Nepal fears blacklisting by Financial Action Task Force

Nepal will be blacklisted by the Financial Action Task Force — a global anti-money laundering body – if the parliament does not pass two Bills and two UN Conventions by June 7.
“We hope Anti-Money Laundering Act (first amendment), Mutual Legal Assistance Bill, UN Convention Against Organised Crime and UN Convention Agianst Terrorist Financing will soon gets its approval from the Parliament,” said revenue secretary Krishnahari Baskota, who is flying to Macau tomorrow to take part in a examining body of Financial Action Task Force (FATF).
Central bank governor Dr Yubraj Khatiwada and law secretary Madhav Poudel will accompany him.
"If the parliament could not approve these Bills and Conventions by the June 7 deadline, we will try to extend some time like earlier,” he added.
Nepal had assured both Asian Pacific Group and FATF that it would fulfil its commitment within December 2010, but it failed and extended the deadline till June 7, 2011.
Since yesterday, the Parliamentary Statute Committee has started discussion on the Anti-Money Laundering (amendment) Bill that is in the Parliament since last one year. “The discussions might complete in a couple of days,” he said, hoping that Nepal will escape the blacklisting.
Under international law, the FATF Blacklist carried with it no formal sanction, in reality, a jurisdiction placed on the FATF Blacklist often found itself under intense financial pressure meaning Nepal will find it difficult to get foreign aid from international organisations like the World Bank and International Monetary Fund. Foreign banks may not trust the letters of credit issued by Nepali banks creating difficulties for Nepali businessmen at the international trade level. Nepali Businessmen may have to face harassment at foreign customs offices, with those authorities not allowing Nepali goods to go through the green channel. Nepalis may also face hassles while undergoing immigration procedures in other countries.
Nepal itself has issued a circular to Nepali banks to be overly cautious while doing business with citizens and agencies of North Korea and Iran.
“The Macau meeting will access Nepal’s progress on its earlier commitments and standards,” Baskota said, adding that it will recommend Nepal to FATF plenum.
According to central bank Nepal has done lots of progress and the approval of these Bills and Conventions will give them legal teeth. After the approval of Acts, we can get time to build our international capacity and procedural aspects.
Including Nepal Angola, Bolivia, Ethiopia, Kenya, Myanmar, Nigeria, Sri Lanka, Syria, Trinidad & Tobago, and Turkey have to take sufficient action to implement significant components of their action plan by June 2011, then the FATF will identify them as being out of compliance with its agreed action plans and will take the additional step of calling upon it to consider the risks arising from the deficiencies associated with the jurisdiction.
There are 36 members of FATF currently and Nepal falls under Associate Member – Asian Pacific Group – that has 40 countries including Nepal.
The purpose of the Asia Pacific Group on Money Laundering is to ensure the adoption, implementation and enforcement of internationally accepted anti-money laundering and counter-terrorist financing standards as set out in the FATF Forty Recommendations and FATF Eight Special Recommendations.
Last year, FATF had categorised Nepal among 20 countries as seriously deficient in combating money laundering and terrorist financing, alleging that Nepal was posing a risk to the international financial system.