For three years, a dangerous gap between Sri Lanka’s banking and customs systems allowed hundreds of millions of dollars to leave the country on the strength of paperwork for imports that allegedly never arrived. Now, after an estimated US$715 million disappeared through phantom transactions, the Government is attempting to close the loophole with sweeping controls on foreign-exchange payments.
The Ministry of Finance has introduced the Imports and Exports (Control) Regulations No. 06 of 2026, under which commercial banks are prohibited from processing dollar advance payments unless importers have been properly verified and pre-registered with Sri Lanka Customs.
The changes represent a major shift in how foreign-exchange transactions linked to imports are scrutinised. Importers must provide a Unique Identification Number (UIN), Taxpayer Identification Number (TIN) and detailed beneficiary information before foreign currency can be released.
At the centre of the problem was not necessarily a failure of Customs’ computer system itself, but a failure of systems to communicate with each other.
Sri Lanka uses the Automated System for Customs Data, or ASYCUDA World, to process customs declarations, track cargo information and calculate duties. Yet, according to concerns raised by Parliament’s Committee on Public Finance, the system historically operated separately from commercial banks’ transaction records.
That separation created an opening for abuse.
Investigators allege that fraudsters presented apparently legitimate proforma invoices to banks and obtained approval for advance payments in US dollars. Once banks completed Telegraphic Transfers, the money could leave Sri Lanka before Customs systems established whether the promised cargo had actually arrived.
The alleged racket exploited that gap repeatedly. Authorities have identified 105 shell companies and more than 24,000 suspicious transfers linked to the movement of approximately US$715 million between January 2023 and March 2026.
The consequences extend beyond the missing dollars.
The foreign-exchange drain came at a particularly sensitive time for Sri Lanka, which has been rebuilding its reserves following the country’s economic crisis. A large volume of unbacked foreign-currency outflows can increase pressure on the rupee and raise the cost of imported essentials, including fuel, medicine and food.
The alleged phantom imports also distorted trade data and potentially allowed businesses operating through shell companies to evade legitimate taxation. Such distortions matter because Sri Lanka’s trade statistics influence economic planning, debt-restructuring assessments and negotiations with international lenders.
The Government has responded by phasing out Customs’ Fast Track and Green Channel facilities and demanding more rigorous verification of declarations.
It is also preparing amendments to the Foreign Exchange Act No. 12 of 2017 that would potentially make non-remittance and fraudulent import documentation criminal offences rather than matters dealt with primarily through regulatory penalties.
But the crackdown carries a cost.
Legitimate importers now face additional registration, documentation and reporting requirements. Banks must transmit TINs and detailed beneficiary profiles to Customs, while importers must complete pre-registration before making purchases.
The challenge is therefore twofold: stop another multibillion-rupee leak without turning the controls designed to protect Sri Lanka’s economy into another obstacle for businesses that genuinely need to import.