Central Bank dismisses concerns over potential money laundering activities linked to Special Deposit Accounts

The Central Bank (CB) dismissed concerns over potential money laundering activities linked to the recently introduced Special Deposit Accounts (SDAs) while stressing that the exemptions granted  from procedural requirements are provided under the provisions of the Foreign Exchange Act (FEA).

“The CB wishes to categorically deny the views/concerns expressed/raised by few authorities and persons that the required due diligence processes are not followed by banks (Authorized Dealers - ADs) operating in Sri Lanka in opening and maintaining recently introduced Special Deposit Accounts (SDAs),” the regulator said. 

It noted that the government introduced the SDA with the consultation of Monetary Board of the CB in April with the view to seek assistance for the national effort to overcome the effects of COVID-19 outbreak by issuing regulations under the provisions of the Foreign Exchange Act (FEA).

 “The exemptions from procedural requirements specified in the said Regulations allow an AD to directly credit funds to an SDA without routing such funds through an Inward Investment Account under normal circumstances. The said regulations cannot exempt ADs from complying with provisions of FEA,” the CB elaborated.  Therefore, the CB pointed out that the above  exemptions in the regulations on SDAs are not related to the requirements applicable under regulations, rules, guidelines, etc. issued by the Financial Intelligence Unit of CB on Anti Money Laundering (AML)/Countering the Department of Foreign Exchange 03 July 2020 Financing of Terrorism (CFT) and the provisions of FEA.

However, Joint Cabinet spokesman and Minister Bandula Gunawardana in late April announced that Sri Lankans and non-nationals could deposit any amount of foreign currencies in the SDA  free of foreign exchange regulations in any licenced commercial bank of the country.   

Recently, the country’s State Information Department announced that the earlier gazette issued on April 8, relaxing certain foreign exchange controls to encourage foreign currency remittances into the country across foreign currency deposit accounts, would be revised to address the concerns over money laundering and terrorist financing. The Financial Action Task Force (FATF), the global policy setter on anti-money laundering and countering financing of terrorism (AML/CFT), last October delisted Sri Lanka from its ‘Grey List’ after placing the country in the list in 2017 due to deficiencies in implementing the AML/CFT regime.

The global policy setter is scheduled for another evaluation of the country’s AML/CFT regime next year.