A legal expert has called for administrative reforms to Sri Lanka's new beneficial ownership disclosure requirements, arguing the current implementation may hinder foreign direct investment while creating impractical compliance burdens for companies.
Sri Lanka's beneficial ownership disclosure regime, introduced under the Companies Act No. 12 of 2025 to combat money laundering and meet international standards, requires urgent regulatory reforms to prevent it from becoming an obstacle to business investment, according to Heritage Partners Precedent Partner Dr. Arittha Wikramanayake.
Dr. Wikramanayake acknowledged that the law's anti-money laundering objectives are valid, noting the legislation followed Sri Lanka's experience with the Financial Action Task Force grey list. However, he argued that the implementation has exceeded what international standards require. He pointed out that while the Financial Action Task Force mandates proportionate sanctions for non-disclosure, Sri Lanka's framework imposes obligations that companies frequently find impractical to fulfil, particularly when ownership structures span multiple overseas entities. Tracing ultimate beneficial owners through foreign corporate structures and obtaining verified personal information from international investors presents significant challenges under the current requirements, he noted.
Dr. Wikramanayake warned that integrating beneficial ownership disclosures into company registration could delay business incorporations and complicate efforts to attract foreign direct investment. "We are desperately in need of investment," he stated at a seminar organised by Corporate Management Consultants, suggesting the new requirements may further burden the Board of Investment's already challenging recruitment efforts.
Rather than seeking legislative amendments, Dr. Wikramanayake proposed administrative reforms to the beneficial ownership declaration forms through regulations. He suggested allowing companies to disclose steps taken to identify owners when complete information cannot reasonably be obtained. He also recommended that listed companies receive exemptions from beneficial ownership requirements, noting that jurisdictions including the United States, United Kingdom, and Singapore provide such exemptions.
The expert further advised Company Secretaries and directors to maintain detailed compliance documentation as evidence of due diligence, and encouraged corporate practitioners to engage in legislative processes earlier to address implementation challenges before laws take effect.
