Sri Lanka’s financial crime rate increases with black money circulation

Sri Lanka’s financial crime rate has risen in the recent past with the country’s Financial Intelligence Unit ( FIU) being kept on alert as a priority task given the country’s recent experience in battling a sophisticated extremist terror organisation.

A number of measures were taken over the years and the government is currently working on bringing on necessary amendments to some of the existing regulations with the objective of preventing financial crimes.

In order to deter and detect all forms of money-laundering, the government is working with the Financial Action Task Force ( FATF), in strengthening laws to prevent such financial crimes.

Sri Lankan authorities have taken a number of measures to enhance Anti Money Laundering compliance such as introducing amendments to the Trust Ordinance, Companies Act, and the enactment of the Proceeds of Crimes Act, Finance Minister Mangala Samaraweera said.

Measures have been taken enhancing Customer Due Diligence Rules and regulations on targeted financial sanctions on proliferations, he told a recent roundtable meeting with senior ministry officials in Colombo.

The Financial Intelligence Unit (FIU) has conducted many investigations into money laundering and terrorist funding and relevant findings after comprehensive analysis on such cases had been handed over to CID for further investigation and necessary action, Central Bank Governor Dr. Indrajit Coomaraswamy revealed.

Suspicious financial transactions ( STR) in Sri Lanka have been on the rise since last few years with the increase in narcotics and terrorism financing amidst the emergence of religious extremism among a few groups of followers of Islamic fundamentalism, official sources revealed.

The FIU received 1,022 STRs from reporting institutions, law enforcement agencies and the general public last year and after analysis and assessment a total of 317 STRs was referred to the law enforcement and regulatory authorities for further investigations, Central Bank data showed.

Reporting institutions also continued to report Cash Transactions (CTRs) and Electronic Fund Transfers ( EFTs) - Inward and outwards - exceeding the threshold of Rs. 1 million or its equivalent in foreign currencies.

During the period, reporting institutions have reported Rs. 5.6 million CTRs and Rs. 6.3 million EFTs, respectively.

Suspicious financial transactions were being detected rapidly following a Finance Ministry directive to banks and financial institutions to send confidential reports to the Central Bank FIU with regard to illicit transactions of customers.

The reports are required from registered financial institutions, banks, stockbrokers, insurance companies and money exchanges.

In the wake of the recent Easter Terror attack and the recovery of massive amount of cash and kind from several suspects taken into custody, the Depositors Association of F& G Group of Companies has exposed suspicious financial transaction made by the new investor who stepped in to resurrect the now defunct company.

The association has sent a letter with all relevant details to the Central Bank, Inland Revenue Department, the FCID and the Bribery or Corruption Investigation Commission for further investigations and necessary action, a front line member of the association said.

The new investor ZRA Holdings (Pvt) Ltd has deposited Rs. 325 million in fixed deposit at a leading bank in Colombo on September 25, 2018; he said adding that they came to know recently that the money has already been withdrawn.

Mohamed Siddik and Abdul Sameen Mohammed are the directors of this company, he pointed out noting that they have deposited money as proof of funds to take over the company.

The FIU may be investigating this transaction; a senior Central Bank official said adding that investors should prove the source of funds, their income and other details under the present set up.

Various brokers being employed by customers, opening accounts to the names of family members or named representatives, maintaining accounts for large sums of money for a long time, maintaining accounts without any economical or commercial reasons, unusual transactions, sudden changes in transaction behaviour, etc, are deemed suspicious.

Selling or buying stocks during unfavourable economic situations, using account money to buy a controlling stake of a business with a high turnover, showing unusual ownership in internal administration, naming a bank account to the name of a third party as the payee are also being probed, he said.