Four UN Special Rapporteurs have cautioned that Colombo’s proposed law imposing blanket controls on non-profits risks violating both human rights and global counter-terror financing rules just as the country faces a critical mutual evaluation.

Four United Nations Special Rapporteurs have formally warned the Sri Lankan government that its draft Non-Governmental Organisations (Registration and Supervision) Bill 2026 is inconsistent with the right to freedom of association and with the very Financial Action Task Force (FATF) standards the legislation is said to advance. The joint communication arrives as Sri Lanka undergoes a Mutual Evaluation by the Asia/Pacific Group on Money Laundering, a FATF-style regional body, scheduled later this month.

The evaluation carries significant economic weight. An adverse outcome could raise borrowing costs, complicate correspondent banking relationships and increase compliance burdens across the financial sector. Sri Lanka previously spent time on the FATF grey list between 2017 and 2019, an experience officials are determined not to repeat.

Mandatory Registration and Sweeping Powers

The Bill, first published in 2024 and revised in June 2026 to include explicit anti-money-laundering and counter-terrorist-financing provisions, would replace the 1980 Voluntary Social Services Organisations Act. It requires virtually every non-profit entity – trusts, companies limited by guarantee, informal community groups of five or more people engaged in social service or advocacy – to register with a newly empowered Competent Authority. Operating without registration would become a criminal offence punishable by fines of up to one million Sri Lankan rupees. Directors and office-bearers of corporate bodies would face personal criminal liability, effectively reversing the burden of proof.

Registration would last only three years. The draft sets no deadline for the authority to decide applications or renewals, provides no right of appeal against refusal, and bars organisations from beginning activities until registration is granted. The experts note that this approach conflicts with Article 22 of the International Covenant on Civil and Political Rights, which protects associations without requiring prior state authorisation, and with Human Rights Council resolutions calling for registration procedures that are transparent, accessible, inexpensive and subject to appeal.

Vague Grounds and Chilling Effects on Advocacy

Beyond registration, the Bill imposes substantive restrictions. Organisations would be required to “align with the policies of the Government,” refrain from activities affecting sovereignty or territorial integrity, avoid political advocacy using NGO funds during election periods, notify the authority before any crowdfunding, and follow Central Bank instructions. Grounds for suspension or deregistration include threats to national security, public order or unspecified laws – criteria the rapporteurs describe as vague, overbroad and failing tests of legality, necessity and proportionality.

Such language, they warn, could be applied arbitrarily against groups working on enforced disappearances, land rights, transitional justice, minority rights, LGBTIQ+ issues or governance accountability. Dissolution of an entire organisation, rather than action against individual wrongdoers, would also breach international standards that treat forced dissolution as an exceptional last resort.

Inspection Powers Without Judicial Oversight

The Competent Authority would gain powers to enter NGO premises on prior notice without a search warrant, copy records, attend meetings and demand detailed information on staff and funding sources – all without judicial authorisation. Data-sharing arrangements with financial-intelligence and counter-terrorism regulators raise additional privacy concerns under Sri Lanka’s Personal Data Protection Act. The experts recall earlier communications documenting patterns of intimidation, surveillance and house raids against human rights defenders, noting that a previous Special Rapporteur on freedom of assembly and association had already recommended against mandatory registration after a 2019 country visit.

Contradiction with FATF’s Risk-Based Approach

Central to the UN communication is the finding that the Bill’s blanket regulation of the entire non-profit sector contradicts FATF Recommendation 8. That standard, revised in recent years, requires measures that are targeted, proportionate and risk-based. Most non-profit organisations, FATF emphasises, pose no terrorist-financing risk; self-regulation or limited oversight of identified high-risk entities may be sufficient. Sri Lanka’s own national risk assessment of January 2026 rated the inherent terrorist-financing risk of the NGO sector as only low to medium, with limited evidence of actual abuse.

Civil society groups have long argued that successive governments have invoked FATF requirements to justify measures that go far beyond what the global standard demands. A detailed shadow report submitted to the Asia/Pacific Group by the Sri Lanka CSO FATF Network documents how amendments to the Convention on the Suppression of Terrorist Financing Act, the Financial Transactions Reporting Act and the Prevention of Money Laundering Act – passed in mid-2026 – have expanded executive powers while banking practices have left many legitimate organisations struggling to open or maintain accounts and receive foreign funds.

Broader Context of Civic Space Concerns

The current draft recycles elements of earlier proposals advanced under previous administrations, a continuity that has drawn particular criticism given the National People’s Power government’s electoral commitments to expand democratic space. UN Resident Coordinator Marc-André Franche has publicly cautioned that treating AML/CFT rules as sector-wide restrictions, rather than targeted tools, risks undermining both security and development objectives.

International monitors note that over-compliance is a common pattern among countries facing mutual evaluations. Fear of grey-listing often produces measures that create financial exclusion, de-risking by banks and a chilling effect on legitimate civic activity – outcomes FATF itself has identified as unintended consequences to be avoided.

Call for Withdrawal or Substantial Revision

The four Special Rapporteurs – Ben Saul (counter-terrorism and human rights), Leopoldo Maldonado Gutiérrez (freedom of expression), Gina Romero (freedom of peaceful assembly and association) and Andrea Bolaños Vargas (human rights defenders) – have asked the government to explain how the Bill complies with international human rights law and FATF standards, whether it will be withdrawn or extensively revised, and whether it will be gazetted for transparent, representative and inclusive public consultation. Their communication and any official reply will be made public and reported to the UN Human Rights Council.

As Sri Lanka’s Mutual Evaluation proceeds, the choices made on this legislation will influence not only the country’s technical compliance rating but also the practical operating environment for the non-profit organisations that deliver services, advocate for accountability and contribute to democratic resilience. Balancing genuine efforts to combat illicit finance with the protection of civic space remains a test that international standards – and international observers – will closely watch.