Central Bank introduce new guidelines for lawyers & Notaries on real estate, client funds

Attorneys-at-law and Notaries are legally bound to conform with regulations targeting money laundering and illegal funds management when carrying out transactions for their clients in buying, and selling real estate and managing client funds.

Under Section 33 of the Financial Transactions Reporting Act No. 6 of 2006 (FTRA), both Lawyers and Notaries are considered ‘Legal Professionals’ and are required to vet evidence before engaging in activities such as “managing client money, securities or other assets; management of bank, savings or securities accounts; organization of contributions for the creation, operation or management of companies; and creation, operation or management of legal persons or arrangements and the buying and selling of business entities,”

According to the guidelines issued by the Financial Intelligence Unit (FIU) of the Central Bank of Sri Lanka (CBSL), this move is to identify, assess and manage Money Laundering (ML) and Terrorist Financing (TF) risks, when carrying out such activities.

Meanwhile, the FIU also urged legal professionals to appoint Compliance Officers as per the FTRA regulations when engaging in activities such as the formation or management of legal persons, acting as or arranging for another person to act as, a director or secretary of a company etc.

Under the regulations, a legal professional is required to report the attempted transaction as a suspicious one to the FIU if the client fails to provide satisfactory evidence with regard to the said transaction.  “Failure to conform to the requirements under the FTRA shall be liable to administrative penalties,” the FIU warned in a public notice.

The recent “Governance Diagnostic Report” on Sri Lanka, formulated by the International Monetary Fund also noted that these laws “could help mitigate governance vulnerabilities and support anti-corruption efforts such as transparency of beneficial ownership of legal persons, enhanced customer due diligence (CDD) requirements for politically exposed persons (PEPs) and reporting of suspicious transactions,”

However,  the international lending partner stressed that “there are still gaps in its legal framework which prevent Sri Lanka from being fully compliant with Financial Action Task Force (FATF) standards.”