“Many areas of concern exist with respect to Sri Lanka’s current anti-money laundering efforts. The Central Bank continues to allow the operation of bearer certificates of deposits. In July 2003, in order to limit money laundering through bearer certificates, the Central Bank required banks to maintain a record of purchasers of these certificates. Casinos, jewelry shops and dealers in gems are also areas of concern, there are no laws to regulate their operations. A key vulnerability in the Sri Lankan financial system is the existence of SIERA accounts which allow foreign investors to participate directly in the Sri Lankan Stock Exchange. These accounts have historically allowed for undisclosed principals and beneficial owners. The Central Bank and Securities Commission are currently drafting rules which would require better disclosure and CDD procedures prior to establishment of these accounts.” the US Embassy Colombo informed Washington.
The Colombo Telegraph found the related leaked cable from the WikiLeaks database. The unclassified cable discuses Sri Lanka’s money laundering and financial crimes. The cable was written by the Ambassador Robert O. Blake on November 21, 2007.
The ambassador wrote; “Sri Lanka established a Financial Intelligence Unit (FIU) in 2006 as a semi-autonomous body connected to the Central Bank. In 2007 the FIU was moved to be a line department under the direct authority of the Central Bank. The FIU is an administrative body that performs intelligence collection and analytical functions. It has the authority to issue regulations and instructions to combat money laundering and terrorist financing, including the ability to freeze transactions and accounts.”
“Financial institutions such as banks, finance companies, leasing companies, money transfer agents, credit card issuers, foreign exchange and money market dealers, and designated non-finance businesses such as portfolio managers, fund managers, insurance companies, casinos, and real estate agents are required to generate suspicious activity reports and other mandatory disclosures such as cash transaction reports and forward to the FIU. These reports are required to be maintained for 6 years. More than 50 Suspicious Transaction Reports were received by the FIU in 2007 leading to 20 referrals to law enforcement for investigation. The CID maintains that it has a special unit of 20+ officers detailed for AML/CFT cases, but it appears that this unit, as a matter of practice, has been detailed to other duties. Furthermore, the CID does not currently have any qualified financial investigators. Representatives from the international community including the US Treasury, the Asia Pacific Group, the World Bank and others are currently pressing the Government to address the deficiencies in the law enforcement sector.” Ambassador Blake further wrote.