FINANCIAL TRANSACTIONS REPORTING ACT

Arrangement of Sections

1. Short title.

PART I

Duties of Institutions

2. Identification essential to conduct of business of Institution.

3. Procedure if identity is not satisfactorily established.

4. Institutions to maintain and retain records.

5. Institutions to conduct ongoing due diligence and scrutiny of customers.

6. Institution to report financial transactions.

7. Duty to disclose information relating to property of terrorist groups or property used for commission of offence under this Act.

8. Disclosure to Financial Intelligence Unit.

PART II

Provisions Applicable to Institutions and other Persons

9. Duty not to divulge information.

10. When disclosure of information is permitted.

11. Disclosure not to be prevented.

12. Protection of persons reporting suspicious transactions.

13. Privileged Communication.

14. Appointment of Compliance Officer.

PART III

Powers and Functions of the Financial Intelligence Unit

15. Functions of the Financial Intelligence Unit.

16. Disclosure to foreign institutions and agencies.

17. Agreements and arrangements by the Financial Intelligence Unit.

18. Power of Unit to examine books, records.

19. Imposition of penalty to enforce compliance.

20. Non-disclosure of information in certain case.

21. Protection from liability.

PART IV

Functions of Supervisory Authority of an Institution and Auditors

22. Functions of supervisory authority or auditor under this Act.

23. Supervisory authority to ensure compliance by all Institutions.

PART V

Currency Reporting at the Border

24. Currency reporting at border.

25. Seizure or detention of cash.

26. Procedure on seizure of cash.

PART VI

Offences and Liabilities

27. Offences.

28. Giving false information an offence.

29. Regulations.

30. Application of Act.

31. Institutions have duty to comply with the provisions of this Act.

32. Sinhala text to prevail in case of inconsistency.

33. Interpretation.

6 of 2006.

AN ACT to provide for the collection of data relating to suspicious Financial Transactions to facilitate the prevention, detection, investigation and prosecution of the offences of money laundering and the financing of terrorism respectively; to require certain institutions to undertake due diligence measures to combat money laundering and the financing of terrorism; to identify the authority which will be responsible for monitoring the activities of all institutions to whom this act applies; and to provide for matters connected therewith or incidental thereto.

[Date of Commencement: 6th March, 2006]

1. Short title.

This Act may be cited as the Financial Transactions Reporting Act.

PART I

Duties of Institutions

2. Identification essential to conduct of business of Institution.

(1) No Institution shall open, operate or maintain an account, where the holder of such account cannot be identified, including any anonymous account or any account identified by number only, or any account which to the knowledge of the Institution is being operated in a fictitious or false name.

(2) An Institution shall, subject to any rules issued by the Financial Intelligence Unit under subsection (3), identify each customer and verify their customer identification data or information relating to a customer as is reasonably capable of identifying a customer on the basis of any official document or other reliable and independent source document verifying the identity of the customer, in cases where the Institution—

(a) enters into a continuing business relationship, or in the absence of such a relationship, conducts any transaction, with any customer;

(b) detects the carrying out of an electronic funds transfer by a customer, other than any prescribed transactions;

(c) entertains a suspicion relating to the commission of an unlawful activity; or

(d) entertains doubts about the veracity or adequacy of the customer identification and verification documentation or information it had previously obtained.

(3) The Financial Intelligence Unit may issue rules prescribing—

(a) the official or identifying document or documents, or the reliable and independent source documents, data or information or other evidence that is required for identification or verification of any particular customer or class of customers;

(b) the timing of the identification and verification requirements under this section; and

(c) the threshold for, or the circumstances in which, the provisions of this section shall apply to transactions carried on by the customers of an Institution.

(4) The terms and conditions imposed by rules issued under subsection (3) may vary in respect of different categories of Institutions, different categories of transactions or different categories of customers.

(5) The provisions of subsection (2) shall not apply—

(a) if the transaction is part of an existing and regular business relationship with a person who has already produced satisfactory evidence of identify unless the Institution has reason to suspect that the transaction is suspicious or unusual;

(b) if the transaction is an occasional transaction not exceeding a prescribed sum unless the Institution has reason to suspect that the transaction is suspicious or unusual;

(c) if any person has been a customer of the Institution prior to the enactment of this Act, subject to a phase in period which shall not exceed three years:

Provided that by the end of such period each Institution shall apply the provisions of subsection (2) hereof to such persons subject to such regulations as may be prescribed in that behalf; and

(d) in such other circumstances as may be prescribed by regulations made in that behalf.

(6) For the purpose of subsection (5), "occasional transactions” means any transaction, in relation to cash and electronic fund transfer, that is conducted by any person other than through an account in respect of which the person is the customer.

3. Procedure if identity is not satisfactorily established.

If satisfactory evidence of identity is not submitted to an Institution as required in terms of the provisions of section 2, the Institution shall not proceed any further with the transaction unless directed to do so by the Financial Intelligence Unit established in terms of this Act, and shall report the attempted transaction to the Financial Intelligence Unit as a suspicious transaction under section 7.

4. Institutions to maintain and retain records.

(1) Every Institution shall be required to maintain—

(a) records of transactions and of correspondence relating to transactions and records of all reports furnished to the Financial Intelligence Unit for a period of six years from the date of the transaction, correspondence or the furnishing of the report, as the case may be; and

(b) records of identity obtained in terms of section 2 for a period of six years from the date of closure of the account or cessation of the business relationship, as the case may be,

unless directions have been issued by the Financial Intelligence Unit that such records or correspondence should be retained for a longer period, in which case the records or correspondence should be retained for such longer period.

(2) Records required to be maintained under subsection (1)
shall contain particulars sufficient to identify the—

(a) name, address and occupation (or where appropriate business or principal activity) of each person—

(i) conducting the transaction; and

(ii) where applicable, on whose behalf the transaction is being conducted;

(b) nature and date of the transaction;

(c) type and amount of currency involved;

(d) parties to the transaction;

(e) the name and address of the employee who prepares the record; and

(f) such other information as may be specified in rules issued by the Financial Intelligence Unit.

(3) Where any record is required to be maintained under this Act—

(a) it shall be maintained in a manner and form that will enable an Institution to comply immediately with requests for information from the Financial Intelligence Unit or a law enforcement agency; and

(b) a copy of it may be kept—

(i) in a machine-readable form if a paper copy can be readily produced from it; or

(ii) in an electronic form, if a paper copy can be readily produced from it and an electronic signature of the person who keeps the records is retained for purposes of verification.

(4) The records maintained under subsection (1) shall be made available upon request to the Financial Intelligence Unit for purposes of ensuring compliance with this Act.

5. Institutions to conduct ongoing due diligence and scrutiny of customers.

An Institution shall—

(a) conduct ongoing due diligence on the business relationship with its customer;

(b) conduct ongoing scrutiny of any transaction undertaken throughout the course of the business relationship with a customer to ensure that any transaction that is being conducted is consistent with the Institution's knowledge of the customer, the customer's business and risk profile, including, where necessary, the source of funds,

in order to ensure that its obligations under section 2 are satisfied and that the transactions conducted are consistent with the information that the Institution has of its customer and the profile of the customer's business.

6. Institution to report financial transactions.

An Institution shall report to the Financial Intelligence Unit—

(a) any transaction of an amount in cash exceeding such sum as shall be prescribed by the Minister by Order published in the Gazette, or its equivalent in any foreign currency (unless the recipient and the sender is a bank licensed by the Central Bank); and

(b) any electronic funds transfer at the request of a customer exceeding such sum as shall be prescribed by regulation,

in such form, manner, and within such period as may be prescribed by rules issued by the Financial Intelligence Unit.

7. Duty to disclose information relating to property of terrorist groups or property used for commission of offence under this Act.

(1) Where an Institution—

(a) has reasonable grounds to suspect that any transaction or attempted transaction may be related to the commission of any unlawful activity or any other criminal offence; or

(b) has information that it suspects may be relevant—

(i) to an act preparatory to an offence under the provisions of the Convention on the Suppression of Financing of Terrorism Act, No. 25 of 2005;

(ii) to an investigation or prosecution of a person or persons for an act constituting an unlawful activity, or may otherwise be of assistance in the enforcement of the Money Laundering Act, No. 5 of 2006 and the Convention on the Suppression of Terrorist Financing Act, No. 25 of 2005,

the Institution shall, as soon as practicable, after forming that suspicion or receiving the information, but no later than two working days therefrom, report the transaction or attempted transaction or the information to the Financial Intelligence Unit.

(2) A report under subsection (1) shall—

(a) be in writing and may be given by way of mail, telephone to be followed up in writing within twenty-four hours, fax or electronic mail or such other manner as may be determined by the Financial Intelligence Unit;

(b) be in such form and contain such details as may be prescribed by the Financial Intelligence Unit;

(c) contain a statement of the grounds on which the Institution holds the suspicion;

(d) be signed or otherwise authenticated by the Institution.

(3) A person who has made a report or has given any information to the Financial Intelligence Unit shall provide to the Financial Intelligence Unit any further information that it has about the transaction or attempted transaction or the parties to the transaction if requested to do so by the Financial Intelligence Unit.

8. Disclosure to Financial Intelligence Unit.

Every Institution shall, in relation to any person conducting transactions with such institution, forthwith disclose to the Financial Intelligence Unit—

(a) the existence of any property in its possession or control, which to its knowledge is, or which it reasonably suspects is, property derived from the commission of any terrorist activity in terms of any law for the time being in force;

(b) the existence of any property in his or her possession or control, owned or controlled by or on behalf of a specified entity or for which there are reasonable grounds for suspicion that it is owned or controlled by or on behalf of a specified entity;

(c) any information regarding a transaction or proposed transaction in respect of property derived from the commission of any terrorist activity in terms of any law for the time being in force; or

(d) any information regarding a transaction or proposed transaction and there are reasonable grounds for suspicion that such transaction may involve property derived from the commission of any terrorist activity in terms of any law for the time being in force.

PART II

Provisions Applicable to Institutions and other Persons

9. Duty not to divulge information.

(1) A person shall not disclose to any other person—

(a) that a report has been made or information provided to the Financial Intelligence Unit in terms of any provisions of this Act;

(b) that any suspicion in relation to a transaction has been formed as referred to in section 7; or

(c) any other information from which the person to whom the information is disclosed could reasonably be expected to infer that a suspicion has been formed or that a report has been or may be made.

(2) The provisions of subsection (1) shall not apply to disclosures made to—

(a) an officer or employee or agent of the person making the report under this Act for any purpose connected with the performance of that person's duties;

(b) a lawyer, attorney or legal advisor for the purpose of obtaining legal advice or representation in relation to any matter; or

(c) the supervisory authority of the relevant Institution, in so far as it is related to the discharge of the functions of the supervisory authority.

(3) No person referred to in paragraph (b) of subsection (2) to whom any disclosure of information has been made, shall disclose that information other than to a person referred to therein, in so far as it is necessary for—

(a) the performance of the first-mentioned person's duties; or

(b) obtaining legal advice or representation in relation to the matter.

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