FIU Tightens Bank Compliance Rules Ahead of Global Review 📈

Sri Lanka's Financial Intelligence Unit (FIU) is introducing a stricter Customer Due Diligence (CDD) framework for banking, finance, insurance, and virtual asset service providers by mid-September to align with global Anti-Money Laundering (AML) standards. • New Regulations & Requirements • Continuous transaction monitoring replaces one-off onboarding checks. • Mandatory "event-driven reviews" triggered by material changes in ownership, control, directors, or business scope. • Failure to complete CDD halts onboarding, transactions, and business relationships, requiring a Suspicious Transaction Report (STR). • Risk-based updates: Annual CDD for high-risk clients vs. every 3 years for low-risk clients. • Penalties & Enforcement • Maximum fine for a single AML breach rises from Rs. 1 Mn to Rs. 100 Mn (up to Rs. 200 Mn for repeat violations). • Additional sanctions include cease-and-desist orders and license suspensions. • National Economic Impact • Institutions get 4-5 weeks to comply before an international evaluation team arrives on October 26. • Crucial to prevent re-listing on the FATF grey list, which risks country ratings, correspondent banking links, foreign investment, and borrowing costs.