Sebon brings anti-money laundering directive

Stockbrokers and merchant bankers will now have to scrutinise their clients for any instances of money laundering.

Securities Board of Nepal (Sebon) — the capital market regulator — has issued the Anti-Money Laundering and Counter-terrorist Financing Directive 2069 in order to prevent any illegal fund from entering the capital market for laundering purposes.

Nepal Rastra Bank’s Financial Information Unit (FIU) and Department of Money Laundering Investigation requires stockbrokers to inform the authorities regarding any suspicious transaction exceeding Rs 1 million, under the Anti-Money Laundering Act-2008.

According to the current directive, securities businesspersons have to report any transaction undertaken by a person or a firm exceeding Rs 1 million in a single day to the FIU. The Sebon has defined securities businesspersons as stockbrokers, portfolio managers, asset managers and merchant bankers managing any share issue.

Securities businesspersons also need to maintain separate documents on clients conducting businesses higher than Rs 1 million and have to ask the clients regarding the source of the money. Share brokers and portfolio managers have been asked to maintain customer due diligence so that any suspicious income can be detected.

The directive has asked brokers and asset managers not to be involved with clients who are unable to provide all the information required for customer due diligence or if the information is found to be incorrect.

It has also asked securities brokers and merchant bankers to maintain enhanced customer due diligence for very risky clients and simplified customer due diligence for less risky clients. The directive has identified clients or investors who are suspected of being involved in some sort of illegal activity among others.

Since the last three years, in order to prevent the Nepali financial sector from aiding any sort of placing or layering of illegal money, authorities have asked financial institutions, insurance companies, accountants and cooperatives to report any suspicious transaction exceeding Rs one million.

Nepal is dealing with the possibility of being blacklisted by the Financial Action Task Force (FATF), an inter-governmental global anti-money laundering body due to its inability to show the commitment towards fighting money laundering. Nepal has been given the deadline of June 2013 to get all the related Acts enacted.