Inside Sri Lanka’s alleged “black economy” — the phantom imports, shell companies, bank accounts and foreign transfers now under investigation
By Lakbima News Investigative Desk
September 7, 2026
A billion dollars is difficult to imagine.
For a family worrying about the price of rice, medicine, electricity or fuel, it is simply a number too large to feel real.
But put it another way.
Sri Lanka earned about US$1.5 billion from tea exports in 2025. So when President Anura Kumara Dissanayake says approximately US$1 billion was illegally taken out of the country, he is describing an amount equivalent to roughly two-thirds of an entire year of the country’s tea export earnings.
And now there is a much bigger question behind the number.
Where did the money go?
More importantly:
How was it possible for such large amounts of foreign currency to leave Sri Lanka through the formal banking system without the goods supposedly being imported?
The answers are still being investigated.
But documents placed before Parliament, statements made in court, disclosures by investigators and warnings issued by Sri Lanka’s own Financial Intelligence Unit paint a disturbing picture of possible weaknesses stretching from company registration to banking controls, Customs verification and international money transfers.
There is also an important caveat.
The headline figure of US$1 billion should not yet be described as a proven US$1 billion theft.
The evidence publicly disclosed so far establishes a substantial investigation involving hundreds of billions of rupees and thousands of transactions. But the exact amount that ultimately proves to have been illegally siphoned away, the identities of all beneficiaries and whether every questioned transaction was fraudulent remain matters for investigators and the courts.
That is precisely why this story deserves closer examination.
The allegation that shocked Parliament
The story first exploded publicly in June.
President Dissanayake, speaking in Parliament on June 25, said investigators had uncovered nearly US$1 billion in advance payments made through telegraphic transfers since 2023 for imports that apparently never arrived.
He said the investigation involved money connected to organised crime, drug trafficking and corruption, and alleged that certain bank branches and officials had been involved.
The allegation was enormous.
But Parliament would soon receive a more specific number.
In July, Senior Deputy Inspector General of Police Asanka Karawita told the Committee on Public Finance that Customs had identified 105 companies that had transferred approximately Rs.214.7 billion — around US$715 million — overseas between January 2023 and March 2026 through telegraphic transfers for supposed imports for which investigators had found no corresponding goods.
That figure is crucial.
It means the investigation was no longer merely a political speech or an allegation made in passing.
Police had a transaction trail.
105 companies. 227 accounts. Almost 24,300 transfers.
The numbers are staggering.
According to evidence reported from the parliamentary investigation, the 105 companies were connected to only 55 individuals acting as directors or company secretaries.
The money travelled through approximately 227 bank accounts.
And investigators identified roughly 24,300 telegraphic transfers involving 13 major public and private commercial banks.
One individual allegedly presented himself as the owner of 43 of the companies and was linked to approximately US$43 million in transfers alone. Investigators allege that forged invoices were obtained through local brokers and submitted to banks to support the outward payments.
This is where the story changes character.
It is no longer simply a question of a businessman sending money overseas.
It raises the possibility of an organised financial network.
A company is created.
A bank account is opened.
Money enters the account.
An overseas payment is made.
An invoice is produced.
A supposed import is declared.
And then, according to investigators, the goods do not arrive.
The system has apparently been given a transaction that looks like ordinary international commerce.
Except the physical goods may not exist.
How could the money leave?
The suspected mechanism is relatively simple in concept.
A Sri Lankan company tells its bank that it needs to make an advance payment to a foreign supplier.
The bank transfers foreign currency overseas.
The payment is supported by documents relating to an intended import.
Under normal circumstances, the goods eventually arrive in Sri Lanka.
Customs records the import.
The transaction can then be reconciled.
But investigators allege that in the cases now being examined, some of those goods never arrived.
The money had already crossed the border.
That is what makes a “phantom import” so dangerous.
It creates the appearance of legitimate commerce while potentially functioning as a mechanism for capital flight or money laundering.
And this was not an unknown risk.
Sri Lanka’s own Financial Intelligence Unit had already identified trade-based money laundering as a significant risk.
Its national risk assessment identified customs-related offences, including laundering through trade, among the country’s major money-laundering threats. The FIU has specifically warned about suspicious patterns such as unusually large advance payments, missing Customs declarations, third-party payments and companies with no genuine place of business.
The warning signs were already known
This may be one of the most uncomfortable parts of the story.
The problem was not entirely invisible.
The FIU’s 2021/22 national risk assessment described trade-based money laundering as an emerging risk.
The FIU later conducted training for banks specifically on detecting suspicious international trade transactions and highlighted phantom shipping, false documentation and manipulated invoices as recognised techniques used in trade-based money laundering.
According to evidence reported from the parliamentary inquiry, the FIU had also warned relevant authorities about risks associated with advance payments as early as 2021.
If those warnings were indeed available, another question emerges:
Was the problem a lack of information — or a failure to act on information that already existed?
That distinction could become one of the most important questions for investigators.
The bank question
Perhaps the most serious issue is that the alleged transfers did not happen through some secret underground banking system.
They allegedly passed through Sri Lanka’s formal banking system.
In August, the CID’s Financial Crimes Investigation Division arrested four officials attached to private commercial banks in connection with the investigation.
Police alleged that the officials had facilitated numerous transfers, including one official allegedly linked to more than US$24 million in transactions and another to approximately US$32 million.
Investigators also alleged that some officials received payments for facilitating transactions and that forged Customs documents were used.
Those allegations remain allegations.
The defence has challenged them.
Lawyers representing the bank employees have argued that some were junior employees whose responsibilities did not extend to determining whether imported goods actually arrived. One defence lawyer also argued that a particular employee had been suspended during part of the period in question and therefore did not have access to the relevant banking systems.
That distinction matters.
A bank employee processing a transaction is not automatically part of a criminal conspiracy.
The investigation will have to establish knowledge, intent, conduct and benefit.
That means proving much more than the fact that a particular transaction passed across someone’s desk.
The alleged loopholes
The parliamentary investigation has raised several possible weaknesses.
One concerns company registration.
Investigators reportedly found that many companies were linked to the same relatively small group of people.
The Committee heard allegations that dummy directors were used and that some companies had no meaningful business presence.
The Registrar of Companies’ systems were also criticised as being too slow and insufficiently integrated with other government databases.
Another alleged weakness concerned the Unique Reference Number, intended to help reconcile foreign exchange payments with imports.
According to reporting on the parliamentary inquiry, banks had allegedly entered a single full stop into mandatory reference fields in some instances, allowing transactions to pass through the system without a meaningful reference number.
If proven, this would be more than an individual mistake.
It would suggest a systemic control that could be bypassed.
And that raises a much larger question:
How many people knew the loophole existed?
Then there is the drug-money connection
This is where the story becomes even darker.
Investigators have alleged that some money passing through the network may have been connected to drug trafficking.
Court proceedings reportedly included allegations that money associated with a suspected drug trafficker was transferred through accounts connected to one of the companies under investigation.
The FCID has been investigating possible money-laundering offences alongside the foreign-exchange transfers.
Police have also reportedly traced parts of the investigation beyond Sri Lanka, including alleged links to individuals operating from Dubai and the repatriation of suspects with Interpol assistance.
But again, this is precisely where responsible journalism matters.
A transaction allegedly connected to a drug trafficker does not mean every company, bank employee or transfer in the wider investigation was connected to drugs.
Investigators must establish the chain of money.
Where did the money originate?
Who controlled it?
Who received it?
Who ultimately benefited?
Those are the questions that can turn an allegation into evidence.
The US$1 billion may not all be the same thing
This is perhaps the most important distinction in the entire story.
The President has referred to nearly US$1 billion.
Police told Parliament about approximately US$715 million identified through the 105-company investigation.
Those numbers should not automatically be treated as two separate scandals.
Nor should they automatically be treated as exactly the same pool of money.
They appear to represent different stages or scopes of the wider investigation.
And there is another complication.
The Central Bank Governor, Dr. Nandalal Weerasinghe, told the Committee on Public Finance that not every apparent mismatch between foreign-exchange payments and Customs records necessarily represents a phantom import.
Advance payments for legitimate imports are permitted.
There can also be timing differences between when a bank records a payment and when Customs records the corresponding shipment.
According to reporting of the Governor’s evidence, preliminary analysis suggested that approximately 40% of the questioned US$1 billion could potentially relate to genuine imports, although the broader investigation was still required before firm conclusions could be drawn.
This is a crucial counterweight to the political headline.
It means:
US$1 billion allegedly transferred ≠ US$1 billion proven stolen.
And:
US$715 million under investigation ≠ US$715 million proven criminal proceeds.
The courts will ultimately have to decide what the evidence proves.
The defence has raised another uncomfortable possibility
In August, lawyers for the principal suspect, Jiffry Mohamed of A.Y. Investments Impex, asked the court for what they described as a fair and complete investigation.
They argued that the company and associated companies were not importers but performed operational services for commissions, receiving rupees from brokers and facilitating transfers through licensed banks.
The defence also argued that advance payments for imports were lawful under Sri Lanka’s existing regulations.
Most importantly, the defence claimed that some of the goods may actually have been exported from countries including China and India and subsequently cleared by Sri Lankan importers.
The Colombo Chief Magistrate subsequently ordered the FCID to investigate whether the relevant goods had in fact been exported to Sri Lanka and to verify the position with overseas exporters.
That court order is significant.
Because it identifies exactly what investigators now need to establish.
Not assumptions.
Not political speeches.
Not newspaper headlines.
Actual goods. Actual exporters. Actual shipping records. Actual importers. Actual payments.
Follow the transaction all the way to the other side of the ocean.
So what are the possible explanations?
At this stage, several possibilities deserve investigation.
1. A large-scale phantom-import operation
This is the most serious possibility.
Companies may have deliberately created fictitious imports to move foreign currency abroad.
If investigators prove that invoices, Customs documents and company structures were deliberately fabricated, the case could involve multiple financial and criminal offences.
2. Trade-based money laundering
The payments may have been used to move money generated from other crimes.
The suspected drug-money links make this possibility particularly important.
Sri Lanka’s FIU has already identified trade-based money laundering as a significant national risk.
3. A banking-control failure
It is possible that some transactions were fraudulent while bank employees failed to detect them.
That would be different from proving that banks or individual employees deliberately participated.
The investigation therefore needs to distinguish between:
criminal facilitation, negligence, inadequate compliance and ordinary processing.
4. Genuine transactions caught in a data mismatch
The Central Bank’s position cannot simply be dismissed.
Advance payments can legitimately precede imports.
A shipment may also arrive later than expected.
Therefore, some portion of the apparent discrepancy could disappear once overseas shipping, Customs and banking records are reconciled.
5. A wider foreign-exchange black market
The phantom-import investigation may represent only one mechanism within a much larger informal economy involving foreign currency.
That possibility is particularly important because the Government itself has been investigating other channels, including suspected use of cryptocurrency.
The parliamentary inquiry was reportedly told that some suspected funds had moved through USDT, while investigators believed other networks were still operating.
6. Capital flight through trade manipulation
There is also a much older problem.
Sri Lanka has for years faced allegations and estimates involving trade misinvoicing — manipulating the declared value of imports and exports to move wealth across borders.
Global Financial Integrity’s methodology uses discrepancies between countries’ reported trade data to estimate potential trade misinvoicing. But GFI itself stresses that these value gaps are indicators of exposure and risk, not direct measurements of proven criminal proceeds.
That distinction is essential.
Sri Lanka has had serious trade-misinvoicing concerns for years, but those estimates should not simply be added to the current US$1 billion investigation.
They are different datasets using different methodologies.
The bigger historical question
The US$1 billion allegation has emerged against a much older background.
A previous Global Financial Integrity analysis estimated enormous trade-value gaps involving Sri Lanka over earlier years. A 2022 report based on GFI’s work estimated that Sri Lanka’s trade misinvoicing-related value gap reached tens of billions of dollars over a nine-year period.
But those numbers are estimates of discrepancies in international trade data, not court-certified stolen money.
The current investigation is different.
This time, investigators have identified actual companies.
Actual bank accounts.
Actual telegraphic transfers.
Actual invoices.
Actual bank officials.
And actual court proceedings.
That is why this case deserves attention beyond the political argument over whether the Government is exaggerating.
Why this matters to ordinary Sri Lankans
Foreign exchange sounds like something that belongs to economists and bankers.
It does not.
When dollars disappear from a country that has limited foreign-exchange resources, ordinary people eventually feel the consequences.
Sri Lanka learned that lesson painfully in 2022.
The country ran out of sufficient foreign exchange to pay for essential imports, while fuel, food and medicine became difficult to secure and prices surged.
The IMF described the crisis as involving depleted reserves, severe shortages and major economic and social hardship.
That does not mean the current alleged US$1 billion scheme caused the 2022 crisis. It did not: the investigation concerns transactions beginning in 2023.
But it demonstrates why foreign currency leaving the country through potentially illegal channels is not an abstract issue.
Every dollar matters more when a country has recently experienced a foreign-exchange crisis.
A dollar that should finance a legitimate import but instead disappears into an offshore account is ultimately a dollar that cannot be used for something else.
One billion dollars versus the IMF lifeline
There is another way to understand the scale.
Sri Lanka’s IMF Extended Fund Facility was approved in 2023 at approximately US$3 billion. By May 2026, the IMF said Sri Lanka had received approximately US$2.4 billion under the arrangement.
So the alleged US$1 billion figure is enormous when compared with the country’s international financial support.
But again, the comparison must not be abused.
The alleged transfers are not necessarily equivalent to a US$1 billion loss to the Treasury.
They are not equivalent to US$1 billion stolen from the IMF.
And they are not necessarily all criminal.
The comparison is useful only to demonstrate the scale of the allegation relative to the country’s financial resources.
What investigators now need to prove
The most important stage of this investigation may actually be ahead.
Investigators need to answer at least eight questions.
1. Did the goods exist?
If so, where were they shipped?
2. Who were the overseas exporters?
Were they genuine businesses?
3. Who were the ultimate beneficial owners of the Sri Lankan companies?
Were the directors genuine businessmen or nominees?
4. Who prepared the invoices and supporting documents?
Were they genuine or fabricated?
5. Why did banks approve the transfers?
Were required checks completed?
6. Did any bank employee knowingly facilitate illegal transactions?
If so, who benefited?
7. Where did the money ultimately go?
This may require cooperation from foreign banks and financial-intelligence authorities.
8. What portion, if any, came from drugs, corruption or other criminal activity?
That question could transform the case from a foreign-exchange investigation into a major money-laundering case.
And then comes the political question
There is another issue Sri Lanka should not ignore.
If hundreds of billions of rupees could allegedly be transferred through dozens of companies and thousands of transactions, the question cannot stop at the people who allegedly executed the transfers.
Someone created the companies.
Someone opened the accounts.
Someone prepared or supplied the documentation.
Someone approved the payments.
Someone received the money overseas.
And someone ultimately benefited.
The investigation therefore needs to follow the money upwards, not merely sideways.
It should not matter whether the final beneficiary is a businessman, a criminal network, a politically connected individual or nobody yet known to investigators.
Evidence should determine the answer.
Not political affiliation.
Not social status.
Not whether the suspect belongs to the Government or Opposition.
The uncomfortable possibility: this could be bigger than the billion
The most interesting part of the parliamentary evidence may be what sits around the US$1 billion investigation.
The investigation has reportedly identified other suspicious companies and networks.
It has raised questions about cryptocurrency.
It has uncovered alleged links to narcotics.
It has exposed weaknesses in company registration and transaction verification.
And it has raised questions about how long some bank officials and customers may have been operating across institutions.
That means the US$1 billion figure could eventually turn out to be:
too high,
too low,
partially legitimate,
or only one part of a much larger system of illicit financial flows.
At present, nobody outside the investigation can honestly say which one it is.
What happens next?
The courts have already begun forcing the investigation toward evidence rather than headlines.
The Colombo Chief Magistrate has directed the FCID to establish whether the alleged overseas exporters actually shipped goods corresponding to the payments.
That could be decisive.
If investigators contact an overseas exporter and discover that no goods were ever shipped, the phantom-import theory becomes considerably stronger.
If shipping documents, customs declarations and bills of lading are found, the picture becomes more complicated.
If goods arrived but were cleared by different companies, investigators will need to trace the chain again.
And if money went to companies that existed only on paper, the investigation could expose a much deeper financial network.
The question Sri Lanka should ultimately ask
The most important question is not whether the President’s US$1 billion figure sounds shocking.
It is.
The important question is whether Sri Lanka can finally establish where the money went.
For years, Sri Lankans have heard about missing billions, corrupt deals, foreign accounts, shell companies and money that somehow disappears beyond the country’s borders.
The public is tired of numbers without conclusions.
This time, there is an opportunity to do something different.
Follow every dollar.
Identify every company.
Identify every beneficial owner.
Identify every bank account.
Identify every overseas recipient.
Determine which imports were genuine.
Determine which documents were false.
Determine which officials acted lawfully and which did not.
And if criminal money was involved, determine who ultimately benefited.
Because for the person standing in a fuel queue, waiting for medicine, paying a higher electricity bill or watching the price of food rise, the difference between US$715 million and US$1 billion is not an academic argument.
It is a question of whether the country’s scarce resources were protected.
And whether, after the worst economic crisis in generations, Sri Lanka has finally learned how to stop its money from disappearing through the cracks.
Editorial note
Lakbima News has treated the US$1 billion figure as an allegation under investigation. The President has publicly referred to approximately US$1 billion in alleged illegal outward transfers, while investigators told Parliament that approximately US$715 million involving 105 companies had been identified in a specific investigation. The Central Bank Governor has cautioned that some apparent discrepancies may have legitimate explanations involving advance payments and timing differences. Allegations against suspects and bank officials remain subject to investigation and judicial proceedings. No individual or institution should be regarded as guilty unless established through due legal process.
Sources and further reading
The Morning — Financial crimes: Anatomy of Sri Lanka’s $1b phantom import scandal
Daily FT — Nandalal backs multi-agency probe into alleged $1b phantom imports
Sunday Times — Court orders FCID probe into $1bn overseas remittance case
Global Financial Integrity — Trade-Related Illicit Financial Flows in Developing Asia, 2013–2022
