FINANCIAL CHRONICLE – The recent implementation of mandatory Beneficial Ownership (BO) disclosure in Sri Lanka marks a significant move towards enhancing corporate transparency and aligning with international standards on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), according to Deloitte Sri Lanka.
The effectiveness of this reform will be determined by its execution, integration, and the extent to which it is utilized to foster improved governance and economic results, the professional services firm emphasized. Disna Perera, the Director of Corporate Secretarial at Deloitte Sri Lanka, noted, “As Sri Lanka moves forward with this reform, the emphasis should shift from mere disclosure to building capability. It is essential to ensure data accuracy through verification, integrate BO information within regulatory frameworks, adopt a risk-based enforcement approach, and invest in raising awareness and developing institutional capacity to fully realize its benefits.”
Deloitte pointed out that beneficial ownership frameworks are most impactful when they transcend basic compliance and become integrated into the broader financial and digital landscape of a nation, thereby promoting trust, resilience, and sustainable value creation across various institutions and markets.
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Insights can be gleaned from the experiences of the United Kingdom, the European Union, and other regional economies that have faced similar structural challenges. For instance, India has taken a more proactive stance with its Significant Beneficial Ownership framework, which mandates companies to actively identify individuals in control, moving beyond reliance on shareholder declarations.
Countries like Singapore and Malaysia further illustrate how well-structured, technology-driven systems can aid in the effective collection and standardization of BO data. Their centralized frameworks combine straightforward regulatory guidelines with digital submission methods and system-based validation, allowing regulators to maintain accurate and reliable ownership records.
However, Deloitte notes that Sri Lanka’s beneficial ownership framework has distinct features compared to those in neighboring jurisdictions. In Singapore, for example, company secretaries typically are not required to verify beneficial ownership information unless there are indications of inaccuracy. Similarly, India’s framework does not impose the responsibility of independent verification on its Significant Beneficial Ownership declarations, relying mainly on the information disclosed by shareholders and beneficial owners.
In contrast, Sri Lanka’s regulatory structure places a heavier burden of independent verification on directors and company secretaries who submit BO declarations to the Registrar of Companies on behalf of beneficial owners. This situation poses a practical challenge, as these officials often depend on the information provided by the beneficial owners, especially when the owner is a non-resident.
Deloitte suggests that the extensive verification responsibilities assigned to directors and company secretaries may not lead to the desired regulatory outcomes. Instead, greater value could be realized through improved technological integration among key regulatory agencies, such as the Department of Registration of Persons (Sri Lanka Unique Digital ID Project), the Inland Revenue Department, the banking sector, and the Registrar of Companies, alongside the creation of national data-sharing partnerships.
This approach would enhance regulatory oversight through the provision of more accurate, real-time data validation. In many regions, beneficial ownership disclosure frameworks have matured significantly, with processes becoming increasingly streamlined and efficient. For example, in the United Kingdom, Persons with Significant Control (PSCs) must verify their identities directly via the Companies House system, which also allows companies to make appropriate disclosures when PSCs cannot be identified.
Sri Lanka stands to benefit from these international practices to create a balanced framework that reinforces compliance requirements while fostering a credible and investment-friendly business atmosphere. Ultimately, the effectiveness of Sri Lanka’s BO regime will hinge on its reception and implementation. Jurisdictions that have maximized the advantages of beneficial ownership frameworks are those that view them as essential to transparency, trust, and digital governance.
For Sri Lanka, the potential lies in adopting this outlook and transforming regulatory reforms into concrete improvements in governance, enhanced transparency, and long-term economic resilience.
