FOREIGN EXCHANGE ACT

Arrangement of Sections

1.Short title and date of operation.

2.Central Bank to be responsible for implementation of the Act.

3.Discharge of powers, duties and functions by the Central Bank.

4.Authorised dealers and restricted dealers.

5.Foreign exchange or foreign assets held or owned by a person in or resident in Sri Lanka.

6.Current transaction.

7.Capital transaction.

8.Regulation of certain transactions.

9.Guidelines and directions.

10.Investigations of foreign exchange transactions and foreign assets.

11.Failure to comply with a provision of the Act or any Regulation, Order, Direction, Guideline & etc. made or issued thereunder.

12.Investigations and Inquiries to be concluded within six months.

13.Board of Inquiry.

14.Liability of bodies corporate or unincorporated.

15.Recovery of sums due to Government.

16.Provisions relating to permission, consent or authority.

17.Burden of proof of permission.

18.Presumption relating to foreign currency.

19.Admissibility of certain documents.

20.Indemnity for acts done in good faith.

21.Duty of officers and servants to maintain secrecy.

22.Preservation of financial stability.

23.Expenses in suit or prosecution to be paid out of the Consolidated Fund.

24.Contracts.

25.Obligations under other written laws.

26.Penalties.

27.Amendment of Schedules by Resolution of Parliament.

28.Publication of Orders in daily newspapers.

29.Regulations.

30.Repeal and savings.

31.Currency, securities etc.

32.Sinhala text to prevail in case of inconsistency.

33.Interpretation.

SCHEDULE

12 of 2017.

AN ACT to provide for the promotion and regulation of foreign exchange; to vest the responsibility for promoting and regulating foreign exchange in the Central Bank as the agent of the Government; to provide for the repeal of the Exchange Control Act; and to provide for matters connected therewith or incidental thereto.

[Date of Commencement: Not yet in force]

1. Short title and date of operation.

This Act may be cited as the Foreign Exchange Act and shall come into operation on such date as the Minister may by Order published in the Gazette appoint (hereinafter referred to as “the appointed date”).

2. Central Bank to be responsible for implementation of the Act.

(1) The Central Bank shall as the agent of the Government, be responsible for implementing the provisions of this Act in order to ensure proper promotion and regulation of foreign exchange in Sri Lanka, in accordance with such directions as may from time to time be issued in that behalf under this section.

(2) The Minister assigned the subject of the Central Bank may, from time to time, issue such directions as may be necessary for the implementation of the provisions of this Act and it shall be the duty of the Monetary Board to cause such directions to be carried out.

3. Discharge of powers, duties and functions by the Central Bank.

Where under any provision of this Act any power, duty or function is authorised or required to be exercised, performed or discharged by the Central Bank, such power, duty or function may be exercised, performed or discharged by the officer designated as the head of the Department of Foreign Exchange or on his behalf any other officer designated as an assistant to him, subject to the direction and control of the Governor of the Central Bank.

4. Authorised dealers and restricted dealers.

(1) —

(a)Every licensed commercial bank shall, immediately upon such bank being issued a license to carry on banking business under the Banking Act, be authorised by the Central Bank to act, subject to the provisions of section 9 as an authorised dealer to deal in foreign exchange.

(b)Every licensed commercial bank which is on the appointed date carrying on banking business, shall subject to the provisions of section 9, be deemed to have been authorised by the Central Bank, to act as an authorised dealer to deal in foreign exchange.

(c)   Every licensed specialised bank, immediately upon such bank being issued a license to carry on banking business under the Banking Act, may be authorised by the Central Bank subject to the provisions of section 9, to deal in foreign exchange for the purposes specified in such authorisation.

(d ) Every licensed specialised bank which is on the appointed date carrying on banking business, shall subject to the provisions of section 9, be deemed to have been authorised by the Central Bank to deal in foreign exchange for the purposes specified in such authorisation.

(2) —

(a)The Central Bank may permit, subject to the provisions of section 9, any person, class or classes of persons (hereinafter referred to as a “restricted dealer”) not being an authorised dealer, to deal in foreign exchange within Sri Lanka for the purposes specified in the permit, subject to such terms and conditions as may be imposed by the Central Bank in that behalf.

(b)Every dealer in foreign exchange including money changers or any other person other than licensed commercial banks or specialised banks, which are on the appointed date permitted to deal in foreign exchange, shall subject to the provisions of section 9, be deemed to have been permitted by the Central Bank, to act as a restricted dealer to deal in foreign exchange for the purposes specified in such authorisation.

(c)   The Central Bank may, subject to the provisions of section 9, grant special permission, to any person not being an authorised dealer or restricted dealer, to deal in foreign exchange within Sri Lanka for specific purposes as may be prescribed by the Minister by an Order published in the Gazette subject to such terms and conditions as may be specified in such Order.

(3) Save as otherwise provided in this Act, no person in or resident in Sri Lanka shall deal in foreign exchange within or outside Sri Lanka, by any act which involves the conversion of Sri Lanka Rupees or assets within Sri Lanka to foreign exchange, otherwise than through an authorised dealer, or to the extent specified in the permit, through a restricted dealer.

5. Foreign exchange or foreign assets held or owned by a person in or resident in Sri Lanka.

Any person in, or resident in, Sri Lanka who—

(a)holds foreign exchange in a bank account in Sri Lanka or outside Sri Lanka; or

(b)owns any foreign asset,

may utilise such foreign exchange or foreign asset for making of any payment for, or in respect of, any current or capital transaction of such person, within or outside Sri Lanka. Any such payment made from foreign exchange held by such person within Sri Lanka shall be made through an authorised dealer, or to the extent specified in the permit, through a restricted dealer.

6. Current transaction.

(1) A person shall be entitled to deal in foreign exchange for a current transaction of such person, through an authorised dealer or to the extent specified in the permit, through a restricted dealer.

(2) An authorised dealer or a restricted dealer may deal in foreign exchange for a current transaction as a principal or as an intermediary.

(3) Prior to dealing in foreign currency for a current transaction under subsection (1), an authorised dealer or a restricted dealer shall request the person requiring foreign exchange for such transaction to provide such information or produce such documents or make such declaration as is reasonably necessary, in order to satisfy himself that the requirement is in relation to a current transaction and is in conformity with any other laws regulating such transactions.

(4) An authorised dealer or a restricted dealer shall refuse to deal in foreign exchange for a current transaction under subsection (1) where the request for information, documents or declaration in terms of subsection (3) relating to such transaction is not complied with or where the dealer is satisfied that the requirement is not for a current transaction or is not in conformity with any other laws regulating such transactions.

(5) An authorised dealer or a restricted dealer refusing to deal in foreign exchange for a current transaction under subsection (4) shall communicate his decision in writing together with the reasons therefor, if requested by the person requiring the foreign exchange subject to the provisions of section 9 of the Financial Transactions Reporting Act.

(6) Any person aggrieved by the decision of an authorised dealer or a restricted dealer under subsection (4) may, within fourteen days after such decision is communicated to such person, appeal against such decision to the Central Bank and the Central Bank shall, after giving such person and the dealer a reasonable opportunity of being heard, affirm, vary or revoke such decision.

7. Capital transaction.

(1) The Minister shall in consultation with the Monetary Board and with the approval of the Cabinet of Ministers, authorise by regulations, the class or classes of capital transactions in foreign exchange for the purpose of
this section.

(2) In making regulations under subsection (1), the Minister shall have regard to—

(a)transactions required to be regulated in conformity with any treaty or agreement relating to international financial transactions to which the Government of Sri Lanka is a signatory;

(b)the impact of such authorisation on the monetary policy of Sri Lanka and its stabilisation.

(3) The regulations published under subsection (1) may specify the limit up to which capital transactions may be authorised and the terms and conditions subject to which foreign exchange may be dealt with for the class or classes of capital transactions, so authorised.

(4) Without prejudice to the provisions of section 5, a person shall be entitled to deal in foreign exchange in respect of a capital transaction of such person, through an authorised dealer or to the extent specified in the permit, through a restricted dealer, being capital transactions of a class or classes, which is or are authorised by regulations made under subsection (1).

(5) An authorised dealer or a restricted dealer may deal in foreign exchange for a capital transaction as a principle or an intermediary, being a transaction authorised by regulations made under subsection (1).

(6) Prior to dealing in foreign exchange in respect of a capital transaction under this section, the authorised dealer or the restricted dealer shall request the person requiring foreign exchange for such transaction, to provide such information or produce such documents or make such declaration as is reasonably necessary in order to satisfy himself that the requirement is in relation to a capital transaction authorised under subsection (1) and is in conformity with any other laws regulating such transactions.

(7) An authorised dealer or a restricted dealer shall refuse to deal in foreign exchange for a capital transaction under this section where a request for information, documents or a declaration is not complied with or where the dealer is satisfied that the requirement is not for a capital transaction authorised under subsection (1) or is not in conformity with other laws regulating such transaction.

(8) An authorised dealer or a restricted dealer refusing to deal in foreign exchange in respect of a capital transaction under this section shall communicate his decision in writing together with the reasons therefor, if requested by the person requiring the foreign exchange subject to the provisions of section 9 of the Financial Transactions Reporting Act.

(9) Any person aggrieved by the decision of an authorised dealer or a restricted dealer under subsection (7), may within fourteen days after such decision is communicated to such person, appeal against such decision to the Central Bank, and the Central Bank shall, after giving such person and the dealer a reasonable opportunity of being heard, affirm, vary or revoke such decision.

(10) An authorised dealer or a restricted dealer shall not deal in foreign exchange for a capital transaction that is not authorised by regulations made under subsection (1) unless the Monetary Board taking into consideration the existence of any exceptional circumstances has granted approval for such capital transaction in accordance with such directions as may be issued by the Minister in conformity with the approvals made under subsection (1).

8. Regulation of certain transactions.

(1) A person in, or resident in, Sri Lanka shall—

(a)export from Sri Lanka or import into Sri Lanka, any foreign currency or Sri Lanka currency;

(b)hold foreign exchange in his possession or in a bank account in Sri Lanka,

only for such purpose, up to such limits and subject to such terms and conditions, as may be prescribed by the Minister by an Order published in the Gazette.

(2) A person in, or resident in, Sri Lanka shall acquire a foreign asset from foreign exchange derived from the conversion of Sri Lanka currency or the disposal or conversion of an asset within Sri Lanka or provision of any service in or from Sri Lanka only for such purposes, up to such limits and subject to such terms and conditions as may be prescribed by the Minister by regulations made in that behalf.

(3) Notwithstanding anything to the contrary in the provisions of any other written law, any Sri Lankan citizen resident in Sri Lanka who remits to Sri Lanka any foreign exchange which have not been declared to the Commissioner General of Inland Revenue or the Head of the Department of Foreign Exchange before the appointed date and which are not the property in respect of which proceedings are pending in a court of law or an order has been made by a court of law under the Prevention of Money Laundering Act, Convention on the Suppression of Terrorist Financing Act, or the Bribery Act shall be liable to pay only a remittance fee of one per centum to the Commissioner General of Inland Revenue and shall not be subject to the payment of any other fee, tax, surcharge, levy or penalty:

Provided that any such person who remits to Sri Lanka foreign exchange not exceeding the value of one million United States dollars held outside Sri Lanka shall not be liable to pay the remittance fee or any other tax, surcharge, levy or penalty and any amount remitted exceeding such value shall be liable to pay the remittance fee specified in subsection (3):

Provided further that any such person who remits to Sri Lanka an amount of foreign exchange exceeding the value of one million United States dollars held outside Sri Lanka and invests in a development bond issued by the Government of Sri Lanka shall not be liable to pay the remittance fee or any other tax, surcharge, levy or penalty.

(4) Foreign Exchange held outside Sri Lanka and remitted to Sri Lanka after the appointed date under subsection (3) may be held in a foreign currency account or may be converted into Sri Lanka rupees.

(5) The property referred to in subsection (3) shall not be deemed to be the property obtained by the commission of an offence under the Prevention of Money Laundering Act, even if such foreign exchange had been held outside Sri Lanka without the permission of the Central Bank.

(6) There shall be no restriction on the repatriation of funds out of Sri Lanka remitted to Sri Lanka by any person in terms of subsection (3) of section 8.

9. Guidelines and directions.

(1) The Central Bank may from time to time, subject to informing the Minister issue guidelines and directions to authorised dealers and restricted dealers engaging in current transactions.

(2) The Central Bank may from time to time subject to the approval of the Minister issue guidelines and directions to authorised dealers and restricted dealers engaging in capital transactions.

(3) The Central Bank may from time to time subject to the approval of the Minister issue guidelines and directions to authorised dealers and restricted dealers engaging in transactions other than those referred to in subsections (1) and (2) relating to foreign exchange.

(4) The Central Bank may from time to time subject to the approval of the Minister issue guidelines and directions to any person, class or classes of persons not being an authorised dealer or restricted dealer, permitted to deal in foreign exchange within Sri Lanka under paragraph (c) of subsection (2) of section 4.

(5) The Central Bank may for statistical and monitoring purposes, request an authorised dealer or a restricted dealer to furnish within such time as may be specified in such request, such information or returns in such form and manner in relation to any foreign exchange transaction engaged in by such dealer for a period of six years immediately prior to the date on which such request is communicated to such dealer.

10. Investigations of foreign exchange transactions and foreign assets.

(1) The Central Bank may, at any time, cause an investigation to be made, of foreign exchange transactions or foreign assets of any authorised dealer or a restricted dealer or any other person, class or classes of persons as the case may be, by an officer of the Department of Foreign Exchange authorised in writing by the Central Bank (hereinafter referred to as an “authorised person”) in that behalf.

(2) It shall be the duty of every authorised dealer or a restricted dealer or any other person, class or classes of persons—

(a)to permit an authorised person entry into any premises for the purposes of such investigation;

(b)to produce any books or other documents as may be required for the investigation by such authorised person;

(c)   to permit such authorised person to retain for such time as may be necessary such books and other documents or to take copies or extracts;

(d)to appear before the authorised person when required to do so by such authorised person;

(e)   to furnish such statement or information in relation to the investigation within such time and in such manner as the said authorised person may require; or

(f )not to furnish information under this section, which to the knowledge of such dealer is false.

(3) Where an authorised person retains any book or document under subsection (2) the authorised person shall furnish to the person from whose custody or control such book or document was taken for detention, a copy of such book or document certified by such authorised person if a request for a copy is made by the person from whose custody or control such book or document was taken or the authorised person may without retaining original books or documents require the person to furnish true copies of such books or documents.

(4) An authorised dealer or a restricted dealer or other person required to appear before the authorised person may be examined orally and any statement made by such dealer or person shall be reduced to writing and shall be signed by the dealer or person making the same.

(5) For purposes of an investigation under subsection (1), the Central Bank or the authorised person may if the circumstances warrant, obtain the assistance of a police officer to prevent a breach of the peace, in the exercise of that right.

(6) Where the Central Bank apprehends any resistance in the course of an investigation under subsection (1), the Central Bank may, on application made to a Magistrate’s Court by a person authorised in that behalf by the Monetary Board, within whose jurisdiction such investigation is made, obtain an Order directing the authorised dealer or the restricted dealer or other person as the case may be whose foreign exchange transaction or foreign assets is or are being, or is or are to be, investigated, to appear before the authorised person or to produce such books or documents in the custody or control of such dealer or person as the Central Bank or the authorised person making the investigation may reasonably require for such investigation.

(7) An application made under subsection (6) by a person authorised in that behalf by the Monetary Board shall contain—

(a)the name and address of the authorised dealer or a restricted dealer or other person as the case may be whose foreign exchange transaction is being or is to be investigated;

(b)the address of the premises in which the investigation is to be made;

(c)   the name of the authorised person making the investigation; and

(d)a prayer for an Order—

(i)   for the appearance of such dealer or person before the authorised person;

(ii)for the production of the books and documents to the Central Bank or the authorised person;

(iii) to refrain from obstructing the authorised person making an investigation under this section.

(8) —

(a)Court may, after considering an application made under subsections (6) and (7) make an Order prayed for under paragraph (d) of subsection (7) and such dealer or person shall comply with the Order forthwith.

(b)Any dealer or person who fails to comply with an Order of the court under paragraph (a) commits an offence and shall, on conviction be liable to a fine not exceeding rupees five hundred thousand.

(c)   Where the offence under paragraph (b) is a continuing offence, such dealer or person shall be liable to an additional fine of rupees hundred thousand for each day during which such offence continued.

11. Failure to comply with a provision of the Act or any Regulation, Order, Direction, Guideline & etc. made or issued thereunder.

(1) Where the Central Bank is satisfied that an authorised dealer or restricted dealer—

(a)deals in foreign exchange in any current transaction or capital transaction contrary to the provisions of this Act;

(b)deals in foreign exchange in relation to foreign assets contrary to the provisions of this Act;

(c)   fails to comply with any guideline or direction issued under subsections (1), (2) and (3) of section 9 or any requirement under subsection (4) of section 9; or

(d)violates any provision of this Act or any regulation or Order made thereunder,

the Central Bank may, upon the Minister being informed, issue a notice directing any such authorised dealer or restricted dealer to comply with the provisions of this Act or any regulation, Order, guideline or direction issued or made thereunder, within the period specified therein.

(2) Where any authorised dealer or restricted dealer fails to act in accordance with the notice issued under subsection (1), the Central Bank may, temporarily suspend the authorisation granted under subsection (1) of section 4 or paragraph (b) of subsection (2) of section 4 or the permit granted under paragraph (a) of subsection (2) of section 4 to deal in foreign exchange.

(3) The Central Bank may, where there is a temporary suspension under subsection (2), after an inquiry, giving the authorised dealer or restricted dealer a reasonable opportunity of being heard and with the approval of the Monetary Board, revoke the authorisation or permit granted under section 4.

(4) The Central Bank may in the circumstances referred to in subsection (1), without proceeding to revoke the authorisation or the permit under subsection (3), after giving a reasonable opportunity of being heard and where it deems it appropriate taking into consideration all the relevant circumstances—

(a)require an authorised dealer or restricted dealer who engages in any dealing in relation to foreign assets contrary to the provisions of this Act as referred to in paragraph (b) of subsection (1), to pay to the Central Bank within such time as may be specified in such requirement an amount not exceeding the amount or value of such foreign asset or any part thereof in foreign exchange or Sri Lanka currency together with such expenses incurred by the Central Bank for the detection and investigation of such transaction; or

(b)impose a limitation on such authorised dealer or restricted dealer who has directly or indirectly been a party to the unauthorised transaction, from dealing in or engaging in current or capital transactions in relation to foreign exchange as the case may be, for a period not exceeding twelve months.

(5) Where any other person, class or classes of persons, not being an authorised dealer or restricted dealer acts in violation of the provisions of paragraphs (a), (b), (c) or (d) of subsection (1), the Central Bank may, upon the Minister being informed, after giving such person a reasonable opportunity of being heard, require such person in writing, to pay as a penalty a sum not exceeding rupees one million or to pay a penalty of an amount not exceeding the amount or value of such current transaction or capital transaction or value of such foreign asset or any part thereof in foreign exchange or Sri Lanka currency together with such expenses incurred by the Central Bank for the detection and investigation of such transaction.

(6) Where the Central Bank revokes an authorisation or permit under subsection (3) or requires to pay the sum determined under paragraph (a) of subsection (4) or imposes a limitation under paragraph (b) of subsection (4), the Central Bank shall communicate its decision or determination in writing together with its reasons therefor to such authorised dealer or restricted dealer.

(7) —

(a)Where any authorised dealer or restricted dealer—

(i)   aggrieved by a revocation of the authorisation or permit under subsection (3);

(ii)aggrieved by the requirement to pay the sum determined under paragraph (a) of subsection (4); or

(iii) aggrieved by any limitation imposed under paragraph (b) of subsection (4),

as the case may be, he may within thirty days after such decision or determination is communicated to such dealer, appeal against such revocation or determination to the Board of Inquiry which shall determine such appeal in accordance with the procedure set out in section 13.

(b)Where any person not being an authorised dealer or a restricted dealer, aggrieved by a penalty imposed under subsection (5), he may within thirty days after the requirement to pay such penalty is communicated to such person, appeal against such requirement to pay such penalty to the Board of Inquiry which shall determine such appeal in accordance with the procedure set out in section 13.

(8) Subject to any Order made on an appeal under subsection (7), the revocation of the authorisation or the permit under subsection (3) or any limitation imposed under subsection (4) shall, notwithstanding such appeal, take effect from the date the Order of revocation or limitation is made or imposed on the authorised dealer or restricted dealer, as the case may be.

(9) Any sum paid to the Central Bank under paragraph (a) of subsection (4) or any penalty paid under subsection (5) shall be credited to the Consolidated Fund.

12. Investigations and Inquiries to be concluded within six months.

Every investigation and inquiry under section 11 shall be concluded within a period of six months from the date of commencement of such investigation or inquiry unless an extension of time is obtained with the approval of the Minister.

13. Board of Inquiry.

(1) The Minister shall appoint a Board of Inquiry to inquire into appeals made under paragraphs (a) and (b) of subsection (7) of section 11.

(2) The Board of Inquiry appointed under subsection (1) shall consist of the following persons appointed by the Minister—

(a)a retired judge of the Supreme Court or of the Court of Appeal who shall be the Chairman of the Board; and

(b)two persons who are conversant in matters relating to international financial or exchange transactions and have had experience at a senior managerial level in the public or private sector and are of good standing and repute.

(3) Every member of the Board of Inquiry shall, unless he vacates office earlier by death, resignation or removal, hold office for a term of three years from the date of his appointment and unless he has been removed from office, be eligible for re-appointment.

(4) A member of the Board of Inquiry shall be remunerated in such manner and at such rates as may be determined by the Minister.

(5) A person shall be disqualified from being appointed or continuing as a member of the Board of Inquiry if he—

(a)if he is, or becomes a member of Parliament or any Provincial Council or any local authority; or

(b)if he is not, or ceases to be a citizen of Sri Lanka; or

(c)   if he is under any law in force in Sri Lanka or in any other country found or declared to suffer from unsoundness of mind; or

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