On 9 July 2026, the Sri Lankan Parliament passed three amendments to the country’s anti-money laundering and counter-terrorist financing framework. These laws are the Prevention of Money Laundering Bill that was passed in line with the Supreme Court’s determination, and the Financial Transactions Reporting (Amendment) Bill with amendments, although the exact changes have not yet been made public. In addition, the Convention on the Suppression of Terrorist Financing (Amendment) Bill was passed without amendments. However, these Bills will only come into effect once they receive the Speaker’s endorsement, and the date of endorsement has not yet been confirmed.
The Bills were introduced through a fast-tracked process in April and May 2026 ahead of Sri Lanka’s Financial Action Task Force (FATF) mutual evaluation, with significantly limited opportunities for public consultation and civil society engagement.
Their passage therefore raises concerns for Sri Lanka’s enabling environment for civil society. The Convention on the Suppression of Terrorist Financing (Amendment) Bill significantly expands surveillance and interception powers for law enforcement, including monitoring of non-profit organisations deemed “high risk,” such as those engaged in human rights advocacy, without clearly defined or objective criteria. This raises concerns about increased scrutiny of civil society activity even in the absence of financial crime risk. The Financial Transactions Reporting (Amendment) Bill grants extensive and potentially vague powers to the Financial Intelligence Unit (FIU), with limited safeguards against arbitrary application.
Civil society actors have previously challenged all three Bills before the Supreme Court, arguing that several provisions risk undermining freedom of association, expression, equality before the law and access to judicial remedies. Although the Court upheld the Prevention of Money Laundering (Amendment) Bill and the Convention on the Suppression of Terrorist Financing (Amendment) Bill as constitutional, and only Clause 22 and Clause 39 in the Financial Transactions Reporting (Amendment) Bill as unconstitutional. While the Supreme Court identified only limited inconsistencies with the Constitution, stakeholders argue that the breadth of discretionary authority could still result in disproportionate regulatory burdens on civil society organisations and related professionals. Similarly, the Prevention of Money Laundering (Amendment) Bill removes the requirement for a prior conviction in establishing predicate offences, potentially lowering the threshold for enforcement actions. Civil society actors caution that this could enable the misuse of AML/CFT frameworks to constrain legitimate civic, advocacy, and economic activities.
Overall, the reforms reflect a broader pattern of expanding executive authority through financial and security legislation, contributing to heightened regulatory scrutiny and concerns over the gradual narrowing of civic space in Sri Lanka. The passage of the Bills marks a significant step in this legislative process, with their practical impact depending on the final text of the amendments and their implementation following the Speaker’s endorsement.