- Concerns grow about how funds from narco sales are moved overseas
- Suspicion that gold smuggling may be linked
- The Government has entered a decisive phase in its long struggle against organised crime.
President Anura Kumara Dissanayake has strengthened his public stance against drug trafficking, money laundering, and high-value contraband smuggling, particularly gold, which law enforcement agencies have increasingly identified as a preferred financial instrument for criminal networks.
On 30 October, President Dissanayake launched a national counter-narcotics initiative, warning that the drug trade must be stopped. He declared that the Government would not tolerate any form of political protection for criminals and warned officials with connections to narcotics trafficking to sever all ties immediately.
“Those who have any connection to these traffickers must sever all ties immediately. Vast sums of money circulate in this illegal trade, and no one involved will be allowed to remain hidden any longer,” he added.
Intelligence picture
The Sri Lanka Navy has been at the forefront of intercepting criminal activity at sea, and Navy Spokesperson Commander Buddhika Sampath told The Sunday Morning that smuggling networks remained active despite intensified surveillance.
According to Commander Sampath, the Navy’s success in 2025 has been driven by Intelligence-led operations, strategic deployments, and the maintenance of a robust vigilance network across Sri Lanka’s maritime domain. From his standpoint, the strength of these operations comes from early intelligence gathering, precise planning, and the ability to adapt rapidly to changing smuggling tactics.
Commander Sampath confirmed that the Navy’s confiscations for 2025 to date included 24.5 kg of gold, three boats, and seven suspects. These confiscations illustrate that gold smuggling continues to operate as a profitable criminal enterprise, often intertwined with the same routes and networks used for narcotics trafficking.
The Navy does not credit its success to fixed route identification because smugglers frequently shift pathways to avoid detection. However, Commander Sampath acknowledged that most indicators showed that these smuggling operations tended to be oriented towards India, although he emphasised that final determinations were made through investigation rather than assumption. “We cannot identify one specific route they always use. Our operations are based on intelligence, and we plan our deployments accordingly.”
When asked whether gold was being used to pay for narcotics shipments to India, Commander Sampath said he had no direct knowledge of such links and that these matters remained under investigation by other agencies. He added that the Navy’s role was limited to arresting suspects at sea and handing them over to law enforcement for follow-up investigations.
The question of terrorism financing links also remains open. Commander Sampath said he could not comment on the connection at this time because investigations had not been completed.
The Navy also apprehended a multi-day fishing trawler suspected of carrying narcotics during a deep sea operation earlier this week. Six Sri Lankan suspects were taken into custody after the vessel, which had departed from a Sri Lankan port, was intercepted.
Commander Sampath cautioned against drawing early conclusions and stated that the full nature of the shipment would only be understood once investigations were completed.
The Navy Spokesperson also emphasised that Sri Lanka maintained a strong intelligence-sharing network through the Maritime Rescue Coordination Centre. While he could not confirm which partners provided information for specific incidents, he described the overall network as healthy and collaborative.
Links between drug proceeds and gold
Police Spokesperson ASP F.U. Wootler told The Sunday Morning that Sri Lankan law enforcement had identified a suspected pattern connecting drug-trafficking profits to domestic gold smuggling, while maintaining that investigations had not conclusively revealed such a pattern.
“We have identified a pattern where individuals engaged in money laundering, particularly drug traffickers with illicit profits, are turning to gold smuggling,” he said. “Since they cannot deposit large amounts of black money in banks, they convert it into gold and store it in secure vaults, which later allows them to pass it off as clean assets.”
ASP Wootler confirmed that several such gold holdings had already been confiscated by law enforcement and were presently moving through legal processes, awaiting final forfeiture orders. He made clear that at this stage of the investigations, law enforcement believed the majority of the gold linked to these cases was sourced domestically rather than imported or acquired internationally.
On the question of whether gold was being used to pay for narcotics shipments to India, ASP Wootler said that investigators had not formally established this link. He added that no confirmed intelligence had been shared with him regarding direct Indian criminal involvement in gold-for-drug exchanges. These matters remain under investigation.
The Police Spokesperson reiterated that the existence of strong domestic connections between gold smuggling and drug trafficking was well established, even though cross-border linkages were still being examined.
Sri Lanka Customs Spokesperson Chandana Punchihewa, speaking about the evolving gold-smuggling ecosystem, highlighted the statutory reward system and the significant successes Customs had achieved in prosecuting illicit gold networks. Speaking to The Sunday Morning, Punchihewa expanded on the legal framework for seized goods and how enforcement officers were rewarded for successful interdictions.
He referred to Section 153 of the Customs Ordinance, which governed the legal framework for the disposal of forfeited goods through public tender. Under this statutory scheme, any goods seized and legally forfeited by Customs, along with the penalties imposed, are converted into revenue and then distributed according to a fixed allocation system established by law.
Punchihewa emphasised that the Customs maintained strict transparency in the application of Section 153. The entire process is codified in law, ensuring that all disbursements are carefully documented and monitored. The system balances the need to reward officers and informants who assist in enforcement actions with the requirement to contribute to the State’s revenue.
Half of the total proceeds, or 50%, is placed into a designated fund distributed among Customs officers involved in the enforcement action and the informants who provided intelligence. “This allocation is carried out under a scheme approved by the minister, ensuring the rewards are legally sanctioned and transparent,” he said.
The other half, also amounting to 50%, is divided further. Forty percent of this second half, equivalent to 20% of the total, goes to the Customs Officers’ Management and Compensation Fund, which supports officer welfare, management, and compensation.
“This fund is rarely used, but when needed, it is essential. It supported the families of officers like Sujith Perera and Amarapala, who were killed in the line of duty,” Punchihewa said.
The remaining 30% of the total proceeds is credited to the Consolidated Fund of the State as Government revenue.
He noted that this legal structure had enabled the department to handle complex seizures, including high-value gold confiscations, while maintaining public confidence in the integrity of Customs operations.
Investigative challenges
Punchihewa also provided significant insight into Customs investigations into gold-smuggling networks. He revealed that numerous major jewellery businesses in Sri Lanka had been sourcing gold directly from smugglers, an arrangement that was difficult to detect due to the physical indistinguishability between legal and illegal gold.
Customs has overcome this barrier by deploying forensic accounting techniques. In several cases, they have discovered that businesses claiming to possess about Rs. 150 million worth of gold had legal purchase records for only Rs. 50 million. The remaining value represented smuggled gold acquired off the books.
This financial evidence formed the basis of a landmark enforcement effort in which Customs levied fines amounting to Rs. 10-15 billion against 10-15 jewellery houses. All fines have been paid, and several businesses have conceded their involvement in purchasing illegally acquired gold.
Policy changes have also made an impact. Punchihewa noted that banks could no longer import gold slabs for release into the domestic market, eliminating a channel that had previously facilitated regulatory loopholes.
Customs also acknowledges that gold smuggling intersects with broader financial crime. Punchihewa said that there was a strong possibility that smuggling networks engaged in money laundering, although Customs had not independently detected actionable evidence in its own case files. He emphasised that Customs maintained a close liaison with the Financial Intelligence Unit, which may possess relevant information on the money-laundering dimension.
With regard to narcotics, he stated that there was growing suspicion that gold was used as a counter-payment in drug-trafficking transactions but said Customs had not uncovered concrete proof of such a link yet. These issues remain central to the State’s wider investigation.
Criminal economies
The concerns of the Navy, Police, and Customs reveal a convergence of criminal economies that mirrors regional trends. Gold has emerged as a preferred instrument for storing illicit value because it is easily transported and highly fungible and can be integrated into the formal economy through refiners and jewellers.
While Sri Lanka has long been vulnerable to maritime narcotics movements, the expanding use of gold as a medium of exchange has allowed criminal networks to diversify their methods of concealing profits. Investigators believe that as anti-money-laundering frameworks become more stringent, criminals are turning increasingly to portable commodities.
President Dissanayake’s policy direction reflects this reality. The Government has emphasised the importance of sealing financial loopholes, tightening surveillance at ports and airports, and pursuing inter-agency collaboration.
The activation of the Gambling Regulatory Authority Act on 1 December is one part of this effort. The Government has signalled that the act will enhance transparency in a sector that has historically been exploited to launder money. In Budget 2026, the President also increased allocations to drug rehabilitation programmes and proposed further reforms to strengthen enforcement capacity.
Combating the black economy
The operational environment remains challenging. Agencies must keep pace with rapidly evolving smuggling tactics, particularly at sea where traffickers routinely modify routes and vessel types to evade detection. On land, routine audits must be strengthened to identify businesses that serve as conduits for integrating illicit commodities into the formal market.
The Government’s seemingly firm stance against political interference represents a major shift in the governance culture of Sri Lanka. Successful implementation will depend on visible and consistent disciplinary action against State officials who enable smuggling networks.
Law enforcement agencies are aware that gold smuggling and narcotics trafficking are dynamic phenomena that will respond adaptively to policy pressure. Although significant seizures and fines have disrupted several networks, most agencies anticipate that criminal groups will attempt to reconfigure their financial and logistical structures.
The long-term impact of the Government’s current strategy will depend on sustained inter-agency coordination, improved data sharing, and continuous oversight of the financial system.