Sri Lanka import fraud investigators examine US$715 million in suspected transfers as COPF identifies banking, Customs and reporting failures.
The Sri Lanka import fraud investigation has exposed serious weaknesses in banking controls, Customs data and regulatory coordination, according to the Committee on Public Finance.
COPF examined suspected overseas transfers valued at about US$715 million. Authorities believe businesses may have sent the money abroad through questionable import transactions and advance payments.
However, the committee’s inquiry has not established that every payment was fraudulent. Investigators must still identify the companies, beneficial owners and transactions linked to possible offences.
During a meeting at the Parliamentary Complex, committee members said the suspected scheme did not result from an absence of laws.
Instead, they blamed weak enforcement, poor information-sharing and failures by institutions responsible for monitoring foreign exchange and imports.
Sri Lanka Import Fraud Exposed Banking Weaknesses
COPF criticised state-owned and private banks over their handling of outward remittances linked to imports.
The committee said some banks had failed to follow mandatory reporting and verification procedures. It also heard allegations that institutions processed certain transactions without obtaining the importer’s Taxpayer Identification Number.
Such failures could make it harder for authorities to connect overseas payments with registered importers, tax records and goods entering Sri Lanka.
COPF Chairman Dr. Harsha de Silva said the committee had identified serious gaps in the reporting process.
“The most regrettable fact we found is that both state and private banks have not strictly followed the mandatory reporting rules for foreign remittances,” he said.
“It is this regulatory gap that the racketeers have exploited.”
Officials from the Central Bank’s Financial Intelligence Unit reportedly told the committee that banks had previously received instructions to monitor advance-payment transactions closely.
Financial institutions also have obligations to report suspicious transactions under Sri Lanka’s anti-money laundering framework. The FIU monitors electronic fund transfers and receives suspicious transaction reports from reporting institutions.
However, the committee heard that implementation had remained inconsistent.
Customs Records Limit the Investigation
COPF also raised concerns about gaps in Sri Lanka Customs data.
According to the supplied report, investigators encountered difficulties when seeking transaction records from before 2023. The limitation has made it harder to determine when the suspected activity began and calculate its full value.
Authorities are examining whether importers sent advance payments overseas without bringing the corresponding goods into Sri Lanka.
Such transactions could indicate foreign exchange abuse, trade-based money laundering or false import documentation. However, each payment requires individual examination before investigators can classify it as unlawful.
The committee also discussed the Foreign Exchange Act No. 12 of 2017.
Participants reportedly questioned whether moving certain foreign exchange violations from criminal enforcement into a civil regulatory system weakened deterrence.
However, the change in legal classification alone does not prove that it caused the suspected transactions. Investigators must establish how companies, intermediaries and banks allegedly exploited the framework.
The absence of integrated, accessible historical data remains a major obstacle.
A real-time link between banking information and Customs’ ASYCUDA platform could help officials compare overseas payments with import declarations and actual cargo arrivals.
Shell Companies Conceal Beneficial Owners
The inquiry also focused on shell companies and nominal directors.
Investigators suspect that some entities existed mainly to facilitate transactions while concealing the people who ultimately controlled or benefited from them.
This creates difficulties for law enforcement because the registered director or shareholder may not be the true decision-maker.
The Government has been working on stronger beneficial ownership requirements under company law. Such measures require companies to identify the individuals who ultimately own or control them.
The Registrar of Companies is responsible for administering Sri Lanka’s company registration framework and monitoring compliance under the relevant legislation.
According to the supplied article, amendments scheduled to take effect on September 30 would require company secretaries to certify beneficial ownership information. False declarations would also become criminal offences.
That specific commencement date and the final wording should be checked against the enacted law or official Gazette before publication.
Accurate beneficial ownership records would also support Sri Lanka’s efforts to meet international anti-money laundering standards and reduce the risk of financial grey-listing.
COPF Calls for Enforcement, Not More Burdens
Dr. de Silva argued that authorities should properly enforce the existing rules before imposing additional obligations on legitimate businesses.
“The answer to weak regulation is not to burden law-abiding importers with additional regulations,” he said.
“It is to properly enforce the regulations we already have and arrest the fraudsters.”
The committee’s position reflects a central concern in the investigation. Sri Lanka already has institutions responsible for Customs control, taxation, foreign exchange supervision and suspicious transaction reporting.
The problem identified by COPF is that these agencies allegedly failed to combine their information quickly enough to detect unusual patterns.
In the past, Customs, banks, the Central Bank, the Inland Revenue Department and law enforcement bodies reportedly operated with limited coordination.
Multi-Agency Committee Given Two Months
A National Coordination Committee involving 22 state institutions is now expected to improve information-sharing and enforcement.
The proposed National Digital Identity programme could also help authorities verify the identities of people connected to financial transactions and registered companies.
However, digital identity alone cannot prevent fraud. Authorities would still need accurate records, effective supervision and clear responsibility when institutions ignore warning signs.
COPF has directed the multi-agency body to submit a full report within two months.
The report must address enforcement weaknesses, banking supervision and gaps between foreign remittance records and Customs information.
The Sri Lanka import fraud inquiry now depends on whether investigators can trace the money, identify the beneficial owners and connect individual transfers to missing or falsely declared imports.
Closing those gaps will require more than new legislation. Banks, Customs and regulators must exchange reliable information in real time and act when transactions do not match the goods entering the country.
