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Cablegate: 2002-2003 International Narcotics Control

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 COLOMBO 000059

SIPDIS

DEPARTMENT FOR SA/INS, INL
JUSTICE FOR OIA, AFMLS, AND NDDS
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: SNAR EFIN PGOV PREL CE
SUBJECT: 2002-2003 International Narcotics Control
Strategy Report (INSCR) Part II Financial Crimes and Money
Laundering - Sri Lanka

REF: (A) 02 STATE 240035
(B) 02 COLOMBO 2314
(C) 02 COLOMBO 2304

1. Provided below is response to ref A request for
information on Sri Lanka's regulations and practices
regarding financial crimes and money laundering.

2. Sri Lanka is neither an important regional financial
center nor a preferred center for money laundering. There
is no significant market for black market goods.
Government policy and practice do not encourage or
facilitate laundering proceeds from illegal drug
transactions, serious crimes or terrorist financing. While
Sri Lanka recently experienced a failure of a small savings
bank due to fraud by senior bank officials, there has been
no evidence linking their activities to money laundering or
terrorist financing. Nothing suggests that Sri Lanka's
financial institutions engage in currency transactions
involving international narcotics trafficking.

Money laundering
----------------

3. Money laundering per se is not a criminal offence. As
of January 2003, a draft law to deal with money laundering
has been approved by the Central Bank and sent to the
Ministry of Justice for review and presentation to cabinet
and parliament. Currently, financial transactions relating
to terrorism and narcotics are illegal under Central Bank
regulations and Bank Secrecy laws. In December 2001, the
Central Bank introduced regulations on customer due
diligence. However, the Central Bank continues to allow
the operation of bearer certificates (i.e. nameless
certificates of deposits).

Terrorist Finance
-----------------

4. Based on UN Regulation 1 of 2001 (made by the Minister
of Foreign Affairs of Sri Lanka on October 16, 2001)
terrorist financing is an offense punishable by
imprisonment for a period of 5 to 10 years. The Central
Bank of Sri Lanka has circulated the list of individuals
and entities that have been included on the UN 1267
Sanctions Committee's consolidated list with instructions
to identify, freeze and seize terrorist assets. To date no
such assets have been identified. Sri Lanka has signed the
1999 convention for the suppression of the financing of
terrorism.

Offshore financial centers
--------------------------

5. Sri Lanka is not considered an offshore financial
center. Offshore banking units are allowed to operate as a
part of a commercial bank operating in the country in order
to facilitate trade finance. They are subject to Central
Bank supervision. Bearer shares are not permitted for
banks and companies.

International Cooperation
-------------------------

6. Sri Lanka is a party to the 1988 UN Drug Convention and
the 1999 international convention for the suppression of
terrorist financing.

Asset forfeiture and seizure legislation
----------------------------------------

7. Regulations under the United Nations Act no 45 of 1968
provide for freezing and forfeiture of assets of financiers
of terrorism. There is no specific provision in law to
freeze and forfeit narcotics related assets. Trafficking,
possessing, importing or exporting of narcotics is
punishable by death or life imprisonment under the Poisons,
Opium and Dangerous Drugs Ordinance (OPDDO). Draft
amendments to OPDDO and a separate draft money-laundering
bill are expected to include asset forfeiture and seizure
provisions for narcotics related crimes and money
laundering.

Wills

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