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Imposition/Collection of Administrative Penalties by the Financial Intelligence Unit (FIU) to Enforce Compliance on Financial Institutions during the Fourth Quarter of 2021

By virtue of the powers vested under Section 19 (1) read together with section 19 (2) of the Financial Transactions Reporting Act, No. 6 of 2006 (FTRA), financial penalties are imposed on Institutions for non-compliance with the provisions of the FTRA. The penalty may be prescribed taking into consideration the nature and gravity of relevant non- compliance of the Financial Institution.

Accordingly, as Sri Lanka’s regulator for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), the FIU collected penalties as indicated below, amounting to Rs. 1.5 million in total for the period from 1 October 2021 to 31 December 2021 to enforce compliance on Financial Institutions. The money collected as penalties were credited to the Consolidated Fund.

Recommendations made by the Advisory Committee for Revival of Failed Licensed Finance Companies

The Monetary Board of the Central Bank of Sri Lanka (Monetary Board) established the Advisory Committee for Revival of Failed Finance Companies (Committee) in October 2021 to examine possible revival options for five (5) failed finance companies, i.e., Central Investments & Finance Ltd., ETI Finance Ltd., TKS Finance Ltd., The Finance Company PLC and The Standard Credit Finance Ltd, of which licenses have been either cancelled or suspended. The Monetary Board has vested the Committee with the responsibility of recommending possible revival options or recommending liquidation for aforementioned five failed finance companies if such revival options do not seem feasible.

The Committee submitted its final report to the Monetary Board on 31.05.2022, after careful consideration of several proposals submitted by different parties for revival of four (4) of the above-mentioned companies.

Amending Limits and Terms and Conditions on Possession of Foreign Currency

With the intention of attracting foreign currency in the hands of the public into the formal banking system, the Minister of Finance has issued an Order under Section 8 of the Foreign Exchange Act No. 12 of 2017 as follows: 

  1. Reducing the amount of foreign currency retained in possession by a person in, or resident in, Sri Lanka from USD 15,000 to USD 10,000 or its equivalent in other foreign currencies.
  2. Granting an amnesty period of 14 working days effective from the date of the Order (16 June 2022) for persons in, or resident in, Sri Lanka who hold foreign currency notes in possession for the following:

i.To deposit into a Personal Foreign Currency Account or into a Business Foreign Currency Account as specified in the Order, or

The Central Bank of Sri Lanka Launches the International Transactions Reporting System

Recognising the need to implement a comprehensive cross border transactions and domestic foreign currency transactions monitoring system as a key national priority, the Central Bank of Sri Lanka (CBSL) has implemented a new data collecting system known as the International Transactions Reporting System (ITRS) with the participation of Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs). The ITRS is a comprehensive data gathering system on cross border transactions and domestic foreign currency transactions and is aimed at filling multitude of existing data gaps. It will help policy formulation in many aspects by providing valuable inputs for both statistical and regulatory purposes. The ITRS system will serve a number of purposes, including the enhancement of Balance of Payments Statistics, including export proceeds, imports, services account transactions such as IT/BPO transactions, workers’ remittances, financial account transactions, and many other statistical data inputs.

NCPI based headline inflation accelerated further on year-on-year basis in May 2022

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100) increased to 45.3% in May 2022 from 33.8% in April 2022. This increase in Y-o-Y inflation was driven by the monthly increases of both Food and Non-Food categories. Accordingly, Food inflation (Y-o-Y) increased to 58.0% in May 2022 from 45.1% in April 2022, while Non-Food inflation (Y-o-Y) increased to 34.2% in May 2022 from 23.9% in April 2022.

Sri Lanka Purchasing Managers’ Index - May 2022

Purchasing Managers' Indices for both Manufacturing and Services activities indicated a subdued performance in May 2022.

Manufacturing PMI recorded an index value of 50.3 in May 2022, with an increase of 13.9 index points from the seasonally low value in the month of April.

Services PMI dropped marginally to an index value of 42.4 in May 2022 indicating a contraction in services activities for the second consecutive month.