FATF status

Sri Lanka is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement - 18 October 2019

The FATF welcomes Sri Lanka's significant progress in improving its AML/CFT regime and notes that Sri Lanka has strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in November 2017. Sri Lanka is therefore no longer subject to the FATF’s monitoring process under its ongoing global AML/CFT compliance process. Sri Lanka will continue to work with APG to improve further its AML/CFT regime.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Sri Lanka was a follow-up to the APG evaluation that took place in 2021. According to the Evaluation, Sri Lanka was deemed Compliant for 7 and Largely Compliant for 25 of the FATF 40 Recommendations. It remains Highly effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

Sri Lanka has established laws to combat corruption; however, enforcement is often weak, hindering foreign investment and infrastructure projects. The Commission to Investigate Allegations of Bribery or Corruption is seen as ineffective, focusing mainly on minor cases rather than significant national issues. Despite recent legislative efforts to strengthen anti-corruption measures, including a new bill in 2023, the political will and resources needed for effective enforcement remain inadequate.

Sri Lanka is a lower middle-income country with a population of approximately 22 million, currently recovering from an economic crisis that caused significant political upheaval in 2022. The economy showed signs of recovery with a 1.6 percent year-on-year GDP growth in the third quarter of 2023, although it contracted by 2.3 percent for the entire year. Key challenges include high poverty levels, income inequality, and a weak balance of payments, with major export categories like apparel experiencing significant declines.

Sri Lanka's investment climate is currently challenging due to ongoing economic reforms and political uncertainty. Despite the government's commitment to attracting foreign direct investment (FDI) and implementing reforms, issues such as high transaction costs, bureaucratic inefficiencies, and corruption continue to deter potential investors. In 2023, foreign investment was approximately $730 million, with the government aiming for $5 billion in FDI by 2025, but the upcoming presidential elections in 2024 may further complicate the investment landscape.