CB guidelines soon on anti-money laundering, financial transactions

The Central Bank will issue guidelines to the banking industry on the reporting of anti-money laundering and financial transactions in the near future.

Initially we will introduce them to the banking industry as guidelines while it will be followed by the securities market and insurance sector.

The Financial Intelligence Unit (FIU) has decided to issue them as guidelines initially as it takes a long time to introduce them as law, FIU consultant, Joan de Zilva Moonesinghe told a press conference after the inauguration of an international workshop.

Governor of the Central Bank Ajith Nivard Cabraal in his keynote address at the World Bank Workshop on Capacity Enhancement for Anti-Money Laundering and Combatting the Financing of Terrorism said that today, combatting terrorism cannot be considered as the sole responsibility of single governments or soldiers who fight at the front at the risk of their lives. We must all get involved in an international effort if we are to defeat this menace.

He said that in these efforts, financial institutions and all other corporate entities, especially, NGOs must also actively help prevent the funding and the flow of goods and services to terrorist organisations. We must all be wise to the type of trade we are engaged in, and be mindful of the impact it can have in facilitating terrorist activity.

Therefore it becomes imperative that any loopholes in banking which can be identified as facilitating the financing of terrorism and strict adherence to regulations to prevent such financing, receive the immediate attention of the regulatory institutions.

The governor said that Sri Lanka has made considerable headway in this regard by enacting three key laws including the Convention on the Suppression of Terrorist Financing Act, The Prevention of Money Laundering Act, and the Financial Transactions Reporting Act (FTR). The FTR Act created the institutional body of the FIU within the Central Bank, with regulatory powers and a mandate, to formulate policies and guidelines to meet the Financial Action Task Force recommendations.

The enactment of the AML/CFT legislation in Sri Lanka, early last year and the establishment of the Financial Intelligence Unit soon after, demonstrates Sri Lanka's strong commitment to the global efforts to fight financial crime and terrorism.

Naturally, therefore, in this effort, the areas of vulnerability have been identified and adequate measures taken to deal effectively with the weaknesses. The stakeholders also need to be adequately equipped to discharge their responsibilities effectively.

We therefore, see today's effort at building capacity and processes, as one of the most important pre-requisites for the implementation of an effective AML/CFT regime, and we commend the World Bank and all others who are involved in this endeavour.

He said that Sri Lanka was ever mindful of its obligations and long before the advent of the AML and CFT legislation, certain safeguards were introduced as legislation such as the Exchange Control Act, the Banking Act and the Customs Ordinance. Adequate reporting requirements were also imposed to monitor large cross-border flows of currency. "Know-your-customer" guidelines were issued to the banks as far back as 2001.

Cabraal said that the aftermath of natural disasters also provide happy hunting grounds for money launderers and terrorists. Sri Lanka's post-tsunami experience is ample testimony to this reality.

Organisations and individuals emerged from nowhere after the tsunami, with absolutely no track record of humanitarian work, to descend on us in the guise of humanitarian relief. In the critical circumstances of the aftermath of the tsunami, it was perhaps not possible for us to closely verify their bonafides.

However, we are now much wiser about the humanitarian face of money launderers and terrorists. We now know that several terrorist front organisations have used the official banking channels to solicit and remit funding, on the grounds of humanitarian relief.

He said that though Rs. 4 billion of funds came through the official banking channels post-tsunami there is no corresponding relief work done which makes them suspicious transactions which may not have penetrated our banking system through normal circumstances.

SG