Sri Lanka’s Cabinet of Ministers on Friday approved a new legislative bill, endorsed by the International Monetary Fund (IMF) that will allow the state to confiscate any property or proceeds resulting from criminal activities, a spokesperson for the cabinet told local media.
Under the new law, known as the Proceeds of Crime Act (POCA), the government will be entitled to freeze and/or confiscate any assets they suspect are the proceeds of criminal activity, including those assets acquired through commissions, bribery, and fraud. In the US and other common law jurisdictions, this is known as civil forfeiture and refers to a judicial process under which law enforcement or government officials are empowered to seize assets and property connected to criminal activity. The POCA, in addition to allowing for the judicial freezing and forfeiture of such assets, will also establish a new authority comprised of industry experts who will be tasked with managing these assets in the South-Asian island nation.
The POCA, endorsed by the IMF, is the first of its kind to be undertaken in the region.
Minister (Dr.) Bandula Gunawardana, Minister of Transport and Highways and Minister of Mass Media and the cabinet’s spokesman, announced the news during a media briefing at the Government Information Department following the cabinet’s weekly meeting.
“There is a dire need for this law,” Gunawardana told reporters, as shared by Reuters. “Sri Lanka’s economy is stabilizing but it will only be stable after we complete the debt restructuring process, which is at a crucial stage now. We must continue down this path.”
The new law forms part of a larger joint effort between Sri Lanka and the IMF to improve governance, as well as fulfill Sri Lanka’s obligations under their $2.9 billion debt restructuring program, amid the country’s ongoing economic crisis, which began in 2019 and worsened in 2022 following unprecedented levels of inflation and a dramatic decline in available foreign exchange reserves. The latter led to nationwide demonstrations, with civilians protesting the government’s response to economic hardship. Sri Lanka received a line of credit from its neighbor India, amounting to $4 billion, which covered the costs of importing essential goods and fuel. It has led to a notable improvement in Sri Lanka’s foreign debt obligations. In 2023, Sri Lanka turned to the IMF, which set out a four-year bailout program that requires the country to impose economic reforms and entertain bi-annual fiscal reviews in exchange for $2.9 billion in tranches. The POCA is one of the first required reforms to take shape.
