Sri Lanka Prevention of Money Laundering Amendment Bill 2026: Key AML Changes

 

Regulation Name: PREVENTION OF MONEY LAUNDERING (AMENDMENT)
Date Of Issue: 05 May 2026
Region: Sri Lanka
Agency: Sri Lanka Parliament

Sri Lanka’s Prevention of Money Laundering (Amendment) Bill 2026: What AML Compliance Leaders Need to Know

Sri Lanka has introduced a significant overhaul of its anti-money laundering framework through the Prevention of Money Laundering (Amendment) Bill, 2026. The proposed amendments substantially strengthen the country’s AML regime by expanding the scope of money laundering offences, enhancing investigative powers, introducing stronger asset recovery mechanisms, improving international cooperation, and aligning the framework more closely with international standards.

The Bill represents one of the most comprehensive updates to Sri Lanka’s AML legislation since the enactment of the Prevention of Money Laundering Act No. 5 of 2006. Financial institutions, designated non-financial businesses and professions (DNFBPs), virtual asset service providers (VASPs), compliance officers, investigators, and regulators will need to closely assess the implications of these reforms.

Why the Amendment Matters

Global AML expectations continue to evolve rapidly under the guidance of the Financial Action Task Force (FATF). Countries are increasingly strengthening legal frameworks around:

• Beneficial ownership transparency
• Asset tracing and recovery
• Virtual assets and cryptocurrency oversight
• Cross-border information sharing
• Proceeds of crime management
• Terrorist financing controls

Sri Lanka’s proposed amendments address many of these priorities and significantly broaden the country’s ability to investigate, freeze, confiscate, and recover illicit assets.

Key Changes Introduced by the Amendment Bill

1. Expanded Jurisdiction Over Money Laundering Offences

One of the most important changes is the expansion of the law’s territorial scope.

The amendments make it clear that the Act applies to:

• Money laundering offences committed within Sri Lanka
• Offences committed partly inside and partly outside Sri Lanka
• Foreign conduct that would constitute money laundering or an unlawful activity if committed in Sri Lanka
• Individuals who commit such acts outside Sri Lanka

This significantly strengthens Sri Lanka’s ability to address transnational financial crime and cross-border laundering networks.

2. Broader Definition of Money Laundering

The Bill substantially widens the scope of conduct that constitutes money laundering.

The revised provisions now explicitly include:

• Use of criminal property
• Purchase of criminal property
• Transfer of criminal property
• Acquisition of beneficial ownership of illicit assets
• Handling property derived from unlawful activity
• Handling property derived from the conversion of criminal proceeds

The law also extends liability to individuals who:

• Facilitate money laundering
• Counsel others in money laundering activities
• Aid or abet laundering offences

This broader approach captures a much wider range of actors involved in laundering schemes.

3. No Predicate Crime Conviction Required

Perhaps the most consequential amendment is the introduction of a new provision clarifying that:

A conviction for the underlying unlawful activity is not required to prove the offence of money laundering.

This means prosecutors can pursue money laundering charges even when the predicate offence has not resulted in a conviction.

The amendment also confirms that individuals may be prosecuted for both:

• The underlying criminal activity; and
• The money laundering offence

This aligns Sri Lanka more closely with modern international AML enforcement practices.

4. Enhanced Freezing Order Powers

The Bill significantly expands authorities’ powers to freeze suspected criminal assets.

A police officer not below the rank of Assistant Superintendent may issue a Freezing Order where there are reasonable grounds to believe:

• A person is involved in money laundering activities; and
• Asset dissipation needs to be prevented

The revised framework allows freezing of:

• Criminal property
• Property of corresponding value
• Property used or intended to be used in connection with money laundering

This marks a major strengthening of preventative asset restraint measures.

5. Longer Asset Freeze Periods

The legislation increases the duration available for freezing and preserving assets.

Key changes include:

Provision	Previous Framework	Amendment
Initial Freezing Order	7 days	14 working days
Court Extension Period	Up to 2 years	Up to 3 years
Interim Court Application Window	7 days	14 working days

These longer timelines provide investigators with greater flexibility to conduct complex financial investigations.

6. Public Notification of Freezing Orders

The High Court will now be empowered to publish notices of confirmed Freezing Orders in:

• The Gazette
• Sinhala newspapers
• Tamil newspapers
• English newspapers

The purpose is to facilitate claims from bona fide third parties with legitimate interests in the affected property.

Stronger Asset Recovery and Forfeiture Regime

Expanded Criminal Property Concept

The Bill introduces a significantly broader definition of criminal property.

The definition now includes:

• Property derived directly or indirectly from unlawful activity
• Converted criminal proceeds
• Income and profits generated from criminal property
• Instrumentalities used in crimes
• Property used in terrorist financing
• Property connected to designated terrorist organizations
• Proceeds generated through terrorist financing activities

This expansion strengthens the legal basis for confiscation and asset recovery proceedings.

Forfeiture of Equivalent Value Assets

The courts will be empowered to order forfeiture of:

• Criminal property itself; or
• Property of equivalent value

Where illicit assets cannot be located or traced, convicted persons may be required to compensate the State for the corresponding value of those assets.

This reflects international best practices regarding value-based confiscation.

Protection for Bona Fide Third Parties

The amendments also provide safeguards for innocent parties.

Courts must consider whether forfeiture would prejudice:

• Bona fide purchasers for value
• Persons holding legitimate interests
• Other good-faith third-party claimants

Affected parties may seek compensation where losses arise from forfeiture orders.

New Beneficial Ownership Focus

The Bill introduces a detailed statutory definition of beneficial ownership.

The definition captures individuals who:

• Ultimately own or control legal entities
• Control trusts and similar arrangements
• Conduct transactions through intermediaries
• Exercise indirect ownership or control

Beneficial ownership is now expressly linked to:

• Companies
• Trusts
• Other legal arrangements

The inclusion of beneficial ownership within the money laundering offence framework reflects global regulatory priorities and FATF recommendations.

Enhanced Investigative Powers

Mandatory Affidavits and Sworn Statements

Individuals under investigation may be required to provide:

• Affidavits
• Sworn statements
• Explanations regarding the origin of assets

Such statements become admissible evidence during money laundering prosecutions.

However, protections remain against compelled self-incrimination.

Special Investigation Techniques

The Bill expressly authorizes advanced investigative methods, including:

• Surveillance
• Observation
• Undercover operations
• Video recording
• Listening devices
• Controlled deliveries
• Access to computer systems and computer data

Court authorization is required for several intrusive techniques, providing judicial oversight while enhancing investigative capabilities.

Joint Investigation Teams

Authorities may establish joint investigation teams involving:

• Sri Lanka Police
• Domestic investigative agencies
• Foreign investigative authorities

Evidence gathered through such teams may be used in court proceedings.

This is particularly important for combating increasingly international money laundering networks.

Major Increase in Penalties

The Amendment Bill substantially raises penalties for non-compliance.

Examples include:

Offence	Previous Maximum Fine	New Maximum Fine
Failure to disclose information	Rs. 50,000	Rs. 500,000
Unlawful disclosure of investigations	Rs. 100,000	Rs. 1,000,000
Violation of Freezing Orders	Rs. 100,000	Rs. 5,000,000

In several cases, imprisonment terms are also significantly increased.

Strengthened International Cooperation

The amendments substantially improve cross-border cooperation mechanisms.

Key provisions include:

• Sharing court proceeding information with foreign law enforcement agencies
• Transfer of forfeited property to foreign jurisdictions
• Recognition of international cooperation obligations
• Expanded mutual legal assistance provisions
• Assistance in foreign confiscation and forfeiture proceedings

These changes reinforce Sri Lanka’s commitment to international AML collaboration.

Virtual Assets and Cryptocurrency Receive Explicit Recognition

A notable modernization of the legislation is the inclusion of

• Virtual assets
• Virtual asset service providers (VASPs)
• Blockchain-related offences
• Cybercrime-linked predicate offences

The Bill defines virtual assets and identifies VASP activities such as:

• Virtual asset exchange services
• Custody services
• Transfers of virtual assets
• Issuance-related financial services

This represents an important step toward regulating cryptocurrency-related money laundering risks.

Expanded List of Predicate Offences

The revised definition of unlawful activity dramatically broadens the range of predicate offences.

Newly emphasized categories include:

• Cybercrime
• Blockchain-related offences
• Virtual asset crimes
• Corruption offences
• Environmental crimes
• Tax offences
• Customs violations
• Human trafficking
• Child exploitation offences
• Intellectual property offences
• Terrorist financing
• Organized crime offences

Importantly, the definition also captures any offence punishable by death or imprisonment of five years or more.

What This Means for AML Compliance Teams

The Amendment Bill will have significant implications for:

Banks and Financial Institutions

• Enhanced customer due diligence requirements
• Greater scrutiny of beneficial ownership structures
• Improved transaction monitoring expectations
• Increased focus on cross-border activity

DNFBPs

• Expanded reporting obligations
• Stronger exposure to AML investigations
• Increased compliance expectations

Virtual Asset Service Providers

• Greater regulatory oversight
• Enhanced AML monitoring obligations
• Higher enforcement risk

Compliance Officers

• Need to reassess AML policies and controls
• Update risk assessment frameworks
• Strengthen sanctions and adverse media screening
• Enhance beneficial ownership verification procedures

Investigative and Enforcement Agencies

• Expanded authority to trace, freeze, and confiscate assets
• Access to advanced investigative techniques
• Improved international cooperation mechanisms

Conclusion

Sri Lanka’s Prevention of Money Laundering (Amendment) Bill 2026 represents a major modernization of the country’s AML framework. The reforms significantly expand the definition of money laundering, strengthen asset freezing and forfeiture mechanisms, introduce robust beneficial ownership provisions, improve international cooperation, and bring virtual assets within the AML regulatory perimeter.

For compliance leaders, the Bill signals a shift toward a more aggressive and sophisticated AML enforcement environment. Financial institutions, DNFBPs, and VASPs should begin reviewing their AML programs now to ensure readiness for the enhanced obligations and enforcement powers that will emerge once the amendments become law.

The proposed legislation demonstrates Sri Lanka’s intention to strengthen its alignment with global AML standards and improve its ability to detect, investigate, prosecute, and recover proceeds derived from financial crime.

Key AML Compliance Takeaway

Organizations operating in Sri Lanka should prioritize upgrades in beneficial ownership screening, transaction monitoring, sanctions screening, customer due diligence, virtual asset risk management, and asset tracing controls to prepare for the expanded AML enforcement powers introduced by the Prevention of Money Laundering (Amendment) Bill 2026.

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