Sri Lanka to criminalize unauthorized overseas fund transfers

Sri Lanka’s Cabinet of Ministers has granted in-principle approval to amend the Foreign Exchange Act, No. 12 of 2017, to criminalize unauthorized outward transfers of funds. The move aims to address gaps in the current legal framework that prevent law enforcement from pursuing criminal prosecutions for illegal capital flight.

Under existing regulations, certain transactions—such as when an entity remits funds overseas as an advance payment for imports but fails to bring the goods into the country within a reasonable timeframe—are classified as unauthorized transfers. Currently, the Central Bank of Sri Lanka is limited to imposing monetary penalties in local currency, which the government deems insufficient to deter such activities.

The proposed amendment, submitted by the President in his capacity as Minister of Finance, Planning, and Economic Development, will provide investigative and law enforcement agencies with the statutory power to initiate formal criminal investigations and prosecutions against offenders.