Ahead of Sri Lanka's 2026 Mutual Evaluation, the Sri Lanka CSO FATF Network has submitted a shadow report to the Asia Pacific Group (APG) and the Financial Action Task Force (FATF), raising concerns that AML/CFT measures are being used to impose disproportionate restrictions on non-profit organisations (NPOs) and civic space. The submission aims to provide assessors with civil society's perspective on how FATF-related measures are being implemented in practice and how they are impacting legitimate civil society mandate and practice.

The report highlights several developments that the Network believes exceed FATF's risk-based approach. These include a draft NGO law that would grant broad oversight and enforcement powers to administrative authorities, amendments to AML/CFT legislation that centralise decision-making while limiting due process safeguards, and banking practices that have made it increasingly difficult for some NPOs receiving foreign funding to access financial services.

Drawing on a 2025 survey of more than 100 NPOs, the report also describes growing challenges in accessing banking services, increased scrutiny from financial institutions, and a broader trend of financial exclusion and de-risking.

According to the Network, these measures have overall contributed to a more restrictive and highly monitored operating environment for civil society organisations.

The shadow report calls on the Mutual Evaluation assessment team to consider whether Sri Lanka's implementation of Recommendation 8 aligns with FATF's requirement that measures to protect the non-profit sector from terrorist financing abuse should be targeted, proportionate, and should not disrupt or discourage legitimate nonprofit activity. 

Read the full submission here.