US embassy cable - 03COLOMBO59

UNCLAS SECTION 01 OF 02 COLOMBO 000059 
 
SIPDIS 
 
DEPARTMENT FOR SA/INS, INL 
JUSTICE FOR OIA, AFMLS, AND NDDS 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: SNAR, EFIN, PGOV, PREL, CE 
SUBJECT:  2002-2003 International Narcotics Control 
Strategy Report (INSCR) Part II Financial Crimes and Money 
Laundering - Sri Lanka 
 
REF: (A) 02 STATE 240035 
(B) 02 COLOMBO 2314 
(C) 02 COLOMBO 2304 
 
1.  Provided below is response to ref A request for 
information on Sri Lanka's regulations and practices 
regarding financial crimes and money laundering. 
 
2.  Sri Lanka is neither an important regional financial 
center nor a preferred center for money laundering.  There 
is no significant market for black market goods. 
Government policy and practice do not encourage or 
facilitate laundering proceeds from illegal drug 
transactions, serious crimes or terrorist financing.  While 
Sri Lanka recently experienced a failure of a small savings 
bank due to fraud by senior bank officials, there has been 
no evidence linking their activities to money laundering or 
terrorist financing.  Nothing suggests that Sri Lanka's 
financial institutions engage in currency transactions 
involving international narcotics trafficking. 
 
Money laundering 
---------------- 
 
3.  Money laundering per se is not a criminal offence.  As 
of January 2003, a draft law to deal with money laundering 
has been approved by the Central Bank and sent to the 
Ministry of Justice for review and presentation to cabinet 
and parliament.  Currently, financial transactions relating 
to terrorism and narcotics are illegal under Central Bank 
regulations and Bank Secrecy laws.  In December 2001, the 
Central Bank introduced regulations on customer due 
diligence.  However, the Central Bank continues to allow 
the operation of bearer certificates (i.e. nameless 
certificates of deposits). 
 
Terrorist Finance 
----------------- 
 
4.  Based on UN Regulation 1 of 2001 (made by the Minister 
of Foreign Affairs of Sri Lanka on October 16, 2001) 
terrorist financing is an offense punishable by 
imprisonment for a period of 5 to 10 years.  The Central 
Bank of Sri Lanka has circulated the list of individuals 
and entities that have been included on the UN 1267 
Sanctions Committee's consolidated list with instructions 
to identify, freeze and seize terrorist assets.  To date no 
such assets have been identified.  Sri Lanka has signed the 
1999 convention for the suppression of the financing of 
terrorism. 
 
Offshore financial centers 
-------------------------- 
 
5.  Sri Lanka is not considered an offshore financial 
center.  Offshore banking units are allowed to operate as a 
part of a commercial bank operating in the country in order 
to facilitate trade finance.   They are subject to Central 
Bank supervision.  Bearer shares are not permitted for 
banks and companies. 
 
International Cooperation 
------------------------- 
 
6.  Sri Lanka is a party to the 1988 UN Drug Convention and 
the 1999 international convention for the suppression of 
terrorist financing. 
 
Asset forfeiture and seizure legislation 
---------------------------------------- 
 
7.  Regulations under the United Nations Act no 45 of 1968 
provide for freezing and forfeiture of assets of financiers 
of terrorism.  There is no specific provision in law to 
freeze and forfeit narcotics related assets.  Trafficking, 
possessing, importing or exporting of narcotics is 
punishable by death or life imprisonment under the Poisons, 
Opium and Dangerous Drugs Ordinance (OPDDO).  Draft 
amendments to OPDDO and a separate draft money-laundering 
bill are expected to include asset forfeiture and seizure 
provisions for narcotics related crimes and money 
laundering. 
 
Wills