Despite recording a historic revenue of over Rs. 2 trillion in 2025, Sri Lanka Customs is facing severe criticism following a damning report by the National Audit Office. The audit exposes deep-seated systemic corruption and mismanagement, revealing that internal funds—such as Reward and Overtime funds—are being operated without proper oversight to benefit officers rather than the state. 1 The report highlights how billions in penalties are diverted to staff distributions instead of the Treasury, while discretionary reductions in fines and a flawed overtime system further erode government revenue. 2 The findings underscore an urgent need for transparency and reform to protect national interests.
Sri Lanka Customs, the government’s key agency for import and export regulation, has recorded unprecedented collections in 2025, amassing over Rs. 2 trillion in the first ten months. Yet, a scathing National Audit Office report exposes systemic mismanagement and misuse of internal funds that divert billions away from the Treasury.
The audit highlights that several internal funds including the Reward Fund, Management & Compensation Fund, and the Overtime & Cargo Examination Fund operate without adequate oversight, clear policy frameworks, or legal sanctioning. Officers are incentivized to prioritize personal rewards over revenue collection, undermining national interests.
Shockingly, only 30% of net penalties from offences are sent to the Consolidated Fund, while Rs. 24.22 billion was distributed to officers and informants from 2012 to August 2023, with only Rs. 14.53 billion reaching the Treasury. Even routine operational detections are converted into “offence detections,” enabling staff to claim reward payouts for normal duties.
Discretionary reductions in penalties further erode government revenue. From 2017–2023, 17 major penalties totaling Rs. 7.61 billion were reduced to Rs. 481.69 million, leaving only Rs. 144.5 million for the Treasury. Administrative discipline remains weak, with handwritten attendance registers still in use despite biometric mandates, creating opportunities for ghost attendance and overpayment.
The overtime system is similarly flawed: 90% of the fund goes directly to officers regardless of extra work, while the government receives only 10%. In 2021–2022, officers were paid nearly Rs. 1.9 billion, while the state retained under Rs. 170 million.
Despite record collections, the audit underscores the urgent need for reform. With billions in potential revenue lost, Sri Lanka Customs must adopt transparency, discipline, and accountability, or risk eroding the integrity of one of its most critical revenue-generating institutions