FIU fines 11 institutions Rs.14.6mn over anti-money laundering failures

Sri Lanka’s Financial Intelligence Unit (FIU) imposed penalties totalling Rs.14.6 million on 11 institutions for anti-money laundering and counter-terrorist financing compliance failures, including one finance company found to have maintained business relationships with three individuals designated under the United Nations regulations.

The penalties, imposed between October 2025 and March 2026, covered seven financial institutions and four non-financial businesses, according to the information released by the FIU.

Citizens Development Business Finance PLC received the largest single penalty of Rs.3 million, after an onsite examination identified the weaknesses in its procedures for screening the prospective and existing customers against the lists of designated individuals and entities.

The FIU said the deficiencies had resulted in the company establishing and maintaining business relationships with three individuals designated under the regulations implementing United Nations Security Council Resolution 1373.

CDB Finance had also failed to freeze funds, financial assets and economic resources held by designated persons and had not informed the FIU within 24 hours after identifying the customers, the regulator said.

The company paid the penalty on January 19, 2026.

The findings come as Sri Lanka works to strengthen its anti-money laundering and countering the financing of terrorism framework ahead of the increased international scrutiny of its financial system.

Cargills Bank PLC was fined Rs.2 million for failing to report 18 electronic fund transfers exceeding Rs.1 million within the stipulated period and for not maintaining a complete and updated list of designated persons, groups and entities.

The FIU said the bank’s screening tool had not been updated on time. However, its examination did not uncover any business relationships with designated individuals or entities.

Indian Overseas Bank was penalised Rs.1 million for several compliance failures, including not reporting 13 transactions exceeding Rs.1 million within the prescribed period and weaknesses in screening the customers involved in wire transfers.

The bank had also failed to maintain updated sanctions lists and promptly incorporate the FIU notifications into its screening system. No relationships with designated parties were identified, the FIU said.

Sanasa Life Insurance Company PLC was fined Rs.2 million after it failed to report nine cash transactions above the Rs.1 million threshold and maintain complete sanctions lists.

The insurer had also failed to adequately screen the customers and beneficiaries under the group insurance policies and obtain senior management approval before establishing a business relationship with a politically exposed person. The examination did not find relationships with designated individuals or entities.

LB Finance PLC and LOLC Securities Ltd were each fined Rs.1 million for delays in reporting transactions exceeding Rs.1 million. The FIU said LB Finance had failed to report nine transactions from an examination sample, while LOLC Securities had not reported 12 electronic fund transfers within the stipulated period.

Janashakthi Finance PLC was fined Rs.1 million over the delays in screening some prospective customers against the designated lists before establishing business relationships. The examination did not reveal the relationships with designated individuals or entities.

The enforcement action also extended beyond the formal financial sector.

Swarnamahal Jewellers Ltd received a Rs.2 million penalty for multiple deficiencies, including failures to collect and verify customer and beneficial-owner information, retain identification records, undertake a money laundering and terrorist financing risk assessment and screen customers against the sanctions lists.

Harbour Village (Pvt.) Ltd was fined Rs.1 million for shortcomings in customer screening and for failing to establish a mechanism to rescreen the existing customers when the designated lists were updated.

Colombo Jewellery Stores (Pvt.) Ltd received a Rs.500,000 penalty for failing to conduct a company-level money laundering and terrorist financing risk assessment, while Zay’s (Pvt.) Ltd was fined Rs.100,000 for not screening the customers and beneficiaries against the designated lists.

The FIU said the penalties were imposed under the Financial Transactions Reporting Act and reflected the nature and gravity of the respective compliance failures. The proceeds from the penalties were credited to the government’s Consolidated Fund.