Sri Lanka to Criminalize Unauthorized Forex Transfers

Sri Lanka is preparing to introduce criminal liability for unauthorized transfers of money overseas, following cabinet approval on Tuesday (18 August 2026), according to Xinhua reporting. The move marks a significant shift in the country's foreign exchange enforcement, which currently treats such conduct only as a financial violation.

The proposed changes will be made to the Foreign Exchange Act, No. 12 of 2017, after the government identified gaps in the existing law that restrict criminal action against certain outward remittances. The cabinet gave policy approval to introduce specific criminal provisions into the law, with the proposal submitted by the president in his capacity as minister of finance, planning and economic development.

Contents

01

What the Planned amendment Covers

02

Why the Current Law Falls Short

03

Broader Regulatory Context

04

What Happens Next

What the Planned amendment Covers

One area covered by the planned amendment involves advance payments made abroad for the import of goods. If the goods linked to such a payment are not brought into Sri Lanka within a reasonable period, the remittance could be regarded as an unauthorized transfer of foreign exchange.

This provision appears designed to close a loophole where funds leave the country under the guise of legitimate trade but the corresponding goods never arrive.

Why the Current Law Falls Short

Current legislation allows the Central Bank of Sri Lanka to impose a financial penalty equal to the value of an unauthorized remittance, calculated in Sri Lankan rupees. The act, however, does not presently classify such conduct as a criminal offence.

The government said this limits the ability of investigative and law-enforcement agencies to pursue criminal proceedings in cases involving unauthorized movement of funds out of the country. Without criminal classification, authorities have been constrained in how far they can take such cases.

Broader Regulatory Context

The move follows a separate cabinet decision dated 8 June 2026, in which Sri Lanka's cabinet approved issuing new regulations and an order under the Foreign Exchange Act No. 12 of 2017, on the recommendations of the Central Bank of Sri Lanka. Those measures cover overseas investments by persons resident in Sri Lanka and fund transfers abroad by emigrants.

Under the Foreign Exchange Act, outward remittances by residents and emigrants are subject to general permissions and to restrictions set out in an Order under section 22 of the Act, published in Gazette Extraordinary No. 2467/67 of 18 December 2025. The new criminal provisions would sit alongside this existing framework of permissions and restrictions.

What Happens Next

The cabinet's policy approval is a step toward amending the law, though the specific criminal provisions have yet to be drafted and enacted. For residents and businesses making outward transfers, the practical takeaway is that unauthorized remittances could carry criminal consequences once the amendment takes effect, beyond the financial penalties already available to the central bank.