The government has asked the bullion traders to record the identity of customers, who buy precious stones and metals worth more than Rs1 million in a day.
The government claimed to take the move – aiming at making trade transparent and discourage money laundering. Lately, the corruption money has been found to be used in buying precious stones and metals.
The Inland Revenue Department (IRD) – that has been named the regulator of the bullion sector two years ago – plans to implement the directive for a few bullion traders only at present. “The initial target is some 400 to 500 bullion traders – both wholesalers and distributors – and commercial banks," the department informed, adding that it has asked the bullion traders to comply with the directives.
According to the anti-money laundering law – that has been brought two years ago – traders can be subject to a penalty of upto Rs 10 million for failing to abide by the directive.
The bullion traders have not been reporting the trading of over Rs 1 million of precious stones and metals, though the Money Laundering Prevention Act categorises bullion traders as reporting entities. They need to record – details of customers, who buy precious metals worth over Rs 1 million – and report suspicious transactions to designated authorities, the Act reads.
As per the directive, bullion traders will have to submit a report about any transactions above Rs1 million by a customer in a day to the Financial Information Unit (FIU) – under the central bank – within 15 days of suspicious transaction. In case of suspicious transactions, the bullion trader should submit a report about it to the FIU within three days, the directives reads, “While submitting such a report, the bullion trader should submit the report in a format prescribed in the directive.”
The government’s recent National Risk Assessment Report has also said there is ‘Medium’ risk of money launderers through the bullion market. The bullion traders neither operate with minimum regulations nor are aware of their AML/CFT obligations increasing the risk of anti money laundering, the report reads, adding that Nepal needs to prepare ahead of the planned evaluation of Nepal’s performance against money laundering and terrorism financing by Asia Pacific Group (APG) – under the Financial Action Task Force (FATF) – in June 2021 on money laundering, fraudulent and smuggling activities.
The government has yet to prepare laws and implement the Acts and regulations that it had brought after the last evaluation of Nepal by the APG.
The new directive also requires bullion traders to maintain updated records on ‘politically exposed persons’ (PEPs), who are suspected to channelise their illegal earnings through businessmen. The transactions by PEPs are considered risky also because they are often found indulge in corrupt activities by misusing their positions.
“Bullion traders need to ensure that the PEPs and their family members are properly identified through documents from credible sources,” the directive reads.
According to the Money Laundering Prevention Act, PEPS range from rural municipality vice-chairpersons to the president and senior bureaucrats. “A trader of precious metals needs to develop a risk management system to identify PEPS and also make effort to find the source of funds,” the directive reads, adding that such enhanced due diligence should also be implemented in the case of those who are found involved in suspicious transactions like those who purchase precious metals on a large scale and unusual ways. “If someone buys precious metals on the behalf of others, a bullion trader needs to identify the real customer.”
But the bullion traders say that it is difficult for them to identify PEPs, though they can seek the identification of persons, who buy precious stones and metals above Rs 1 million in a day.
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