‘Precautions in place to prevent laundered money from entering CSE’


By Hiran H.Senewiratne

The Colombo Stock Exchange (CSE) has a well secured mechanism to prevent ill gotten money from entering the stock market by way of money laundering and funds that are coming from nefarious activities, Head, Marketing Development at the CSE Niroshan Wijesundera said.

"Sri Lanka's addition as a money laundering destination to an EU list has caused some concern that people involved in money laundering businesses will invest in the CSE. But it will not happen because all funds that come to the CSE will come from banking channels, Wijesundera told The Island Financial review when asked whether there is a possibility of laundered 'Black Money' infiltrating the CSE.

He said that apart from normal banking channels to send money, every investor has to complete a CSE application document called "Know Your Customer", in which one has to indicate where he/she gets funds for the investment. "Therefore, banks and the CSE carefully scrutinize all the moneys and their sources until they get invested in stock, he said.

Wijesundera further said that the Sri Lanka government is reportedly working with the international community and international financial institutions to address these issue. "Therefore, the CSE always takes necessary steps to prevent such money entering the CSE," he added.

The Inter Governmental Financial Action Task Force (FATF) had listed Sri Lanka among eleven high risk and monitored jurisdictions that have taken insufficient measures to combat money laundering, terrorist financing and other threats to the international financial system, media reports said.

"When one transfers funds from one county to another through a bank, the sender has to open up a sierra account, which is one of the best systems to prevent ill gotten money from entering the CSE, Wijesundera said.

The Securities and Exchange Commission (SEC) has issued guidelines to stockbrokers in line with Sri Lanka’s laws regarding money laundering and terrorist financing where foreign transactions exceeding the equivalent of Rs. 1 million are mandatorily reported to the SEC.

"There are guidelines in place that have been formulated in collaboration with the Financial Investigations Unit of the Central Bank, an analyst said.

"These guidelines require brokers to practice customer due diligence and follow ‘Know Your Customer ‘policies which require brokers to know as much as they can about their clients. Also, transactions at the Colombo Stock Exchange which exceed Rs. 1 million have to be reported to the regulator. This is a mandatory requirement," he said.

Sri Lanka has introduced the following Acts to combat money laundering and terrorism financing:: the Convention on the Suppression of Terrorist Financing Act No. 25 of 2005, the Prevention of Money Laundering (PMLA) Act No. 5 of 2006 and the Financial Transaction Reporting (FTRA) Act No. 6 of 2006.

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