FINANCIAL CHRONICLE – In an effort to address unauthorized capital flight, Sri Lanka’s parliament has introduced new regulations under the Import and Export (Control) Act. This initiative follows police investigations revealing that over $715 million had left the nation through loopholes in advance payment systems, without the corresponding goods being imported.
During the parliamentary session, Anil Jayantha, the Deputy Minister of Finance and Planning, outlined the proposed amendments, which are encapsulated in Regulation No. 5 and Regulation No. 6 of 2026. These regulations are designed to eliminate trade irregularities, safeguard local industries, and ensure a level playing field for businesses that comply with tax obligations.
The government reported that inquiries conducted by the Criminal Investigation Department (CID) and other law enforcement agencies from 2023 to 2026 uncovered a significant scheme involving approximately 55 individuals and 107 companies that were taking advantage of foreign exchange regulations.
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Currently, importers are allowed a timeframe of 360 to 720 days to bring goods into Sri Lanka after making advance payments abroad. However, some entities exploited this provision to transfer funds without delivering any imports.
Jayantha emphasized that the new regulations aim to rectify these inefficiencies, improve oversight, and eliminate the loopholes that have been misused by certain groups for illicit activities.
Under the revised regulations, it will be mandatory for importers to register with the Customs Department prior to banks processing advance payments. Additionally, importers must provide transaction details, beneficiary information, and both a Unique Identification Number (UIN) and Taxpayer Identification Number (TIN).
The government also plans to submit a Cabinet paper proposing amendments to the Foreign Exchange Act No. 12 of 2017, which seeks to reclassify the failure to remit foreign exchange as a criminal offense, as opposed to a civil matter that incurs only Central Bank fines.
“The substantial outflow of around $715 million has negatively impacted our balance of payments,” Jayantha stated.
In response, Opposition MP Harsha de Silva contended that the root cause of the issue lies not in the absence of new laws, but rather in the inadequate enforcement of existing regulations and poor technical coordination.
De Silva highlighted a significant flaw in the Customs department’s ASYCUDA system, which is unable to align customs documentation with bank transaction records. He also noted that trade-based money laundering intelligence from the Central Bank’s Financial Intelligence Unit (FIU) has not been acted upon.
“The challenge is with the ASYCUDA system, which cannot reconcile the Customs declaration documents with banking transaction documents,” de Silva remarked.
During committee hearings, police officials disclosed critical enforcement failures, such as instances where bank accounts were opened with a simple punctuation mark instead of a valid TIN, and shell companies registered with the Registrar of Companies (ROC) that lacked verified addresses or background checks.
De Silva cautioned that requiring legitimate importers to register with multiple state agencies would lead to significant bureaucratic delays and increased costs for consumers.
“Due to the lack of coordination, these criminals evade capture. Instead of enforcing existing laws, the government introduces new regulations!” de Silva asserted.
In addressing concerns about potential disruptions to business operations, Jayantha assured Parliament that compliant importers should have no worries, specifying that recent arrests were strictly related to non-compliance with customs inquiries. (Colombo/Jul23/2026)
