Sri Lanka hopes to get out of FATF red flag by October: CB Governor

ECONOMYNEXT – Sri Lanka is rolling out an action plan to remove a red flag placed by a global anti-laundering body, and is expecting to get a clean bill of health by October, Central Bank Governor Indrajith Coomaraswamy said.

The Financial Action Task Force, placed Sri Lanka under monitoring status, or a grey list last year saying there were strategic deficiencies.

Sri Lanka is working on a time bound action plan to bring laws and supervision of non-bank firms like casinos and the gem industries, Deputy Governor C P J Siriwardene said.

Sri Lanka has been given till March 2019 to fulfil the requirements.

“We believe that within 8 to 12 months we can fulfil these requirements,” Siriwardene said. “Every quarter we are reporting progress.

“Last month also we had a review meeting.”

Sri Lanka comes under the administration of the Asia Pacific Group of the FATF’s anti-money laundering/countering terrorist finance (AML/CFT) framework.

The IMF warned in October that Sri Lanka was falling behind in complying with the last October and the Central Bank has got cracking filling the blanks, attending a meeting in Argentina promising fast action.

“The Asia Pacific Group supported us,” Coomaraswamy said.  “They wanted to give us more time. A number of regional countries wanted to give us more time.

“But one or two felt (otherwise). The bottom line is we are working flat out as the Deputy Governor said.”

Coomaraswamy said the Prime Minister and the Cabinet had been informed of the urgency of getting through legislation as many agencies other than the central bank has to take measures to fulfil the requirements.

“In a grey list (monitoring status), you are put on notice. At present we have not seen any direct impact but then if you slip down to the blacklist, it has dramatic repercussions,” Governor Coomaraswamy said.

“For example our banks can lose their correspondent relationships, and generally people would be reluctant to deal with out financial institutions. Right now it is an amber light.”

It is not clear why Governor Coomaraswamy had to speak to the Prime Minister to push state agencies to act.

It is now known that the Financial Intelligence Unit, which is in charge of anti-money laundering activities had been first warned in 2015, during the tenure of then Governor Arjuna Mahendran.

Coomaraswamy however sidestepped the question about who got the initial notification.

“The central bank co-oridanates,” he said.  “This involves changing laws, parliamentary enactments, those things take time. So we explained that to the APG and they understood. But as I said one or two other countries felt that we needed to be put on notice.”

The US is believed to be one of the countries. Last week the EU parliament also passed structures on Sri Lanka over the shortcomings found by FATF.