Has govt endorsed money laundering of cooperative fraud ?

While cases related to cooperative fraud and money laundering are still under judicial and investigative review, a recent controversial decision by the government has pushed Nepal into deeper risk under international anti-money laundering scrutiny.
Analysts warn that Nepal, already on the Financial Action Task Force (FATF) ‘grey list,’ could now be heading toward the far more damaging ‘black list.’
Nepal is currently classified by FATF as a ‘jurisdiction under increased monitoring,’ which means ‘grey list’. However, concerns intensified after the Office of the Attorney General (OAG) decided to amend charge sheets in cases involving Rastriya Swatantra Party (RSP) chair Rabi Lamichhane, his business partner and fugitive GB Rai, altogether 153 accused of cooperative fraud and money laundering. The move has raised fears that international confidence in Nepal’s commitment to fighting illicit finance is eroding.
The present civilian government, led by former Chief Justice Sushila Karki and formed in the aftermath of the Gen-Z protests of September 8 and 9 protests – that claimed the lives of 76 young demonstrators demanding good governance – now finds itself engulfed in a serious moral and legal crisis, largely due to decisions taken by its chief legal advisor.
Those protests were driven by calls for transparency, accountability, and the rule of law. Yet critics argue that the very government formed out of that movement has undermined its spirit. Attorney General Sabita Bhandari, appointed by the Karki administration, has issued a series of controversial decisions that many say strike at the core of judicial integrity.
And one of them is damaging to the country also. Most recently, on Thursday and Friday, Bhandari ordered amendments to charge sheets in money laundering and organised crime cases filed against Rabi Lamichhane, GB Rai – chair of Gorkha Media – and more than hundred others implicated in a major cooperative fraud scandal.
The decision is against the Section 36 of the Criminal Procedure Code, according to legal experts, who say that the OAG has misinterpreted it to alter cases that are already under judicial consideration.
Initially, the Attorney General sought to revise charges only against Rabi Lamichhane. However, citing legal complications in treating defendants differently within the same charge sheet, she ultimately removed organized crime and money laundering charges against all 153 accused linked to five cooperatives associated with Lamichhane. This decision also benefited fugitive suspect GB Rai, who according to Rabi Lamichhane also was the mastermind behind the fraud of billions.
AG Bhandari amended all accused charges as amending charges for only one accused in a case involving multiple defendants could have led to rejection by the court. As a result, even serious allegations against absconding suspects were diluted.
Critics further allege that Friday’s decision effectively legitimizes over Rs 5 billion allegedly siphoned from cooperatives and transferred abroad through shell companies, land transactions, and cryptocurrency. “This move has made it easier for those involved to sanitize illicit funds,” one former secretary said.
“Dropping serious charges against a politically exposed person under FATF’s highest-risk category is an act that places both citizens and the state itself in danger."
FATF classifies Politically Exposed Persons (PEPs), along with their family members and close associates, as high-risk under global Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) standards. Under FATF Recommendations 12 and 22, financial and designated non-financial institutions are required to apply enhanced due diligence and continuous monitoring to such individuals.
FATF also follows the principle of ‘once a PEP, always a PEP,’ meaning that heightened scrutiny does not automatically end when a person leaves office. “Given this framework, it is hard to believe that such a decision was taken without the knowledge or consent of the Prime Minister,” he noted.
Under Nepal’s own laws, organised crime and money laundering cases are not meant to be withdrawn in this manner. Beyond domestic legality, observers warn that the decision has put Nepal’s international financial credibility at stake.
After the controversial decision by AG Bhandari, victims of cooperative fraud have already taken to the streets, accusing the state of failing to recover their savings and protect their rights.
Nepal was previously placed on the FATF grey list due to weak enforcement, delayed investigations, and political interference. Analysts say leniency shown by past governments toward illicit financial networks worsened the situation and that the current administration’s actions have only amplified the risk.
Nepal is under pressure to fully implement its FATF action plan by January 2027. However, delays in completing a national risk assessment, poor coordination among investigative bodies, and a soft approach toward high-profile cases suggest the country may struggle to meet its commitments.
FATF has repeatedly urged Nepal to strengthen oversight of banks, cooperatives, casinos, precious metal and real-estate transactions, curb informal money transfer systems such as hundi – illegal transfer of money – enhance investigative and prosecutorial capacity, and ensure effective confiscation of illicit assets. Full compliance with targeted financial sanctions related to terrorism and weapons of mass destruction has also been emphasised.
Although the government claims to be working closely with FATF and the Asia-Pacific Group (APG) to address these weaknesses, analysts say recent decisions have made Nepal appear increasingly vulnerable in the global fight against money laundering.
As cooperative fraud and money laundering now directly affect Nepal’s international credibility, economic and foreign investment climate, experts warn that continued inaction – and politically motivated decisions – could push the country onto the FATF blacklist.
Observers also question the silence of political parties and civil society as the government appears to undermine the very ideals born out of the Gen-Z movement and the sacrifice of 76 young lives.
Despite having laws and institutions in place to combat illicit finance and terrorist funding, Nepal has produced limited tangible results in investigations, prosecutions, and asset seizures. Critics attribute this not only to institutional weakness but also to long-standing collusion between political leadership and notorious financial middlemen under previous administrations.
Analysts warn that Nepal’s situation deteriorated sharply in the immediate past after the then Prime Minister KP Sharma Oli government withdrew cases against members of the controversial ‘Thurman Gun gang’ and individuals including Deepak Bhatt from the Department of Money Laundering Investigation (DMLI) and Nepal Rastra Bank (NRB). They claim the risk has increased even further under the current government due to its controversial decisions, raising fears that Nepal could slide into the FATF ‘dark grey list’ or even the ‘black list.'
Although Nepal has established rules, laws, and institutional mechanisms to combat money laundering and terrorist financing, it has failed to produce tangible results in practice. As a result, progress in investigations, prosecutions, and asset seizures remains limited. Critics argue that this is not due to government inefficiency alone, but also because of alleged collusion between past governments and notorious networks and intermediaries like the so-called Thurmal Gun gang, during the tenure of former Prime Minister KP Sharma Oli and his Finance Minister Bishnu Paudel.
At present, however, analysts say Nepal has been pushed into even greater risk due to what they describe as the Karki government’s inexplicable leniency toward Rabi Lamichhane, a politically influential figure (PEPs) listed under FATF’s high-risk category.
Similar flawed decisions and delays in enforcing the law under previous governments led to Nepal being placed back on the FATF ‘grey list.'
Observers now find it troubling that a country already weakened by alleged close ties between political leaders and intermediaries accused of laundering illicit money may be moving toward the FATF ‘black list’ under Prime Minister Karki and her controversial Attorney General Bhandari.
This is because money laundering in Nepal is not limited to brokers and intermediaries alone; it is also widespread among politically connected figures like Rabi Lamichhane involved in the cooperative sector. Many cooperatives are allegedly operated by politicians and their family members, where public funds are misappropriated while enjoying protection from political parties and law-enforcement agencies. Rabi Lamichhane, critics argue, is only an example of a much broader problem.
For these reasons, the Lamichhane case is no longer just a domestic legal matter, it has become a test of Nepal’s commitment to global financial integrity. Failure to correct course, experts warn, could see Nepal slide from the grey list into the far more damaging FATF blacklist.

(Originally published at Nepalkhabar: https://en.nepalkhabar.com/news/detail/16925/)

Nepal races against time to fix money laundering deficiencies ahead of FATF review

Nepal is currently on the Financial Action Task Force (FATF) ‘grey list’ – officially, the ‘jurisdictions under increased monitoring’ – and has a deadline to implement its action plan by January 2027.
As Nepal is under continuous observation of the international evaluators, officials are scrambling to demonstrate that the country has made real progress in its fight against flow of dirty money.
Financial Action Task Force (FATF), the global watchdog that monitors illicit financial flows, has kept Nepal under ‘increased monitoring’ – a status popularly known as the grey list – after identifying serious gaps in the country’s enforcement and supervision systems.
However, authorities claim that Nepal is actively working with the FATF and the Asia Pacific Group (APG) to address its Anti-Money Laundering / Combating the Financing of Terrorism (AML/CFT) shortcomings. Prime Minister Sushila Karki, on Sunday, took stock of the situation with Finance Minister Rameshore Prasad Khanal, Nepal Rastra Bank Governor Bishwonath Poudel, and Department of Money-Laundering Investigation (DMLI).
Nepal is trying to address the issues raised by FATF and potentially exit the grey list is January 2027, albeit in a lousy pace because the global body to watch flow of dirty money’s decision this year, came with a clear message: Nepal’s laws look better on paper than they work in practice.
The message was: Nepal government does not walk the talk despite passing several regulations and setting up mechanisms to counter money laundering and the financing of terrorism but tangible results – like investigations, prosecutions, and confiscations – remain scarce, not due to successive governments’ inability but due to affiliation of governments with the infamous gangs and ‘middlemen’ like Therman Gun Gang.
The DMLI on Sunday reported the Prime Minister Karki that the department has frozen 1,600 ropanis of land within the Kathmandu Valley alone, in suspicious of Money Laundering.
However, the successive government’s lack of urgency in coming out of the grey list and its failure to meet the requirements by the deadline may result in Nepal being moved to the ‘black list’ – High-Risk Jurisdictions subject to a Call for Action – that will lead to severe economic sanctions and international financial isolation.
Though the erstwhile government led by Prime Minister KP Sharma Oli and his finance minister Bishnu Poudel, both, have claimed to bring Nepal out of the grey list, they have – in reality – been protecting the infamous Therman Gun Gang, which is allegedly involved in most of the money-laundering cases like illegal and suspicious transactions, by stationing their henchmen in the regulators.
The then KP Sharma Oli government has even withdrawn their cases from the Department of Money-Laundering Investigation (DMLI) and even Central Bank due to their affiliation with infamous gangs has also worsened the situation.
“We are responsible for investigation only,” said Director General of the DMLI Gajendra Thakur. But the department has always been under pressure not to investigate on suspicious transactions and therefore the department saw new head almost frequently.
Similarly, the investigation that the then Oli government withdrew against the infamous Thermal Gun Gang including Deepak Bhatta, the department seems at loss, whom to investigate and whom not. “The situation will put Nepal further in red-zone, as the FATF is closely monitoring the country,” according to those, who are privy to the investigation.
However, NRB and Finance Ministry are preparing the agendas to put forward the FATF during the review. Finance Minister Khanal and NRB Governor Poudel, on Sundy, appraised the Prime Minister.
The illicit flow of money is not only rampant among the ‘middlemen’ but also among the political leaders affiliated to the cooperatives sector.
Most of the cooperatives are run by the political leaders and their families, who are, despite cheating people’s money, getting protection from their respective parties, and law enforcement bodies are mere spectators.
FATF, on the contrary, has more focus on politically exposed persons (PEPs) because they are much powerful to cover the illicit money, earned with the help of their political clout.
According to officials familiar with Nepal’s preparation to face the FATF, the FATF wants proof that Nepal’s Financial Information Unit (FIU), law enforcement agencies, and regulators are not only coordinating among themselves but also not producing any measurable outcomes meaning taking action against the flow of dirty money. And it’s not a surprise as the regulatory capture by the infamous gang has made these law enforcement agencies and regulators impotent. “However, this time, FATF is neither interested in new laws or plans nor in paper works, it wants the tangible result,” according to the official, who is involved in the national response team. “FATF wants to see cases, numbers, and results."
In its last assessment, FATF pointed to persistent weaknesses: limited understanding of the country’s biggest money-laundering and terrorist-financing threats; weak supervision of high-risk sectors like cooperatives, casinos, and real-estate businesses; and a lack of visible action against illegal money transfer networks, popularly known as hundi.
The global watchdog also noted a shortage of prosecutions and asset recovery cases, raising concerns about Nepal’s ability to enforce its own laws.
Thus, Nepal will have to convince FATF and its regional counterpart, the Asia-Pacific Group on Money Laundering (APG), of which Nepal is a member, that Nepal has turned its commitment into action.
The face-to-face review will decide whether Nepal’s recent reforms and actions are credible enough to move it closer to removal from the grey list or continued deficiencies will prolong its stay.
Analysts warn that remaining on the list could damage Nepal’s reputation, discourage foreign investment, and make cross-border transactions more difficult. “Grey listing doesn’t shut Nepal out of the global system, but it raises the cost of doing business,” said a senior banker. “Every transaction gets extra scrutiny,” he said, adding that it affects business confidence.
Nepal is trying to get out of the grey list. Officials say the government has already begun working on a short-term action plan. It has prepared key priorities including publishing an updated National Risk Assessment (NRA) that identifies major threats, conducting risk-based inspections of banks and non-bank sectors, and launching visible enforcement against illegal hundi operations, and middlemen like Thermal Gun Gang.
The FIU under NRB is also expected to present detailed records of suspicious transaction reports (STR) enforcement actions, and ongoing investigations. In recent years, the STR has also been increasing, also due to regular and mandatory reporting system of the financial sector.
“But we need to prove effectiveness, not just intent,” according to a source, who is following the FATF process. “If we can show credible numbers, we have a good chance to convince FATF."
Experts also recommend that Nepal demonstrate at least one significant asset seizure or confiscation case before the review. “A clear example of money-laundering proceeds being traced and frozen”, they say, “would help signal that enforcement is moving from policy to practice."
They have also called for a high-level political statement reaffirming Nepal’s commitment to anti-money-laundering reforms before the FATF meeting. Coordination among the FIU, central bank, police, and prosecutors has been described as ‘critical,’ with several agencies already instructed to document all enforcement actions taken since the last evaluation.
However, insiders admit that bureaucratic inertia and overlapping mandates remain challenges. “Different agencies have done different works though in isolation, but what FATF wants is a coherent picture, a single narrative showing how Nepal’s system functions together."
Nepal’s response team has reportedly prepared a concise evidence dossier summarizing actions taken since the last review. If Nepal can demonstrate real progress – more inspections, visible enforcement, and actual asset recoveries – it could begin the process of exiting the grey list starting the next year.
But if Nepal fails to convince the evaluators, Nepal risks a prolonged stay under global watch list. For a country struggling to attract investment and rebuild economic confidence – also after the Gen Z movement on September 8 and 9 – that would be a setback it can hardly afford. After all the Gen Z movement had also called on ‘Corruption free Nepal’, transparency and accountability.

(Originally published at NepalKhabar: https://en.nepalkhabar.com/news/detail/16621/)

Central bank deputy governor suspended

The central bank deputy governor Sheeba Raj Shrestha has been suspended.
After the central bank board meeting this morning formed an inquiry committee to probe into allegations against Shrestha, he has been suspended from his post, according to the Nepal Rastra Bank (NRB) Act-2002.
The central bank has formed a three-member committee led by its board director Sri Ram Poudyal, and Dr Subodh Kumar Karna and Ramjee Regmi as the members. The probe committee has been tasked to investigate within a month and submit the report. Based on the probe report, the government will either remove him or give clean chit. If the probe committee finds him guilty, the government will seek clarification and remove him, if his clarification unsatisfactory. “Or he will be given a clean chit and he will continue as the deputy governor,” according to the central bank.
Following a written request of the Finance Ministry last week based on a cabinet decision of October 17, the central bank has started investigation into Shrestha over a dozen allegations on his ‘misconducts that threaten the financial stability of the country’. The central bank had called for a board meeting today to form a probe committee to investigate the allegations against Shrestha.
Shrestha has been alleged of his involvement in compromising financial stability, acting dishonestly or with mala fide intention for personal gains to protect financial wrongdoers, promoting money laundering and taking facilities unlawfully during his foreign trips, according to a board member of the central bank.
According to the NRB Act-2002, the government shall remove deputy governor from the office on the basis of recommendation made by an inquiry committee.
In its letter, the Finance Ministry stated that the cabinet decided to initiate investigation over those allegations also due to a written request from the Department of Money Laundering Investigation (DMLI) for support over its investigation on a money laundering offense.
Shrestha said that all his decisions are based on law, and as per consultations with the central bank management and board members. “Thus, if I was wrong in taking any decision, it also means that the entire central bank management and the board was wrong,” he said, pledging to fully support the probe. He also urged for fair investigation on charges levelled at him.
Though, a central bank board member also disagrees a probe committee on him as the board is also involved in the decision making process, the central bank has formed a committee – according to the NRB Act-2002 – under one of the board member with other two board members. “If Shrestha is found guilty, the entire board members, who are investigating him are also to be blamed as they are also involved in the decision making process,” according to former governor of the central bank Deependra Bahadur Kchhetry.
Shrestha refuting allegations against him said that the allegations are aimed at tarnishing his credibility amid the race for the post of the governor. “The probe is a ploy to remove me from the race of becoming central bank governor,” said Shrestha, whose five-year term as deputy governor is expiring in 16 months. A deputy governor is also considered a contender for the governor.
The incumbent governor Dr Chiranjibi Nepal is retiring in next five months.

Nepse begins four-hour trading from today

Nepal Stock Exchange (Nepse) extended trading hours to four hours a day from today, up from regular three-hour trading till last week.
In the early days, almost two decades ago, the share market used to see trading for only two hours a day – from 11 am to 1 pm. Daily trading period was increased to three hours -- from 12 noon to 3 pm later on, which has been extended to four hours from today, according to Rabindra Pradhan, a stock broker.
Nepse decided to extend trading hours following complaints from investors and stock brokers that the three-hour trading time was not sufficient. Trading days, however, have been kept unchanged.
Of late, the stock market has been seeing daily turnover in excess of Rs 1 billion due to lucrative returns that the secondary market offers compared to other investment avenues.
Few months ago, daily transaction hovered over Rs 300 million.
Today – the first day of the four-hour trading period – a total of 2.2 million units of shares of 136 companies worth Rs 1.36 billion were traded in the market. The benchmark Nepse index gained 27.59 points to close the day’s trading at 1,745.74 points from today morning’s opening. The market capitalisation reached Rs 1,920.33 billion at the end of the day.
Meanwhile, the Securities Board of Nepal (Sebon) – the capital market regulator – has asked the Nepse management to initiate reform measures along with extension in trading hours. “The extension of trading hours is appreciable,” Sebon said in a statement issued on Friday. “Nepse should also facilitate to process of bringing clearing bank and start massive reforms for sustainable growth of the share market,” it added.
Sebon, on Friday, also formed a committee to look into big investments in the share market on suspicion of illicit flow of money. The committee led by executive director of Supervision and Research Department of Sebon has directors of Legal Enforcement Division and Securities Businessperson Supervision Division along with representatives from Department of Money Laundering Investigation (DMLI), Central Investigation Bureau (CIB) of Nepal Police and experts in the field as members, according to Sebon Director Niraj Giri.
The committee has been asked to submit its report within a month.
Sebon formed the committee after the Ministry of Finance raised suspicion over the ever increasing transaction amount despite poor macroeconomic fundamentals.
Nepse, however, has claimed that rise in transaction is also due to adoption of dematerialised forms of shares trading, which has made trading easier, apart from lucrative returns. High demand for stocks, low bank interest rates and lack of other attractive investment opportunity in the country coupled with handsome returns compared to other sectors is not only propelling the benchmark index to new highs almost every day but also witnessing transaction of over Rs 1 billion ever day. The bonus and rights shares announced by most of the listed companies – especially banks and financial institutions and insurance companies – to meet the new paid-up capital requirement is yet another key attraction pulling the investors to the market, according to share market analysts.

Nepse begins four-hour trading from today

Nepal Stock Exchange (Nepse) extended trading hours to four hours a day from today, up from regular three-hour trading till last week.
In the early days, almost two decades ago, the share market used to see trading for only two hours a day – from 11 am to 1 pm. Daily trading period was increased to three hours -- from 12 noon to 3 pm later on, which has been extended to four hours from today, according to Rabindra Pradhan, a stock broker.
Nepse decided to extend trading hours following complaints from investors and stock brokers that the three-hour trading time was not sufficient. Trading days, however, have been kept unchanged.
Of late, the stock market has been seeing daily turnover in excess of Rs 1 billion due to lucrative returns that the secondary market offers compared to other investment avenues.
Few months ago, daily transaction hovered over Rs 300 million.
Today – the first day of the four-hour trading period – a total of 2.2 million units of shares of 136 companies worth Rs 1.36 billion were traded in the market. The benchmark Nepse index gained 27.59 points to close the day’s trading at 1,745.74 points from today morning’s opening. The market capitalisation reached Rs 1,920.33 billion at the end of the day.
Meanwhile, the Securities Board of Nepal (Sebon) – the capital market regulator – has asked the Nepse management to initiate reform measures along with extension in trading hours. “The extension of trading hours is appreciable,” Sebon said in a statement issued on Friday. “Nepse should also facilitate to process of bringing clearing bank and start massive reforms for sustainable growth of the share market,” it added.
Sebon, on Friday, also formed a committee to look into big investments in the share market on suspicion of illicit flow of money. The committee led by executive director of Supervision and Research Department of Sebon has directors of Legal Enforcement Division and Securities Businessperson Supervision Division along with representatives from Department of Money Laundering Investigation (DMLI), Central Investigation Bureau (CIB) of Nepal Police and experts in the field as members, according to Sebon Director Niraj Giri.
The committee has been asked to submit its report within a month.
Sebon formed the committee after the Ministry of Finance raised suspicion over the ever increasing transaction amount despite poor macroeconomic fundamentals.
Nepse, however, has claimed that rise in transaction is also due to adoption of dematerialised forms of shares trading, which has made trading easier, apart from lucrative returns. High demand for stocks, low bank interest rates and lack of other attractive investment opportunity in the country coupled with handsome returns compared to other sectors is not only propelling the benchmark index to new highs almost every day but also witnessing transaction of over Rs 1 billion ever day. The bonus and rights shares announced by most of the listed companies – especially banks and financial institutions and insurance companies – to meet the new paid-up capital requirement is yet another key attraction pulling the investors to the market, according to share market analysts.

Sebon to check illegal flow of money in share market

The capital market regulator is going to investigate 'suspicious big' investments in the share market without discouraging genuine investors.
Securities Board of Nepal (Sebon) has formed a committee today to conduct investigations into big investments in the share market on suspicion of illicit flow of money as the daily turnover in the market has been exceeding Rs 1 billion lately.
The committee formed under the convenership of the executive director of Supervision and Research Department of Sebon has directors of Legal Enforcement Division and Securities Businessperson Supervision Division, apart from representatives from Department of Money Laundering Investigation (DMLI), Central Investigation Bureau (CIB) of Nepal Police and experts in the field, according to Sebon director Niraj Giri.
The committee has been asked to submit its report within a month.
The capital market regulator has been monitoring 'big investors' in the Nepal Stock Exchange (Nepse) since a few months as the daily turnover has been regularly looking above Rs 1 billion.
“The committee can take further information of the big investors of the market from the brokerage firms,” said chairman of the board Rewat Bahadur Karki.
It has been reported that the committee will keep an eye on investors whose daily transactions are over Rs 5 million. After the enforcement of the Anti-Money Laundering Act in the country, the brokerage firms are also required to notify the capital market regulator regarding transactions of above Rs 1 million.
"Now, the committee can ask for further details of the investors from the brokerage firms and investigate them if the committee has suspicions on the investor’s source of income,” Giri said, adding that the board is going to conduct investigations to prevent the chances of money laundering through the capital market. "Primarily, it is illegal and also will ultimately distort the sound growth of the capital market."

Policy harmonisation needed to curb flow of dirty money

Greater policy harmonisation among government agencies has been urged to curb the flow of dirty money.
As some world leaders have resigned and others are under pressure to resign over the Panama Papers leak concerning international illicit money flows, government agencies in Nepal have also started debating policy harmonisation. "Nepal Investment Board approves mega foreign investments but it now has to be extra careful to investigate backgrounds before approving foreign investments," according to a high source at the Department of Money Laundering Investigation (DMLI).
Likewise, apart from cross checking foreign investments, banks and financial institutions also have to check the backgrounds before handling any transactions or opening accounts for foreign or domestic investors, the source said, adding that Article 6 of the Anti-Money Laundering Act has restricted the opening of accounts for shell companies – offshore bogus companies – and carrying out any transactions with them. "If found out, the banks and financial institutions will be punished under the Act."
Though banks and financial institutions already have to report transactions of over Rs 1 million or suspicious transactions to the Financial Information Unit (FIU) under the central bank, the Panama Papers leak has again raised a serious question over the possibility of such institutions becoming involved 'unknowingly'.
Banks and financial institutions have to be extra careful now, the source said.
Likewise, the government has also to seriously take stock of registered companies to curb the flow of dirty money, the official suggested. "Though Nepal has committed itself to curb the flow of dirty money – earnings through corruption, tax evasion and black marketing – the government itself is promoting black marketing and institutional corruption, and this could damage the economy in the long run."
Meanwhile, the DMLI today called on stakeholders including the revenue administration, the central bank's Financial Information Unit (FIU) and the police, to discuss the possibility of dirty money flowing into the country from offshore shell firms, and also the possible Nepali names in the Panama Papers leak.
Along with the DMLI, the FIU and the Department of Revenue Investigation (DRI) are the key government agencies that deal with issues of money laundering, terrorism financing and foreign exchange misappropriation.
According to DMLI chief Damodar Regmi, the meeting discussed the seven Nepalis fingered by the Panama Papers leak. "We are seriously discussing financial connections, transactions and the possibility of tax evasions," he said, adding that the department has also restarted the profiling of suspicious names that could be in the Panama Papers although the leak has not identified any of the names. "It has, however, claimed that the names will be published in May," Regmi added.
Last year also, the central bank, the DRI and DMLI had tried to investigate names that had figured in rumours following revelations of illegal outflow of money to a Swiss Bank.
Such investigations are very tricky, Regmi said, adding that without any authentic information it's impossible to track the flow of dirty money and the activities of bogus companies. "However, we have restarted the process of profiling names and restarting investigations," he added.
As Nepal has been seeing a steady rise in FDI commitments from the countries identified by the ICIJ as tax havens, the DMLI has said that it will now step up surveillance for FDI coming from these tax havens. There is a need of in-depth investigation, given the huge foreign direct investment (FDI) entering Nepal from tax havens in recent years, Regmi said, adding that statistics from the Department of Industry (DoI) reveals that of the total FDI commitments till last fiscal, about 20 per cent were from tax havens.
The rise in money entering Nepal from tax havens has raised question that it could be illegal money stashed abroad by Nepalis, though the government departments have no proper records of such money.
Apart from enhancing the supervisory capacity to monitor FDI commitments, the government agencies like the DoI and the Office of Company Registrar (OCR) should work together to fight the flow of dirty money.
Regmi said that now onwards the DMLI will adopt 'risk-based supervision system', instead of launching investigating after the incident of money laundering surfaces. But, the DMLI has any success success so far in investigating money laundering cases. The department has not filed any any case against money launderers at the Special Court in the current fiscal year, neither had it filed any case in the last fiscal year too.
Since its establishment some five years ago, the department had filed only 30 money laundering cases at the Special Court. The DMLI was established in 2011 after a huge international pressure on the government. The government had committed the Financial Action Task Force (FATF) – a global anti-money laundering body – that it would approve the anti money laundering act in line with global fight against the fight to dirty money flow.
The department has to be strengthened to get result against the cases of money laundering.
Currently, the department has been probing 700 cases and 200 of them are in 'advanced stage', according to Regmi.

Economists urge tough laws against money laundering

Economists have suggested to the government to strengthen the law to curb the illegal outflow of money from the country.
Their suggestion came a day after the Panama Papers leak that has also fingered seven Nepalis having partnership firms in several tax havens. "Though the issue will not have any impact on Nepal at present, it will definately have adverse impact on revenue mobilisation in the future," said former chief secretary Bimal Koirala, speaking at an interaction in the capital today.
Citing the recent example of how the government is unwilling to charge capital gains tax (CGT) on the sale of TeliaSonera's ownership in Ncell to Axiata, Koirala asked the government to start tracking the money. "The Panama Papers should be a lesson for the government to make its law strong enough to prevent such illegal flow of money."
The names of the seven Nepalis mentioned in the Panama Papers have yet to be disclosed.
Koirala suggested to the government to bring all manner of earning under the tax net so as to prevent money laundering. "If the government fails to bring strong legal provision to curb illicit flow of money, drug peddlers and armed smugglers could misuse the country for stashing their illegal earnings," he said, "Such earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country under the pretexts of loans and investments."
The government also needs to find ways to plug the loopholes if there are any to curb the flow of dirty money.
He also cited the example of the central bank's freezing of Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money, and also asked the government to prioritise the foreign investment. "The government should not accept all kinds foreign investments," Koirala said, suggesting the government to accept only those foreign investments that pay taxes and generate employment in the country.
Likewise, senior economist Prof Dr Bishwhambher Pyakuryal, on the occasion, said Nepal's mention in the Panama Papers has raised a question mark over the country's credibility. The deficiency in trust will result in low foreign borrowings and grants, which will in the longer term hit the development and social sectors, he said, adding that it will hit the social sector hard in the long run. "Tax evasion will hit revenue mobilisation resulting in low government spending in the social sectors."
Previous international reports have also mentioned about Nepalis stashing their illegal earnings in various tax havens. The report 'Illicit Financial Flows from Developing Countries' published by Global Financial Integrity (GFI) had last year revealed that $754 million on an average every year was siphoned away from Nepal between 2003-2012.
According to the report, trade misinvoicing – misreporting the value of a commercial transaction on an invoice submitted to customs – accounted for most of the capital flight.
Likewise, the prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to launder money out of the country, the economists said.
"If the current situation persists, Nepal could face blacklisting by the international community," Pyakuryal added. Blacklisting of a country means it will not be able to do international trade and will have restricted movement of its citizens across the globe.
"Nepal should thus enter into an agreement with the tax haven countries for information sharing relating to tax and banking transactions," he suggested.
Meanwhile, a day after the Panama Papers exposé, Department of Money Laundering Investigation (DMLI) today said that it would start probe to find whether Nepalis too are holding offshore accounts.
It is calling a meeting of key stakeholders –Financial Intelligence Unit (FIU) under Nepal Rastra Bank, Department of Revenue Investigation (DRI) and Nepal Police – tomorrow to discuss on whether Nepalis have offshore accounts and whether the government agencies are aware of such accounts.
In one of the biggest leaks in the history, International Consortium of Investigative Journalists (ICIJ) on Monday made public a huge cache of documents showing how the world’s rich, powerful and famous exploit the secretive offshore tax regimes and hide their money. The documents also named the top 10 destinations, known as tax havens, where the world’s rich and powerful stash their money. 

Panama papers finger seven Nepalis, identity still unknown

There has been no end to illegal outflow of money accumulated through tax evasion and corruption, according to international investigations.
The International Consortium of Investigative Journalists (ICIJ) yesterday disclosed that there are seven Nepalis, who are shareholders in offshore firms in tax havens. The ICIJ investigation has, however, not revealed any names, though the documents do name a company, Nepal Ventures Limited. Details about the company – either it is a real Nepali company or the name only is Nepal Ventures – have not been provided.
The prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to swindle money out of the country, according to an investor, who does not wish to be named. "They have been evading tax and sending the illegal funds to offshore firms," he said. He, however, claimed that detailed investigations by the Department of Money Laundering Investigation (DMLI) could expose the outflow of money accumulated through tax evasion and massive corruption, if the government has the political will to investigate. "The probe will expose the nexus between politicians, bureaucrats and business people."
Unstable governments and policies due to political transition and weak governance, coupled with a lack of political will to crack the whip on corruption have encouraged the illegal outflow of money, according to him.
ICIJ, a nonprofit based in Washington DC, has published a report on the offshore financial dealings of 128 of the world's rich and famous. The report has been prepared after long and extensive investigations by an international coalition of media outlets is based on documents provided by an anonymous source.
According to the ICIJ, as many as 72 world leaders from Russian president Vladimir Putin to Pakistani prime minister Nawaz Sharif and Indian actor Amitabh Bachchan have hidden their assets in the offshore companies.
The German newspaper Süddeutsche Zeitung received 11.5 million encrypted internal documents of a Panama-based law firm, Mossack Fonseca, spanning between 1970s and 2016, and shared them with the ICIJ. The leak thus dubbed the 'Panama Papers' contains mostly emails, PDF files, and photo files belonging to Mossack Fonseca, one of the largest providers of offshore financial services.
A global network with 600 people working in 42 countries, the law firm operates in tax havens including Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies of Guernsey, Jersey and the Isle of Man.
British Virgin Islands is one of three key investment sources - after India and China - for Nepal, according to latest data.
The central bank had freezed Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money.
Earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country in the name of loans, according to business people.
Most of the services the offshore industry provides can be used for legal purposes and by law-abiding customers. "But the documents show that banks, law firms and other offshore players often fail to follow legal requirements to make sure clients are not involved in criminal enterprises, tax dodging or political corruption," the papers read, adding that the files show how these fixers and middlemen protect themselves and their clients by concealing suspect transactions. "In some instances, they work to head off official investigations by backdating and destroying documents."
Last year also, the central bank, the Revenue Investigation Department (RID) and the Department of Money Laundering Investigation tried to investigate suspects, after yet another revelation of illegal outflow of money in a Swiss Bank.
However, we could not find any authentic information, said one of the investigation officer not wanting to be named.
The central bank wrote to RID to look into the matter, the official said, adding that the countries where such bogus companies have been registered are not compelled to provide information, nor can the banks be forced to share their clients' details.
Likewise, the Department of Money Laundering Investigation had also started to profile names that were under suspicion. "But due to lack of Double Taxation Avoidance Agreements (DTAA) and bilateral agreements to share banking information, our investigation reached nowhere," the investigating official shared.

Department of Money Laundering Investigation to investigate 5.4 billion black money stashed in HSBC Switzerland

Department of Money laundering Investigation is going to investigate the Rs 5.40 billion black money stashed in the accounts of eight Nepalis at HSBC bank in Switzerland.
"Black money stashed in or out of the country comes into the jurisdiction of the Department of Money laundering Investigation, according to the Anti-Money Laundering Act," informed director general of the department Kewal Bhandari.
It is illegal to park money earned through illegal means at any domestic or foreign banks”, he said, adding that the government can seek information of the accountholders with the Switzerland government. "Since Nepal is a party of Financial Action Task Force, it could seek information on black money parked anywhere in the world."
Nepal had passed Anti-Money Laundering Act with Legal Mutual Agreement Act to check the flow of black money, according to the country's commitment to the FATF, the international watchdog of the flow of illegal money.
Though, there has been a rumor since Panchayat regime that Nepalis have been stashing away their cash in Swiss banks, the political transition after 1990 movement, the trend increased.
'Swiss Leak' has leaked the information of over $1 million black money parked in HSBC Bank of Switzerland. Though, it has failed to name the eight Nepalis, it has leaked that some $54 million has been stashed in 12 confidential accounts on the names of eight Nepalis. Of the 203 countries, Nepal is 116th   among the countries having private account in HSBC Switzerland. Illegal earnings from criminal activities and proceeds from corruption are routed to Swiss banks through various channels.
Leaked by a computer expert of the HSBC Bank in Switzerland in 2007, the list has as many as 100,000 people from various countries with black money in the bank.
The documents obtained by the International Consortium of Investigative Journalists (ICIJ) via Le Monde, had earlier in 2013 too, too revealed 13 Nepalis having their accounts in the Swiss bank.
The government has established the Department of Money Laundering and Investigation according to the commitment in the Anti-Money Laundering Act. However, the frequent changes of the chief of the department, due to political pressure, has made the department ineffective in investigation of black money.
As the Swiss Leak revealed who-is-who in its list of black money depositors, the British bank HSBC Holdings Plc admitted failings by its Swiss subsidiary. HSBC Bank has been blamed for advising account holders to deposit money by dodging tax or misappropriating government or public fund.
Swiss private banking industry, long known for its secrecy, operated differently in the past and this may have resulted in HSBC having had 'a number of clients that may not have been fully compliant with their applicable tax obligations,' said the bank in its statement.

Dirty money probe not all smooth sailing

The Department of Money Laundering Investigation (DMLI), which yesterday chargesheeted five dons accusing them of amassing property without known legal sources, has so far collected around some Rs 210 million from earlier cases.
However, only 10 of the 24 cases of money laundering have been finalised, according to DMLI. "In all 10 cases, the court ruling has been in favour of the department, making it collect Rs 107.90 million," a source said seeking anonymity.
According to the anti-money laundering law, the accused, after being convicted by the court, also must pay a fine equal to the amount they are charged with amassing illegally. Including the cases of the five gangsters against who the department has moved the Special Court, the total cases now are worth around Rs 1.74 billion. The department yesterday filed money laundering cases against five dons charging them with accumulating assets worth Rs 630 million through extortion, commission and other criminal activities.
Its's latest move may look pretty promising, but it is not all smooth sailing, especially when it comes to country's commitment to the international community to fight against dirty money. In the last two years since its establishment, Department of Money Laundering Investigation has seen as many as six chiefs; needless to say, because of political pressure.
"Once we start investigation, the department chief gets a transfer order," the source said, adding that the department, which can investigate politically exposed persons (PEPs), their families and associates, and gangsters if they are found to have accumulated wealth without any particular source of income, is in need of more teeth.
The amended recommendation of Financial Action Task Force (FATF) — a global anti-money laundering agency — has asked the national authorities to issue a public list of PEPs to check corruption, apart from financing terrorist activities. "But the long-drawn political transition and frequent government changes have thrown a spanner in the department's works," he added.
"The government had planned to appoint secretary, instead of current provision of joint secretary, as the director general to head the department to strengthen it, but the entire process has been delayed to due to 'pressure'," the source said.
Meanwhile, the government has — due to pressure from the FATF — recently finalised the amended Assets Laundry Prevention Act (ALPA) for the third time — as the second amendment was not able to include updated provisions — apart from bringing Proceeds Act that will help seized properties manage and give enough teeth to fight against organised crime and help streamline all others seizures and management of confiscated assets procedures in various Acts.
Established in July 2011 as a pivotal investigative body to fight money laundering, terrorist financing, and any form of illegal earnings and contribution to terrorism and proliferation, Department of Money Laundering Investigation, can investigate PEPs, apart from gangsters, anytime from earlier dates.