On 19th April 2021, the Colombo Port City Economic Commission Bill was tabled in Parliament. the Bill was intended to provide the legal framework within which the Colombo Port City would operate, and was therefore a key piece of legislation. The proposed Bill led to concerns over the setting up of a financial hub that invites offshore companies and banks to register therein, with little scrutiny.
The manner in which the legislation was rushed through was an affront to the right to information of the citizens of Sri Lanka. The proposed bill was not gazetted in advance, and there was no opportunity given for public consultation and public review. Even after the Supreme Court determination was announced, the Bill was debated and passed within 2 days, amidst the height of the third Covid wave in the country. This process did not even provide sufficient time for Members of Parliament to fully review and understand the changes made to the Bill and to reach an informed decision.
Potential corruption risks
- Establishment and inadequate oversight of offshore banks and companies could lead to the Port City attracting money laundering and illicit financial flows.
- Lack of public access to beneficial ownership information could lead to the Port City becoming a secrecy jurisdiction that provides a safe haven for proceeds of crime / black money.
In addition to that, since the Financial Action Task Force (FATF) rates countries based on the vulnerability to money laundering and terrorist financing, if financial operations taking place through the Colombo Port City are not subjected to enhanced scrutiny, Sri Lanka faces the risk of being downgraded by the FATF. This could, in turn lead to reduced investor confidence.
What has been done?
- 19 petitions including one by TISL were filed at the Supreme Court, challenging the constitutionality of the proposed Bill. Having incorporated certain amendments proposed by the Supreme Court, the Bill was passed in Parliament on 20th May 2021.
However, TISL continues to have serious concerns about the new legislation, concerning the aforementioned potential corruption risks posed by the Colombo Port.
What can be done?
- Advocate that legal and procedural measures be introduced to ensure adequate scrutiny of the money inflows and outflows from the offshore institutions operating in the Port City, including oversight by the Financial Intelligence Unit (FIU) of the Central Bank, in line with Financial Action Task Force (FATF) guidelines.
- Advocate for beneficial ownership transparency within the Port City.