Sri Lanka Central Bank imposes Rs.14.6mn worth penalties on key firms for non-compliance as the Financial Intelligence Unit (FIU) intensified enforcement against financial institutions and designated non-financial businesses that failed to meet mandatory anti-money laundering obligations.
Sri Lanka Central Bank imposes Rs.14.6mn worth penalties on key firms for non-compliance amid AML scrutiny
The Central Bank of Sri Lanka said its Financial Intelligence Unit imposed administrative penalties totaling Rs. 14.6 million on 11 institutions between October 2025 and March 2026 for serious breaches of the Financial Transactions Reporting Act (FTRA). The enforcement action targeted both financial institutions and designated non-financial businesses and professions (DNFBPs), highlighting persistent weaknesses in the country’s AML/CFT compliance framework.
Among the institutions penalized were banks, finance companies, securities firms, insurance companies and jewellery businesses. The violations ranged from failures to report large cash and electronic fund transfer transactions to deficiencies in customer due diligence, sanctions screening, record-keeping and compliance monitoring.
LB Finance PLC was fined Rs. 1 million after failing to report nine Cash Transaction Reports (CTRs) and Electronic Fund Transfer (EFT) transactions exceeding the regulatory threshold. Cargills Bank PLC received a Rs. 2 million penalty for failing to report 18 qualifying EFT transactions and for not maintaining an updated list of individuals designated under United Nations Security Council sanctions.
LOLC Securities Limited and Janashakthi Finance PLC were each fined Rs. 1 million for similar reporting failures.
Indian Overseas Bank was also penalized Rs. 1 million after investigators found multiple shortcomings, including failures to report qualifying transactions, inadequate customer verification procedures for wire transfers and delays in updating sanctions screening systems.
The largest penalty of Rs. 3 million was imposed on Citizens Development Business Finance PLC. According to the FIU, the company maintained business relationships with three individuals listed under United Nations sanctions regulations while failing to freeze their assets or notify authorities within the required 24-hour period. The institution was also found to have weaknesses in customer screening and ongoing monitoring processes.
Sanasa Life Insurance Company PLC received a Rs. 2 million penalty for several compliance failures, including inadequate monitoring of politically exposed persons (PEPs) and incomplete sanctions list maintenance.
Among the designated non-financial businesses, Swarnamahal Jewellers Ltd. was fined Rs. 2 million after regulators identified significant deficiencies in customer due diligence, beneficial ownership identification, sanctions screening, record-keeping and risk assessment procedures. Colombo Jewellery Stores, Zay’s (Pvt) Ltd. and Harbour Village (Pvt) Ltd. were also penalized for weaknesses related to sanctions compliance and risk assessment.
The latest enforcement action comes at a crucial time as Sri Lanka seeks to strengthen its anti-money laundering framework and avoid being placed on the FATF grey list for a third time. Earlier this year, the country underwent a mutual evaluation by the Asia/Pacific Group on Money Laundering (APG) on behalf of the Financial Action Task Force (FATF), with authorities under pressure to demonstrate effective implementation of international standards.
The FIU noted that while examinations did not always uncover direct links between institutions and sanctioned individuals or entities, the identified compliance gaps created opportunities for financial crime and terrorist financing. Regulators highlighted recurring issues such as delayed sanctions screening updates, inadequate customer verification and weak oversight by senior management.
Financial analysts warn that persistent shortcomings in AML/CFT compliance could have wider economic consequences. Weak controls can undermine confidence in Sri Lanka’s financial system, prompting international correspondent banks to impose stricter due diligence measures or reduce banking relationships altogether. Such outcomes could increase transaction costs, delay remittances and restrict access to international financial markets.
Previous periods on the FATF grey list have been associated with weaker foreign investment, tighter access to international capital and increased borrowing costs. Experts caution that renewed international scrutiny would place additional compliance burdens on legitimate Sri Lankan businesses while slowing the country’s ongoing economic recovery and reducing investor confidence.
The penalties collected through the latest enforcement action will be credited to the Consolidated Fund, while regulators are expected to continue strengthening supervision to improve compliance standards across Sri Lanka’s financial and business sectors.