Sri Lanka’s Cabinet of Ministers recently approved a legislative bill, backed by the International Monetary Fund (IMF), that grants the state the power to seize any property or proceeds established to have resulted from criminal activities. The decision heralds a major legislative development in the region, shedding light on a vital area of the law that has received increasing attention worldwide, that of civil forfeiture.
Under the new law, known as the Proceeds of Crime Act (POCA), the government will be empowered to freeze and/or confiscate assets it suspects to be the proceeds of criminal activity, which include but are not limited to, assets obtained through commissions, bribery, and fraud. This legal provision, prevalent in the US and other common law jurisdictions under the rubric of civil forfeiture, provides for law enforcement or government officials to seize assets and property linked to criminal activity.
In an unprecedented move for the region, the POCA will further establish a new authority consisting of a team of industry experts tasked with managing these assets in the South-Asian island nation.
The announcement came from Minister Bandula Gunawardana, Minister of Transport and Highways and Minister of Mass Media, during a media briefing at the Government Information Department.
As quoted by Reuters, the Minister highlighted the dire need for this law, especially considering the current economic context of Sri Lanka. He emphasized that the law is a step towards debt restructuring, which is a crucial aspect of stabilizing the country’s economy.
The POCA is key to a joint effort between Sri Lanka and the IMF to improve governance and meet Sri Lanka’s obligations under their $2.9 billion debt restructuring program. A pressing economic crisis, initiated in 2019 and amplified in 2022 following overwhelming levels of inflation and a precarious depletion in available foreign exchange reserves, sparked these initiatives. There have been nationwide demonstrations condemning the government’s response to the economic hardship.
In light of the crisis, Sri Lanka procured a line of credit from its neighbor India, amounting to $4 billion. This credit line facilitated the import of essential goods and fuel, contributing significantly to the improvement of Sri Lanka’s foreign debt obligations. In 2023, Brought to a stalemate, Sri Lanka appealed to the IMF, which presented a four-year bailout program. This program necessitates the country to execute economic reforms and partake in bi-annual fiscal reviews, in exchange for $2.9 billion in tranches. The POCA represents one of the first mandated reforms to be executed under this program.
Read more on this development at JURIST – News.