Friday, June 8, 2012

Uncertain ordinance to black list Nepal

A delay by the caretaker government led by Dr Baburam Bhattarai in bringing three key Bills — Mutual Legal Assistance Bill, Extradition Bill and Bill Against Organised Crime — through ordinance by next weekend will force the Financial Action Task Force (FATF) to downgrade Nepal to the 'high-risk and non-cooperative jurisdictions to which counter-measures apply' along with Iran and North Korea.
The 'high-risk and non-cooperative jurisdictions to which counter-measures apply' is a list of 'Non-Cooperative Countries or Territories' that are perceived to be non-cooperative in the global fight against money laundering and terrorist financing.
Currently, Nepal is under the 'jurisdiction with a high-level political commitment to address the AML/CFT deficiencies,' but the government's failure like before, will force the FATF's plenary — the FATF's decision making body that meets three times a year — meeting in Italy on June 18-21 to downgrade Nepal to 'high-risk and non-cooperative jurisdictions to which counter-measures apply' or commonly known as blacklisting.
Nepal had received a time extension — due to international lobbying — in the February meeting of the plenary that has recategorised the jurisdictions to three; 'High-risk and non-cooperative jurisdictions to which counter-measures apply' under which Iran and North Korea fall, 'High-risk and non-cooperative jurisdictions that have not committed to an action plan' under which 15 jurisdictions including Cuba fall, and 'Jurisdictions with a high-level political commitment to address the AML/CFT deficiencies under which 23 jurisdictions including Nepal fall.
The February meeting had listed a total of 17 countries under high-risk and non-cooperative jurisdictions by the watchdog of the flow of dirty money. All countries are defined as high-risk and non-cooperative jurisdictions, however counter-measures were applied to only Iran and North Korea as the FATF felt that they were not making sufficient efforts to improve their regulations to fight against the flow of dirty money.
"We are committed to bringing the three key Bills through ordinance," said finance secretary Krishna Hari Baskota.
In May, during the face-to-face meeting in New Delhi briefing the Asia Pacific Group –– the regional member of Financial Action Task Force — meeting, Nepal had blamed the prolonged political transition for not being able to pass those Bills. But the meeting had asked Nepal to fulfill its commitment as soon as possible to escape blacklisting in June.
The three key Bills that are among the major commitments to the FATF were presented before the Parliament. But the intra-party rift within the ruling party, UCPN-Maoist, hindered the Parliament from passing them in February.
But after May 27, there is no Parliament and the government can fulfill its long due commitment through ordinance only.
Nepal has been repeatedly failing to fulfill its international commitment on passing the three Bills that will give legal teeth to the UN conventions on Anti Money Laundering that the parliament has already ratified.
The government's failure to fulfill its commitment to FATF will not only downgrade the country to a high-risk zone, it is rather going to cost the country dearly and the financial sector will be the first casualty, besides the flow of foreign investment. The financial sector will be hit hard as they will not be allowed to make any international transaction, and the country will lose its international market as the cost of exports will go up making Nepal's exports expensive.
Similarly, donors will also include more stringent conditions for aid and grants once the country is blacklisted.
The FATF had in February called on 21 jurisdictions to complete the implementation of action plans expeditiously and within the proposed timeframe. It has been closely monitoring the implementation of the action plans.
Earlier, Nepal had committed to the FATF to approve the Bills coupled with other reforms by December 2011, but the country — passing through a political transition — has not been able to keep its promise.


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