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Sri Lankan AMLO Fines a Bank and Two Finance Firms for Non-Compliance

Richard Marley
November 05, 2021
2 minutes read
1749

Approximately two million rupees worth of fines were imposed on three financial institutions in Sri Lanka for AML non-compliance.

Two Sri Lankan finance corporations, People’s Merchant Finance and Ideal Finance Limited, and Seylan Bank have been fined by the Anti-Money Laundering (AML) and Counter-Terrorism Finance (CTF) officer for non-compliance with the record-maintaining regulation under United Nation (UN) sanctions.

People’s Merchant Finance was fined one million rupees, while Ideal Finance Limited and Seylan Bank were fined 500,000 rupees each.

Financial Intelligence Unit (FIU), in light of Section 19 (1) and Section 19 (2) of the Financial Transaction Reporting Act, No. 06 of 2006 (FTRA), has imposed sanctions on financial institutions for non-compliance with the requirements of the FTRA.

According to FIU, Sri Lankan AML/CTF regulatory authority collected fines of two million rupees on financial firms from 1 July 2021 to 30 September 2021 to enforce regulatory financial obligations. The acquired capital from penalties was credited to the Consolidated Fund.

The regulatory sanction was imposed on People’s Merchant Finance and Ideal Finance Limited for non-compliance with the Customer Due Diligence (CDD) laws, No.1 of 2016 in association with the UN’s sanction monitoring regulation. FIU, during the on-site investigation, identified that both financial companies have failed to implement customers’ record maintaining systems under United Nations Security Council Resolutions (UNSCRs). Since sanctions are imposed, People’s Merchant Finance has developed an action plan to eradicate the identified loopholes in their system, and improvements are being made accordingly.

The administrative fine was imposed on Seylan Bank for the non-compliance with the Financial Reporting Act (FRA), No. 6 of 2006 laws, and CDD laws to maintain the logs of the customers’ transitional activities. Additionally, the bank also lacked ongoing screening and risk management systems.

Moreover, Seylan Bank failed to comply with a suspension of transaction order issued by the FIU under Section 15 (2) of the FTRA by omitting to include banking relationships maintained with an individual subject to the FIU suspension order.

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According to reports, cyberattacks contributed to losses of up to $6 trillion in 2021 alone, which is the single largest economic upset in history. By 2025, cybercrimes are expected to cost the world $10.5 trillion. As governments work towards elevating their cybersecurity posture, the key criteria here is the extent to which businesses can adopt the best practices.

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Although Canada is far ahead as compared to the rest of the world in mitigating cyber threats, 78% of Canadian organizations still faced a cyberattack in 2020. This indicates the catastrophic effect of cyberattacks with numbers rising in the negative direction. The most common type of cyberattacks took the form of ransomware and phishing. Looking at the trends of 2021, it’s clear that hackers and malware are becoming advanced with improvements in technology.

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2. Internal Threats & Cloud Attacks

Trojan horses are rightfully named as they can effectively wipe out a large amount of data. However, the origins of all cyberattacks are not malware, as statistics show that 15 to 25 percent of data breaches were due to the involvement of corrupt employees or business partners. In the coming times, virtual workplaces will further gain prominence and companies will need to be more careful at the same time. Therefore, it is becoming essential for businesses to control access levels for new employees, freelancers, and third-party suppliers.

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3. Artificial Intelligence as a Saviour

Considering the cybersecurity trends for 2022, artificial intelligence has become increasingly necessary to establish a strong frontier against cyberattacks. In 2020, 47.3% of companies had a medium to high-security automation level, which was a significant increase as compared to 39% in 2019. The basic concept behind AI comes into play here, as experts suggest that the higher the level of automation, the more secure a business system will be.

An officer in charge of security can make errors like falling prey to a phishing email, but today’s advanced AI systems can easily detect such attacks. Automation of security systems also reduces the risk of internal threats as a lesser number of humans will be able to leak confidential information. Moreover, AI allows much more accuracy in analyzing risk as compared to humans.

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Key Takeaways

Sooner or later, banks, financial institutions, and businesses will need robust identity verification solutions to eliminate the root cause of cyberattacks. Onboarding of legitimate individuals can only be ensured when the company knows who they are every time they try to access the system. Based on the trends, data breaches and ransomware are not going to be eliminated any time soon.

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Sri Lankan AMLO Fines a Bank and Two Finance Firms for Non-Compliance

1. Phishing Attacks to Remain a Major Issue

2. Internal Threats & Cloud Attacks

3. Artificial Intelligence as a Saviour

4. Securing the Supply Chains

5. Identity-based Security Protocols

Key Takeaways

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