By The Pulseline News Desk
The Government is preparing to tighten Sri Lanka’s foreign exchange laws by making unauthorised transfers of funds out of the country a criminal offence, following policy approval granted by the Cabinet to amend the Foreign Exchange Act, No. 12 of 2017.
The proposed amendment is aimed at strengthening the legal framework governing the movement of foreign currency overseas and giving investigative and law-enforcement authorities greater powers to act against transactions that result in funds being transferred abroad without the corresponding economic activity taking place.
One of the situations specifically identified by the Government involves advance payments made overseas for the importation of goods.
Under the proposed changes, if an individual remits money abroad as an advance payment for goods but fails to bring the relevant goods into Sri Lanka within a reasonable period, the transaction could be treated as an unauthorised foreign exchange transfer.
The move seeks to address a gap in the existing legal framework, under which such transactions can attract financial penalties but do not necessarily constitute criminal offences under the Foreign Exchange Act.
At present, the Central Bank of Sri Lanka (CBSL) has the authority to impose a financial penalty equivalent to the value of an unauthorised remittance, calculated in Sri Lankan rupees.
However, because such transactions are not currently classified as criminal offences under the Act, the scope for pursuing criminal proceedings is limited.
The proposed amendment would therefore mark a significant shift from a primarily administrative and financial penalty-based approach towards a framework that allows certain unauthorised outward transfers to be treated as criminal conduct.
The Government has identified the need for stronger legal provisions to enable investigative and law-enforcement agencies to take more effective action where funds have been transferred overseas in breach of foreign exchange regulations.
Cabinet has consequently granted policy approval to amend the 2017 Act and introduce specific provisions establishing unauthorised outward fund transfers as criminal offences.
The proposal had been submitted by President Anura Kumara Dissanayake in his capacity as Minister of Finance, Planning and Economic Development.
The proposed changes come against the backdrop of Sri Lanka’s continuing efforts to strengthen foreign exchange management and safeguard the country’s external financial position.
Foreign exchange controls have remained particularly important following the economic and foreign currency crisis that placed severe pressure on Sri Lanka’s reserves and external payments position.
The Government’s latest move indicates a desire to close legal loopholes that could allow funds to leave the country without the underlying import or commercial transaction being completed.
At the same time, the effectiveness of the proposed amendment will depend on how the new criminal provisions are defined and enforced, particularly in determining when an import-related delay becomes an unauthorised transfer and what constitutes a “reasonable period” for completing an import.
The amendment is therefore likely to attract attention from importers, businesses and financial institutions, as well as law-enforcement and regulatory authorities.
For businesses making legitimate advance payments to overseas suppliers, clarity on compliance requirements will be crucial. For authorities, the challenge will be to distinguish genuine commercial delays from transactions designed to move funds out of the country without importing the goods concerned.
With Cabinet policy approval now granted, the proposed amendment is expected to proceed through the relevant legislative process.
If enacted, the changes would give Sri Lanka a stronger legal basis to pursue unauthorised outward fund transfers as criminal offences, marking another step in the Government’s efforts to strengthen foreign exchange controls and protect the country’s limited foreign currency resources.
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