Move to prevent money laundering, terrorist financing :

FIU issues strict guidelines

Threshold raised to Rs One million:

Hiran H. Senewiratne

The Financial Intelligence Unit (FIU), an arm of the Central Bank has issued strict guidelines for the securities sector to report on financial transactions above the threshold level in the Colombo Stock Exchange.

According to provisions of the Financial Transactions Reporting Act, the Central Bank has issued directives to the securities sector, especially for stockbrokers through the Securities and Exchange Commission (SEC) that any transactions above the current threshold of one million rupees should be reported to the FIU.

All stockbrokers who are frontliners in the securities business are required to comply with the provisions in the Financial Transaction Reporting Act.

The purpose of this move is to prevent money laundering and terrorist financing in the country, a spokesman for the Central Bank said. Earlier the threshold level was Rs. 500,000 and now it has been increased to Rs. 1,000,000, Central Bank sources said.

In addition if there is any knowledge or reasons to believe any suspicious transaction in the Colombo Stock Exchange (CSE), it is mandatory for stockbrokers to report it to the FIU as a suspicious transaction report. The guidelines are issued by the FIU to all stockbrokers through the SEC, sources said.

All stockbrokers have to comply with the customer identification procedures and customer due diligence as well, the spokesman said.

The other procedural laws that are applicable are No. 5 of 2006 Money Laundering Act and No 25 of 2005, The Convention on the Suppression of the Terrorist Finance Act, which prevents money laundering and terrorist financing in the country.

According to the Central Bank, at the outset, banks and finance companies are under the FIU and now it has issued directives to the securities and the insurance sectors. Therefore, all financial businesses and all designated non-financial business entities come under this purview. The FIU will issue such directions step by step, the spokesman said.

SEC Chairman Udayasiri Kariyawasam said that the Central Bank has been empowered to implement the Financial Transaction Act and other related Acts. This is a good move to prevent money laundering and terrorist financing in the country, he said.

According to SEC sources all stockbrokers should practise the Know Your Customer/Client (KYC) system and the customers due diligence including the profiles.

The FIU is looking into the areas of money laundering and terrorist financing, where all stockbrokers who are frontliners in the securities business are required to comply with the provisions in the Financial Transaction Reporting Act.

CSE Chief Executive Officer (CEO) Sureka Sellahewa said that they have to abide by these regulations.

Asha Phillip Securities Ltd Compliance Officer Janani Paranavidana said that since the SEC issued guidelines through the FIU they are compelled to abide by those guidelines.