Sri Lanka Enacts A New Foreign Exchange Control Law
The Sri Lankan Parliament recently enacted the currency exchange Act (Act) which repealed the last change control legislation which has been arranged for a while that is very long.
Summary of key provisions:
Dealers of foreign exchange
The Act recognises ‘Authorised Dealers’, ‘Restricted Dealers’ and ‘Dealers for a Specific Purpose’ to be allowed to deal in currency exchange.
Authorized dealers are Banks (licensed banking institutions being commercial certified specialized banks) that are registered and licensed to try the banking company beneath the Banking Act No. 30 of 1988.
The Central Bank of Sri Lanka (CBSL) will allow a person who is not a dealer that is certified to deal in currency exchange prone to specific stipulations, and such dealers are referred as restricted dealers.
CBSL may appoint someone, perhaps not being a dealer that is certified a restricted dealer, to deal in forex for particular purposes prone to stipulations.
Any person will come into and deal in forex in furtherance of present transactions without the Exchange Control limitations when it comes to the Act. Repayments for current deals are thought as follows:
“Payments for current transactions means payments which are not for the purpose of transferring capital assets, and includes, without limitation—
- all repayments due in connection with international trade, other business that is present services, and normal temporary banking and credit facilities;
- payments due as interest on loans so that as net gain off their investments;
- repayments of moderate amount for amortization of loans or even for depreciation of direct investments; and
- moderate remittances for family living expenses.�
The dealer that is authorised request for documents and information to be able to determine the bona fides associated with the transaction.
Capital deals, depending on the Act, are transactions which do not fall in the concept of a deal that is ongoingrefer above). Within the Exchange that is final Control, numerous regulations were manufactured in mention of the several kinds of capital transactions. The Minister of Finance is empowered to issue regulations related to money transactions in foreign currency within the brand new Act.
The Act has addressed and made provisions for specific transactions.
Somebody who is resident Sri Lanka could make repayments for present deals and money deals within or outside Sri Lanka, by using foreign assets or foreign currency in bank records held by him in or outside Sri Lanka, through a professional dealer or a restricted dealer without acquiring any previous approvals. So long as such asset that is foreign not created from the transformation of neighborhood money, disposal or conversion of each monetary or genuine asset within Sri Lanka, or through the business of dealing in foreign exchange.
A resident citizen of Sri Lanka can remit exchange that is international penalty or prosecution, which were perhaps not previously announced, towards the Commissioner of Inland income by way of a taxable income or to your face of Department of Exchange Control, susceptible to the payment of a remittance charge which will be recommended by regulation. The forex should never have already been acquired because of the payment of money-laundering, terrorist funding or bribery for this specific purpose.
Nonetheless, if such forex is dedicated to a Sri Lanka Development Bond, such remittances will be exempt through the application for the remittance fee that is aforementioned.
Offences and Penalties under the Act
CBSL is empowered to conduct investigations regarding currency exchange deals and assets which can be foreign. The authorized individual of this CBSL is likely to make a pc software towards the Magistrate Court and get a Court purchase, to either look before the authorized person of CBSL or even to produce the publications or documents under consideration in the event, a person will not conform to the needs due to the CBSL for papers and further information or cause any resistance in to the investigation.
Any person failing woefully to comply with Court that is such purchase be in charge of an exceptional of Rs. 500,000. The offense continues if it becomes a continuous offense, such person will probably become prone to still another fine of Rs. 100,000 for each day.
If an dealer that is official a restricted dealer participate in any current deal or money deal, partcipates in just about any working with regards to international assets, in place of the provisions for the Act or violates any supply linked to the Act, including any guidelines or directions issued thereunder, the CBSL will issue a notice to such dealer to conform to the provisions associated with Act. Where in actuality the dealer fails to work in line with the notice released by the CBSL, the CBSL may temporarily suspend the authorization or allow provided to deal in foreign exchange inquiry that is pending.
After the inquiry the CBSL may either revoke the authorization or allow awarded for the dealer, or impose a fine up to the worthiness with this asset that is foreign impose a limitation from working in foreign currency for current or money deals up to a period of year.
Any other person in violation of the provisions of the Act will be imposed a fine of Rs. 1,000,000.
Where a corporate or an unincorporated human anatomy is needed to pay a volume or imposed a penalty, every manager, member or partner among these human anatomy is individually liable, jointly and severally to cover amount that is such. He then will never be vulnerable to pay such amount if such director, user or partner can prove that the act or omission causing such payment is carried out without his knowledge or which he has already established due diligent measures whenever it comes to prevention of these work.
A dealer that is aggrieved by the penalties imposed because of the CBSL may appeal to the Board of Inquiry within 30 days through the date your decision ended up being communicated.
Board of Inquiry
The Board of Inquiry will contain a retired judge of this Supreme Court of Sri Lanka and two people who are conversant in worldwide economic or trade transactions and today experienced experience at a managerial that is senior within the general public or private sector, and generally are of good standing and repute. The Board will hold office for a time period of 36 months through the date of appointment.
The Board of Inquiry is needed to make a determination on the appeals within 30 days connected with receipt linked to the appeal.
“Currency” includes coins, currency notes, postal orders, money orders, cheques, drafts, travelers cheques, letters of credit, bills of exchange, promissory notes, other electronic fund transfer cards and digital currency.
“Foreign asset” means any movable or property that is immovable Sri Lanka, of every course or description whatsoever and without prejudice towards the generality associated with preceding provisions regarding the definition, includes foreign exchange, foreign exchange, international securities and international bank records.
“Foreign exchange” means foreign currency and includes –
- deposits, credits and balances payable in foreign currency;
- drafts, travelers cheques, letters of credit and bills of exchange drawn in Sri Lanka and payable outside Sri Lanka in foreign currency;
- drafts, travelers cheques, letters of credit and bills of exchange drawn outside Sri Lanka but payable in Sri Lankan currency;
- any document or instrument of a type customarily employed for international transfers of funds.
“Currency change dealings” includes accepting, buying, offering, borrowing and lending of forex and change to virtually any other currency that is international.
“Securities” means shares, stock, bonds, debentures, units under a unit trust scheme or of any mutual fund.