Sri Lanka to ensure continued progress of financial inclusion

(COLOMBO, LANKAPUVATH) –Since November 2017, the Sri Lankan government has taken a number of measures to enhance Anti Money Laundering compliance and the challenge for countries like Sri Lanka is how to ensure continued progress of financial inclusion in this context, Finance Minister Mangala Samaraweera said.

Participating in a roundtable discussion on ‘Financial Regulation: Working Together to Address De-Risking,’ held on the sidelines of CHOGM 2018 in London, on Tuesday, Minister Samaraweera said Sri Lanka has long identified the risk of financial crime as a priority area, given the country’s history in battling a sophisticated terror organization and a number of measures were taken over the years in this regard.

The introduction of the Prevention of Money Laundering Act in 2006, Convention on the Suppression of Terrorist Financing Act in 2005, introduction of Financial Transaction Reporting Act in 2006 and setting up the Financial Intelligence Unit at the Central Bank are some of the measures taken by the government.

He said that as the dynamics of the finance industry and technology constantly evolve, it is essential that financial regulations remain one step ahead.

The sophistication of financial crimes has increased exponentially in recent years and is a threat to all nations, be it developing or developed nations. This has resulted in a number of negative fallouts for international finance, according to the Sri Lankan Finance Minister.

“One such negative fall-out is ‘de-risking’, the scenario of global banks selectively withdrawing from the business of correspondent banking. This can have highly detrimental implications for banks in developing countries in particular as it can shut them out of the global financial architecture,” he said.

“This is largely attributed to the shortcomings of the existing structure of the financial system. Given the importance of correspondent banking in a globalized world, it is important to take measures to enhance respondent banks’ capacity to manage risks, improve communication between correspondent and respondent banks, strengthen and effectively implement regulatory and supervisory frameworks in line with international standards, particularly for Anti Money Laundering and counter-terrorist financing,” he added.

Since November 2017, the Sri Lankan government has taken a number of measures to enhance Anti Money Laundering compliance such as introducing amendments to the Trust Ordinance, Companies Act, enactment of the Proceeds of Crimes Act, enhancing Customer Due Diligence Rules, and regulations on targeted financial sanctions on proliferation.

He said the challenge for countries like Sri Lanka is how to ensure continued progress of financial inclusion in this context. At a more micro-level, one of the major objectives of our government, embodied in the 2018 Budget themed Enterprise Sri Lanka, is to empower entrepreneurs by providing access to finance. In order to ensure access to finance at grass roots level, it is important for the Sri Lankan financial system to have robust access and engagement with the global financial architecture.

Pointing out the need to update the laws and regulations aimed at preventing financial crimes as the financial system develops, Minister Samaraweera said Sri Lanka very well understands this reality and is taking every necessary measure to keep abreast of the regulatory developments.

Furthermore, the government is working with the Financial Action Task Force (FATF), in strengthening laws to prevent financial crimes. Based on their recommendations, a number of measures, including amending laws and regulations, were taken by authorities.

“Nonetheless the challenge for financial regulation remains significant, and staying ahead of the curve is onerous, but it is indeed imperative,” he said.

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