Sri Lanka is moving to tighten its grip on foreign money transfer operators amid growing concerns over regulatory loopholes, financial transparency, and compliance failures in the country’s remittance ecosystem.
The Cabinet of Ministers this week approved a major overhaul of regulations governing money and value transfer service providers, paving the way for stronger oversight of cross-border payment operators and bringing previously unregulated foreign entities under the direct supervision of the Central Bank of Sri Lanka (CBSL).
The revised framework, issued under the Payment and Settlement Systems Act, No. 28 of 2005, seeks to replace critical provisions in the earlier Payment or Value Transfer Service Providers Regulations No. 1 of 2024, which had inadvertently created gaps in the country’s financial monitoring structure.
Under the previous rules, only companies incorporated under Sri Lanka’s Companies Act, No. 07 of 2007, were permitted to register as money or value transfer service providers. This excluded foreign-registered entities, offshore companies, and companies limited by guarantee from obtaining formal authorisation.
However, despite the restrictions, several overseas remittance and payment operators reportedly continued conducting business in Sri Lanka through local agents and intermediaries. Financial authorities identified this as a serious compliance concern, warning that such operations existed outside the country’s direct regulatory net.
Analysts say the loophole created significant vulnerabilities in anti-money laundering and counter-terrorism financing enforcement mechanisms, particularly as digital remittance channels and informal payment systems continue to expand globally.
The newly introduced Money or Value Transfer Service Providers Regulations No. 1 of 2025, published through Extraordinary Gazette No. 2468/06 dated 23 December 2025, directly addresses the issue by formally allowing foreign transfer service providers to obtain registration in Sri Lanka, provided they comply with local regulatory obligations.
Officials believe the revised framework will improve transparency over cross-border financial flows while strengthening monitoring mechanisms linked to Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) standards.
The changes are expected to significantly impact Sri Lanka’s remittance sector, which remains a critical source of foreign exchange earnings during a period of ongoing economic recovery and external financing pressures.
Industry observers note that the government is simultaneously attempting to encourage migrant workers and expatriates to use formal banking and licensed remittance channels rather than informal networks such as hawala systems, which often escape official scrutiny.
By bringing foreign operators into a legally recognised framework, authorities hope to improve accountability, increase confidence in digital payment systems, and reduce systemic risks associated with unregistered financial activity.
The proposal was submitted by President Anura Kumara Dissanayake in his capacity as Minister of Finance, Planning and Economic Development, underscoring the administration’s broader push to modernise Sri Lanka’s financial regulatory architecture while aligning the country with evolving global compliance standards.
By a Special Correspondent