The government has prepared National Strategy and Action Plan for Combating Money Laundering and Financing of Terrorism to combat money laundering and also to save the country from being black listed from the Financial Action Task Force (FATF) review meeting.
The government has introduced a new strategy to combat terrorism financing and money laundering with stringent provisions, informed a government official, who was in the team to prepare the strategy.
The FATF – an international inter-governmental organisation tasked with combating money laundering – will review Nepal’s progress in combating terrorism financing and money laundering in 2020-21, he said, adding that Nepal is though under the Asia Pacific Group (APG) on Money Laundering, which is a member of FATF. “As a member of the FATF’s Asia Pacific Group on Money Laundering, Nepal’s progress will be reviewed.”
As part of the Asia Pacific Group (APG) on Money Laundering, the official said that Nepal has managed to avoid being blacklisted so far but it faces a high risk due to slow progress and its non-committal approach to combating money laundering. If a country is blacklisted, all foreign financial institutions will stop conducting transactions with the country. Import and export will also be stopped, if any bank rejects transactions. “This strategy seeks to make all sectors equally responsible,” he said, adding that it has primarily added to the responsibility of banks and financial institutions, and the investigation body has been further empowered.
The government has brought the new strategy that allows for anyone accused of financial impropriety to be investigated for money laundering, which means any complaint registered with government agencies like the Commission for Investigation of Abuse of Authority (CIAA), Nepal Police, Department of Revenue Investigation (DRI), and the Department of Foreign Employment (DoFE) will automatically be up for investigation for money laundering.
Though, the incumbent Prime Minister KP Sharma Oli has brought the Department of Money Laundering Investigation under him – claiming to make it stronger, which the opposition blames to misuse the power – the new strategy will provide authority to the Nepal Police to investigate and file cases related to money laundering and terror financing. The strategy will be monitored by the Prime Minister’s Office (PMO) and the Cabinet. But it has created more confusion among government bodies also after the Department of Money Laundering Investigation was brought under the Prime Minister’s Office.
The strategy read that the Nepal Police will be upgraded with necessary skill sets to qualify it to coordinate with the Department of Money Laundering Investigation in probing such cases regarding investment in criminal activities. “Central Investigation Bureau (CIB) under the Nepal Police will be used to exchange information among all related departments,” it reads, adding that cases of severe nature and high risk will be investigated jointly.
The Department of Money Laundering Investigation, currently, is the sole agency to file cases regarding money laundering. Acording to the Money Laundering Prevention Act 2008, “in case the police or other departments want to investigate cases, they would need permission from the department.”
The new strategy, however, reads that this provision in the Money Laundering Prevention Act 2008 will be amended. The failure to amend Money Laundering Prevention Act 2008 has made it difficult to conduct important tasks relating to the prevention of money laundering. It is doubtful whether the current strategy will also be implemented.
Likewise, the strategy also reads that there will also be a mandatory provision for an individual to have only one account. “Transactions of above Rs 100,000 will be allowed only through digital accounting,” it reads, adding that any state financial transactions will be carried out via bank accounts.
There are also provisions to digitalise transactions and information through mobile apps.
Though, Nepal has still to do a lot before the review meeting to not again listed under grey zone, the strategy has prescribed plans to design a set of procedures related to money laundering that will be included in all public sector training manuals. “The government officials will also be required to sign a performance contract on eradicating money laundering, which will become a basis for their evaluation.”
The strategy also plans to bring all remittance-related activities under the surveillance of the central bank, which needs to maintain a list of remittance companies, company agents and branch agents.
Likewise, the Department of Foreign Employment should provide remittance orientation training before issuing labour permits to foreign employment seekers,” the strategy reads, adding that the Department of Foreign Employment, Foreign Ministry, the Non-Resident Nepali Association (NRNA) and their country organisations, and the Immigration Department should have their links on the website of central bank. “The government will also make it mandatory for all banks, financial institutions and remittance entrepreneurs that they ensure that their transactions are conducted through software.”
The strategy also aims at enforcing the use of software for Securities Board of Nepal (Sebon), the Employees' Provident Fund (EPF), Citizen Investment Trust (CIT) and all savings and financial cooperatives, which have their paid up capital exceeding Rs 100 million.
The purchase of house, land and valuable metals by non-financial professionals and entrepreneurs will be strictly monitored, reads the strategy that has listed new technology and non-profit sector as high risk areas. “Special regulatory surveillance will be arranged for businesses like currency price transfer, currency exchange, real estate and precious metals.”
The strategy also has a provision for signing treaties for mutual legal support – to help check the dirty money flow – and such treaties will be signed with at least two countries in a year.
Nepal – if failed to bring stringent measures to control flow of dirty money – will be blacklisted, thus has no option than to come up with a stricter strategy and implement it to avoid getting blacklisted. But the implementation part still remains a challenge as according to the FATF, the most vulnerable group – Politically Influential People (PIP) – that is responsible to bring the law and implement – have the most black money earned through the corruption, tax evasion, commission and red tape.
According to former finance minister Shanta Raj Subedi, “Nepal has no option but to implement the strategy to avoid being blacklisted.”
Though Nepal has escaped blacklisting by the FATF, it has failed to come up with workable mechanisms to convince the international agency that it is committed to implementing the existing provisions to stop finance terrorism and money laundering.
Nepal has already been blacklisted once, and if this time the country is blacklisted again, it will be not only damaging to the economy but also very difficult to get out of the list as it has not been serious in implementation of its international commitments.
The government has introduced a new strategy to combat terrorism financing and money laundering with stringent provisions, informed a government official, who was in the team to prepare the strategy.
The FATF – an international inter-governmental organisation tasked with combating money laundering – will review Nepal’s progress in combating terrorism financing and money laundering in 2020-21, he said, adding that Nepal is though under the Asia Pacific Group (APG) on Money Laundering, which is a member of FATF. “As a member of the FATF’s Asia Pacific Group on Money Laundering, Nepal’s progress will be reviewed.”
As part of the Asia Pacific Group (APG) on Money Laundering, the official said that Nepal has managed to avoid being blacklisted so far but it faces a high risk due to slow progress and its non-committal approach to combating money laundering. If a country is blacklisted, all foreign financial institutions will stop conducting transactions with the country. Import and export will also be stopped, if any bank rejects transactions. “This strategy seeks to make all sectors equally responsible,” he said, adding that it has primarily added to the responsibility of banks and financial institutions, and the investigation body has been further empowered.
The government has brought the new strategy that allows for anyone accused of financial impropriety to be investigated for money laundering, which means any complaint registered with government agencies like the Commission for Investigation of Abuse of Authority (CIAA), Nepal Police, Department of Revenue Investigation (DRI), and the Department of Foreign Employment (DoFE) will automatically be up for investigation for money laundering.
Though, the incumbent Prime Minister KP Sharma Oli has brought the Department of Money Laundering Investigation under him – claiming to make it stronger, which the opposition blames to misuse the power – the new strategy will provide authority to the Nepal Police to investigate and file cases related to money laundering and terror financing. The strategy will be monitored by the Prime Minister’s Office (PMO) and the Cabinet. But it has created more confusion among government bodies also after the Department of Money Laundering Investigation was brought under the Prime Minister’s Office.
The strategy read that the Nepal Police will be upgraded with necessary skill sets to qualify it to coordinate with the Department of Money Laundering Investigation in probing such cases regarding investment in criminal activities. “Central Investigation Bureau (CIB) under the Nepal Police will be used to exchange information among all related departments,” it reads, adding that cases of severe nature and high risk will be investigated jointly.
The Department of Money Laundering Investigation, currently, is the sole agency to file cases regarding money laundering. Acording to the Money Laundering Prevention Act 2008, “in case the police or other departments want to investigate cases, they would need permission from the department.”
The new strategy, however, reads that this provision in the Money Laundering Prevention Act 2008 will be amended. The failure to amend Money Laundering Prevention Act 2008 has made it difficult to conduct important tasks relating to the prevention of money laundering. It is doubtful whether the current strategy will also be implemented.
Likewise, the strategy also reads that there will also be a mandatory provision for an individual to have only one account. “Transactions of above Rs 100,000 will be allowed only through digital accounting,” it reads, adding that any state financial transactions will be carried out via bank accounts.
There are also provisions to digitalise transactions and information through mobile apps.
Though, Nepal has still to do a lot before the review meeting to not again listed under grey zone, the strategy has prescribed plans to design a set of procedures related to money laundering that will be included in all public sector training manuals. “The government officials will also be required to sign a performance contract on eradicating money laundering, which will become a basis for their evaluation.”
The strategy also plans to bring all remittance-related activities under the surveillance of the central bank, which needs to maintain a list of remittance companies, company agents and branch agents.
Likewise, the Department of Foreign Employment should provide remittance orientation training before issuing labour permits to foreign employment seekers,” the strategy reads, adding that the Department of Foreign Employment, Foreign Ministry, the Non-Resident Nepali Association (NRNA) and their country organisations, and the Immigration Department should have their links on the website of central bank. “The government will also make it mandatory for all banks, financial institutions and remittance entrepreneurs that they ensure that their transactions are conducted through software.”
The strategy also aims at enforcing the use of software for Securities Board of Nepal (Sebon), the Employees' Provident Fund (EPF), Citizen Investment Trust (CIT) and all savings and financial cooperatives, which have their paid up capital exceeding Rs 100 million.
The purchase of house, land and valuable metals by non-financial professionals and entrepreneurs will be strictly monitored, reads the strategy that has listed new technology and non-profit sector as high risk areas. “Special regulatory surveillance will be arranged for businesses like currency price transfer, currency exchange, real estate and precious metals.”
The strategy also has a provision for signing treaties for mutual legal support – to help check the dirty money flow – and such treaties will be signed with at least two countries in a year.
Nepal – if failed to bring stringent measures to control flow of dirty money – will be blacklisted, thus has no option than to come up with a stricter strategy and implement it to avoid getting blacklisted. But the implementation part still remains a challenge as according to the FATF, the most vulnerable group – Politically Influential People (PIP) – that is responsible to bring the law and implement – have the most black money earned through the corruption, tax evasion, commission and red tape.
According to former finance minister Shanta Raj Subedi, “Nepal has no option but to implement the strategy to avoid being blacklisted.”
Though Nepal has escaped blacklisting by the FATF, it has failed to come up with workable mechanisms to convince the international agency that it is committed to implementing the existing provisions to stop finance terrorism and money laundering.
Nepal has already been blacklisted once, and if this time the country is blacklisted again, it will be not only damaging to the economy but also very difficult to get out of the list as it has not been serious in implementation of its international commitments.
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