign assets (other than foreign exchange) not being foreign exchange or a foreign asset – (i) derived from the conversion of Sri Lanka currency or the disposal or conversion of an asset within Sri Lanka or provision of any service within Sri Lanka (other than a service referred to in terms 2A (c) of the Schedule); or (ii) derived by an authorised dealer or restricted dealer from the business of dealing in foreign exchange may utilise such foreign exchange or foreign assets for making of any payment for or in respect of, any current or capital transaction of such person, within our outside Sri Lanka. The Central Bank may permit, (subject to section 11 and 12), any person, class or classes of persons (hereinafter in this Act referred to as a “restricted dealer”) not being an authorised dealer, to deal in foreign exchange within Sri Lanka for the purpose specified in the permit, subject to such terms and conditions as may be imposed by the Central Bank in that behalf. Prior to dealing in foreign currency for a current transaction (under subsection 1), an authorised dealer or restricted dealer may request the person requiring foreign exchange for such transaction to provide such information or produce such documents or make such declaration as reasonably necessary, in order to satisfy himself that the requirement is in relation to a current transaction and is in conformity with any other laws regulating such transaction. Save as otherwise provided in this Act, no person shall deal in foreign exchange within or outside Sri Lanka, by any act which involves the conversion of Sri Lanka rupees or assets within Sri Lanka to foreign exchange or the conversion of assets outside Sri Lanka, otherwise than through an authorised dealer, or to the extent specified in the permit, through a restricted dealer. A person in, or resident in, Sri Lanka may – (a) Export from Sri Lanka or import into Sri Lanka, any foreign exchange of Sri Lanka currency; Hold foreign exchange in or outside Sri Lanka; Acquire a foreign asset from foreign exchange obtained by the conversion of Sri Lanka currency or assets held in Sri Lanka; For such purposes, up to such limits and subject to such terms and conditions, as are specified in the Schedule to this Act. The Central Bank may, at any time, cause an investigation to be made, of foreign exchange transactions or foreign assets of any authorised dealer, or restricted dealer or any other person as the case may be, by a person authorised in writing by the Central Bank (hereinafter referred in this Act as “authorized persons”) in that behalf. The Board of Inquiry (appointed under sub section 1) shall) consist of the following persons appointed by the Minister. (a) A retired Judge of the Supreme Court or of the Court of Appeal; who shall be the Chairman of the Board; and Two persons who are conversant in matters relating to international finance or exchange transactions and have had experience at a senior managerial level in the public or private sector and are of good standing and repute. Where the report of the Board is not a unanimous report, any dissenting member may submit a separate report to the Minister. The Minister shall, after considering the report of or (b) (c) (d) (b) reports submitted by the Board and any member thereof, affirm, revoke or vary the determination of the Central Bank against which the appeal was preferred. The Minister shall in writing communicate his decision to the Central Bank and the party preferring within fourteen days of the receipt of the report or reports. The decision to the Minister under this subsection shall be binding on the Central Bank and the party preferring the appeal. Where the person who is required to pay the amount or value of foreign asset and expenses incurred under section 12 (dealing in relation to foreign assets contrary to this Act or any guideline) is a body corporate or unincorporated, every director, member or partner of such body shall also be personally liable jointly and severally to pay such amount or value and expenses; Provided that such director, member or partner shall not be liable to pay such amount or value if such person proves that the act or omission incurring such liability was done or omitted to be done without the knowledge of such person or that such person exercised due diligence to prevent such act or omission. Where the Monetary Board advises the Minister that in the opinion of the Board, remittances of foreign exchange into or but of Sri Lanka constitute a potential threat to the financial stability of Sri Lanka, the Minister may, with the approval of the Cabinet of Ministers and notwithstanding (the provisions of sections 5,6 and 7) of this Act , by Order published in the Gazette, take such steps as may be necessary to restrict or regulate remittances of foreign exchange into or out of Sri Lanka, for such period not exceeding six months from the date of such Order. No suit, prosecution or other legal proceedings shall lie against the Monetary Board or any of its members or the Central Bank or any of its employees or the Minister or the Secretary or any officials of the Ministry or any other person exercising any power or performing any duty or omission done or omitted to be done, in good faith done under this Act. Where the provisions of any other written law imposes an obligation in respect of doing of any act and the permission or consent of the bank is, by virtue of this Act required for the discharge of the obligation, it shall be an implied condition of the obligation that it shall not be discharged except in so far as the permission or consent is given or is not required. The Minister may make regulation in respect of all matters which are required by this Act to be prescribed or in respect of which regulations are requiredor authorized to be made under this Act.