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/)

नेपाल फेरि कालोसूचीमा पर्ने जोखिम : मूल्यांकन प्रतिवेदन तयार गर्न एपीजीको टोली काठमाडौंमा

नेपाल फेरि पनि अन्तर्राष्ट्रिय सम्पत्ति शुद्धीकरणको कालोसूचीमा पर्ने जोखिम बढेको छ । सरकारले समयमा नै ऐन संशोधन गर्न नसक्दा नेपाल वित्तीय कारबाही कार्यदल (एफएटीएफ)को कालोसूचीमा पर्ने जोखिम बढेको हो ।

गत असारमा सुरु भएको नेपालको सम्पत्ति शुद्धीकरण निवारणसम्बन्धी मूल्यांकन प्रतिवेदन तयार गर्न एफएटीएफ अन्तर्गतको एसिया प्रशान्त समूह (एपीजी)को टोली काठमाडौंमा छ । टोलीले बिहीबार प्रधानमन्त्री तथा मन्त्रीपरिषद् कार्यालय अन्तर्गत सम्पती शुद्धीकरण हेर्ने निकायसँग छलफल समेत गरेको छ । सरकारले एपीजीको मूल्यांकनभन्दा अगाडि नै सम्पत्ति शुद्धीकरण निवारण ऐन अध्यादेशमार्फत भए पनि संशोधन गर्न नसके अन्तर्राष्ट्रिय सम्पत्ति शुद्धीकरणको कालोसूचीमा पर्ने भएको हो ।

सरकारले सम्पत्ति शुद्धीकरण निवारण गर्न भन्दै केही नेपाल ऐनमा संशोधन गर्दै नयाँ ऐन जारी गर्ने तयारी गरेको थियो । तर, प्रतिनिधिसभाबाट परित भएको उक्त विधेयक राष्ट्रियसभा अन्तगर्तको संसदीय समितिमा अड्किएको छ । हाल संसद्का दुवै सदन चुनावका कारण बन्द छ । 

एफएटीएफको सम्पत्ति शुद्धीकरणसम्बन्धी मूल्यांकन एपीजीको कालोसूचीमा प¥यो भने नेपालमा वैदशिक ऋण आउन रोकिनुका साथै विश्वका १ सय ७० वटा देशमा एलसीसमेत खोल्न नपाउने अवस्था बन्न सक्ने जानकारहरु बताउँछन् । कालोसूचीमा समावेश भए नेपालको पासपोर्टमाथि विशेष निगरानी हुने र नेपालीहरुको वैदेशिक गतिविधि नै रोकिन समेत सक्ने छ ।

नेपाल राष्ट्र बैंकका पूर्व गभर्नर चीरञ्जीवि नेपालले सम्पत्ति शुद्धीकरणका विषयमा नेपाल अप्ठ्यारो स्थितिमा रहेको बताए । उनले सम्पत्ति शुद्धीकरण एवं आतंकवादी क्रियाकलापमा वित्तीय लगानी निवारण गर्न नेपाल सरकारले बनाएका कानुनहरु संशोधन नहँुँदा एफएटीएफको मूल्यांकनमा कालोसूचीमा पर्ने खतरा बढेको बताए । सरकार सम्पत्ति शुद्धीकरणजस्तो संवेदजशिल विषयमा गम्भिर नदेखिएको पनि उनको गुनासो छ ।

त्यस्तै, पूर्व कानुन तथा संसदीय मामिला मन्त्री गोविन्दप्रसाद शर्मा कोइरालाले पनि सम्पत्ति शुद्धीकरण निवारण ऐन संशोधन नभए एफएटीएफको कालोसूचीमा पर्नसक्ने सम्भावना रहेको भन्दै नेपाल अहिले पनि कालो धनलाई सेतो बनाउने अर्थात् अवैधानिक रुपमा कमाएको धनलाई वैधानिक बनाउनसक्ने मुलुकमा परेको दाबी गरे । उनले उक्त ऐन स्वार्थ समूहको सिकार भएको पनि जानकारी दिए । 

सम्पत्ति शुद्धीकरण निवारण प्रणाली सुधार नभएको भन्दै नेपाल सन् २००९ देखि २०१४ सम्म कालोसूचीमा परेको थियो । एफएटीएफको टोलीले कर छलीलाई सम्पत्ति शुद्धीकरणसँग अनिवार्य जोड्दै आतंकवादी कार्य, भ्रष्टाचार र लागू औषधलाई विशेष ध्यान दिने गरी मापदण्ड तयार गरेको छ भने कोरोना कालपछि भर्चुअल करेन्सीलाई नयाँ अपराधका आयामको रुपमा हेरेको छ । सरकारी अधिकारीहरुका अनुसार नयाँ मापदण्डअनुसार नेपालले अझै कानुनमा ४० प्रतिशत समेट्न बाँकी छ । हाल संसद् नभएको अवस्थामा अब सरकारले तत्काल अध्यादेशमार्फत भए पनि सम्पत्ति शुद्धीकरणसम्बन्धी ऐन नियमहरु संशोधन गर्न जरुरी रहेको छ । अन्तर्राष्ट्रिय समुदायले गरेको एक अध्ययनअनुसार नेपालजस्ता अति कम विकसित मुलुकमा कुल गार्हस्थ्य उत्पादन (जीडिपी) को ७ देखि ८ प्रतिशतसम्म कालो धन हुने गरेको छ ।

सम्पत्ति शुद्धीकरण निवारण विरुद्धमा नेपालले अन्तर्राष्ट्रिय समुदायसँग गरेको प्रतिवद्धता अनुसारको प्रगति नभएका कारण नेपाल कालोसूचीमा पर्ने जोखिम बढेको हो । स्रोत नखुलेको सम्पत्तिलाई कानुनी दायरामा ल्याउने र त्यस्ता घटना निगरानी गर्ने निकाय कमजोर हुँदा नेपाल सम्पत्ति शुद्धीकरणमा कालोसूचीमा पर्ने जोखिम बढेको उच्च अधिकारीहरुको धारणा छ ।

Banks must maintain a database of high-profile, high-risk customers

The banks needs to maintain an additional database of ‘high-profile’ and ‘high-risk’ clients to help the government track the flow of dirty money, according to a revised directives issued by the central bank.
According to the new move, all the banks will need to ensure that ‘high-profile’ and ‘high-risk’ clients employ only legitimate sources of income for transactions, which will be monitored for money laundering and other suspicious transactions.
According to the anti-money laundering law, high-profile clients include politically exposed persons (PEPs) ranging from Rural Municipality vice-chairpersons and bureaucrats above secretary level to the central leaders of political parties up to the President, whereas high-risk clients include people with criminal backgrounds, those that the banks consider prone to corruption, those involved in the sale and purchase of commodities like gold, and those dealing in heavy cash transactions, and arms deal, apart from the human trafficking.
Until now, customers were required to make a self-declaration about the sources of income for any transactions above Rs 1 million and the objective of their transactions but the new rule makes it mandatory for the banks and financial institutions to either seek all documents from high-profile people about their transactions or develop an intelligence mechanism to confirm whether they had a legitimate income source for the transaction.
According to the Financial Information Unit (FIU) of the central bank, the measure has been introduced in line with the Money Laundering Prevention Act, which was brought according to Nepal’s international commitment to fight the flow of dirty money.
Nepal will have to be present in the mutual evaluation on compliance at the Asia-Pacific Group (APG) on Money Laundering – a regional cluster of the Financial Action Task Force (FATF) – in 2020-21. Nepal must comply with the FATF – the global anti-money laundering body – 40 plus nine recommendations on Anti-Money Laundering and Financing of Terrorism (AML/CFT) as the country’s international commitment.
The government agencies – apart from the central bank – have been introducing more stringent measures to control money laundering but the private sector fears that the government is intimidating them in the name of international commitment. The incumbent Prime Minister KP Sharma Oli has brought the Department of Money Laundering Investigation (DMLI) under his direct supervision.
The government has – in recommendation with FIU and DMLI – has prepared five-year strategy in its fight against the Anti-Money Laundering and Financing of Terrorism (AML/CFT).
But a recent self-evaluation of compliance conducted by the government has found to be deficient in most FATF recommendations including law-making and particularly law enforcement.
Nepal faces the risk of being blacklisted by the FATF, if the mutual evaluation shows more deficiencies. Blacking of FATF means it will create difficulties for Nepali banks to conduct international financial transactions, Nepali passengers have to pass through the red channels in the international airports as they are all suspected of involved in the flow of dirty money. Nepal will not get any foreign aid, assistance and direct investment as the country will lose its credibility in the international community.
The banks and financial institutions have been collecting details from customers perceived to be making suspicious transactions and reporting (STR) to the Financial Information Unit (FIU) that processes, analyses and disseminate financial information and intelligence on suspected money laundering and terrorist financing activities. The STR has also been increasing as the banks and financial institutions have been actively reporting the FIU.
But according to the new directive, BFIs should develop a specific mechanism, according to the international best practices, for enhanced customer due diligence and collect information about high-profile and suspicious customers. They need to collect details from the government and other agencies every year and update the list regularly, after conducting a risk-based analysis, according to the FIU. “The database will also include senior elected representatives from all three layers of the government, high-level government officials and those in other state bodies, and those convicted of corruption will be placed in the ‘high-risk’ category.”
Likewise, banks should prepare ‘red flag indicators’ – for people with high net worth – that indicate any suspicious transactions. “But the banks are free to determine, who constitute high net worth people,” the FIU informed, adding that internal and external auditors will monitor whether banks have AML/CFT systems that conduct risk-based analysis. “Auditors will look into whether banks have taken necessary AML/CFT measures with regard to transactions of politically exposed persons, high-risk countries, high-risk production, equipment, services and transactions.”
January 15, 2020, the banks will have to submit details about suspicious transactions above the threshold of Rs 1 million through the goAML software installed by the FIU. The goAML software – specifically designed by the United Nations Office of Drugs and Crime (UNODC) to meet the data collection, management, analysis, and statistical needs of Finance Intelligence Units – has been purchased by the FIU in 2014 and installed in 2018 to track the STR. The goAML is also a part of Nepal’s compliance to the FATF recommendation to fight the flow of dirty money.

Central bank asks fund managers to enforce AML laws

The central bank has asked Employees Provident Fund (EPF), Citizen Investment Trust (CIT) and Postal Savings Bank to enforce anti-money laundering (AML) measures.
Issuing a directive to implement AML laws at the state-owned fund managers to prevent transfers of illegally acquired money in accordance with a Cabinet decision, the central bank said that the law is needed to be implemented at the government operated institutions too as they manage huge amounts of money collected from civil servants and private sector employees.
The EPF – that provides provident fund services to more than 600,000 clients including government employees – extended its services to employees of private companies too, after Parliament passed the necessary legislation in 2014. Among the total clients, around 166,000 are private sector employees.
Likewise, the Citizen Investment Trust (CIT) manages the retirement fund, gratuity and pension and insurance funds of various organizations including government and non government institutions. It currently holds deposits totalling more than Rs 111 billion.
Similarly, the Postal Savings Bank holds deposits amounting to more than Rs 1 billion, collected particularly from rural areas of the country.
The central bank enforced the directive aiming to extend AML measures to non-banking sectors too. The new law will enable these institutions to act as an oversight agency to check black money transactions in their concerned areas.
The central bank has also asked them to devise working guidelines under headings like internal responsibility and work divisions, risk-based evaluation system and procedures and identification and follow up of risk-based customers and suspicious transactions. “These institutions have to prepare lists of high ranking government officials and their family members so that they can carry out instant enquiries in case any transaction made by them looks suspicious,” the directives read, adding that they need to update the overall customer lists annually based on the degree of risk.
The central bank has asked them to report to the Financial Information Unit (FIU), if an individual carries out transactions of more than Rs 1 million either physically or electronically from abroad. “If the transaction is done in foreign currency, the upper limit has been fixed at an amount equivalent to Rs 500,000,” the directives reads, adding, “For each of these transactions, a separate threshold transaction reporting is mandatory.”
Nepal is now in the process of fulfilling compliance of AML to report to the Asia Pacific Group (APG) on Money Laundering, a regional anti-money laundering watchdog of the Financial Action Task Force. The watchdog body is scheduled to conduct mutual evaluation of Nepal through peer review next year in 2020. With the evaluation time approaching soon, the government has been tightening and implementing the AML laws to check black money transfers, though the Department of Money Laundering Investigation has not been performing as it was expected also due to frequent transfer of its chief.

Sebon brings new AML guidelines

The capital market regulator has introduced new guidelines on anti-money laundering (AML) listing out five dozen transactions of companies in the securities and commodities market that should be notified to the Financial Information Unit (FIU) of the central bank as suspicious transactions.
The new guidelines on prevention of money laundering and terrorist financing released by the Securities Board of Nepal (Sebon) today requires companies – licensed by the capital market regulator – that are termed as reporting entities and include stock brokerage firms, merchant bankers and stock and commodity exchange company, to flag any suspicious transaction to the FIU for further investigation.
The suspicious transactions range from investment that seems to be made from tax-evaded money to discrepancies in the address of any client and transactions from another person's name, according to the guidelines. “The reporting agencies should send suspicious transaction report to the FIU within three days,” the new guidelines reads, adding that it aims at implementing the Asset (Money) Laundering Prevention Act, 2008 and prevent and discourage the money and asset laundering and financing of terrorist activities through the abuse of the securities and commodity market. “Any transaction that seems unusual in terms of size, value, nature and source, should be reported.”
The reporting agencies are also required to send each transaction report to the FIU above the value of Rs 1 million, apart from the suspicious transaction reports, the new guidelines read.
According to the new guidelines, reporting entities in the securities and commodities market are also required to categorise their clients under high-risk, risk and general risk for further scrutiny and reporting of their transactions. “Some of those who fall under high-risk are the clients who carry out transactions without coming at the fore, non-residential clients, high ranking politicians, business persons and officials in social and financial sectors; and transactions carried out with firms, companies and organisations who do not have their regulators,” it further reads, adding that the FIU forwards the cases to the respective law enforcement and investigation agencies for further investigation after analyzing and assessing the information based on the information and reports from the reporting entities.
The capital market regulator has also warned that those reporting agencies who fail to comply with the anti-money laundering laws, regulations and guidelines will have to face stern action. “Those violating the provision risks facing the fine up to Rs 50 million and cancellation of the license,” the guidelines further reads.
Nepal is currently under scanner of the global agency that looks after the AML/CFT as the Financial Action task Force (FATF) will review the country’s status in 2020. Almost all the regulatory authorities have been very serious on implementing the anti money laundering law to keep Nepal out of the black list of the FATF.

Nepal still fears blacklisting next year

Nepal still fears blacklisting next year from the international agency that checks the flow of dirty money.
The Asia Pacific Group (APG) of the Financial Action Task Force (FATF) will evaluate Nepal by the end of 2020 to ensure implementation of its international commitments in fight against the flow of dirty money.
The APG – by the end of 2020 – will be looking for concrete action by Nepal in implementing the 40 suggestions and 11 results that it committed in 2010. The evaluation next year will focus less on laws and more on implementation and results, which remains weak due to long political transition.
As Nepal has no records of wealth of any individual, neither Money Laundering Investigation Department nor the government can figure out wealth with any individual is legal or not. The business people have been, thus, asking the government to let them declare their wealth once, so that the government can have a record of individuals before taking any legal action, on illegal earnings.
Likewise, the Money Laundering Investigation Department – that was set up as a commitment in 2010 evaluation and also to escape the black listing then – also lacks coordination, though Financial Investigation Unit (FIU) under the central bank coordinates and shares suspicious transaction report (STR) with it.
According to the department insiders, the government has also been finding it difficult to implement the law because so many of them enjoy political protection. “The politicians and high ranking officials will not be able to show source of their wealth, if the Money Laundering Prevention Act is implemented,” they said, adding that the legislation was brought and department was created to escape the blacklisting from FATF only, not to implement it. “Implementation of the Act was never a priority for the government as the government is knee deep in corruption.”
Earlier too Nepal was put under an international monitoring list in February 2010 by the APG working committee after it found that Nepal’s attempts to control money laundering were not effective enough. Nepal – to fulfill its international commitment in fight against the flow of dirty money – and also to escape the blacklisting passed the Anti-Money Laundering legislation and established a Money Laundering Investigation Department. The department, however, has been not able to function due to pressure from the higher political leadership, who are flushed with money from ‘commission’ and ‘corruption’. The FATF has identified a politically exposed person (PEP) as a high risk person in the fight against the flow of dirty money. The PEP is an individual, who is or has been entrusted with a prominent function, many of whom hold positions that can be abused for the purpose of laundering illicit funds or other predicate offences such as corruption or bribery. Because of the risks associated with PEPs, the FATF Recommendations require the application of additional AML/CFT measures to business relationships with PEPs.
Established in 1999, FATF tracks down and stop money laundering and funding of terrorist activities around the world. Nepal – a member of FATF associate organisation APG that investigates regional member countries – had passed the Money Laundering Prevention Act in 2008 under pressure, but took 2 years to implement it. Though Nepal brought legislation to escape the black listing in 2010, it does not seem to have made much progress since then in actually preventing tax evasion and money laundering. But the APG will be investigating on its own next year, which is going to create troubles to Nepal. The APG evaluation committee – under the FATF – meets twice a year to review the progress of the member countries and jurisdictions. On June 21, next week, the APG evaluation committee will meet but Nepal’s evaluation will be done in the second meeting of 2020, which will decide the fate of the country.
FATF has, currently, blacklisted Iran and North Korea, whereas 12 countries, including Sri Lanka, Pakistan, Cambodia, Ethiopia, and Syria, are on its international monitoring list.

PM Oli claims government poised for double-digit economic growth

Prime Minister KP Sharma Oli has claimed that the government is going to achieve a double-digit economic growth within the first quarter of next fiscal year.
Meeting with representatives of Nepal Chamber of Commerce (NCC) at his official residence in Baluwatar today, the Prime Minister said that his government is going to surpass fiscal year 2016-17's economic growth of 6.9 per cent to hit a double-digit growth rate.
The Chamber has – submitting a proposal – also emphasised on the need of making the next decade as the 'decade of double-digit economic growth'.
NCC president Rajesh Kazi Shrestha, submitting the 18-point proposal to the Prime Minister Oli said that the private sector and the government should joing hands to achieve economic development.
The proposal submitted by the NCC has prescribed pills for the economic ills including development of the agriculture, energy and the tourism sectors. It has also recommended the government to guarantee the rule of law and promotion of industrial development, apart from promotion of foreign investment, efficient revenue administration, support to share market, well-managed transportation, communication and infrastructure development and importation of petroleum products.
Shrestha, on the occasion, also suggested the government to make the public holidays community specific as the country has too many public holidays that has had a negative impact on the economy.
The private sector has also urged the government to amend the age-old acts, regulations and guidelines to suit the current business environment. They also asked the government to resolve the challenges of federalism, foreign trade and the banking sector that is fighting to manage the lonable fund.
On the occasion, finance minister Dr Yubaraj Khatiwada assured that the government would move ahead by taking the private sector into confidence to achieve the economic prosperity. The finance minister also expressed commitment that the government would do the needful to implement all logical suggestions.
Making a commitment that the private sector will join hands with the government to meet the economic growth target, the Chamber also urged the premier to declare the next decade as ‘Decade of double-digit economic growth’.
The Chamber has also suggested the government to adopt various measures to reduce the cost of doing business in the country, provide assurance of rule of law, improve industrial environment and attract investment in various sectors.
Likewise, the Chamber also drew the government’s attention to solve problems of double taxation, prepare an inventory of property lacking sources and create an environment for investing them.
"The provision requiring a Nepali citizen to disclose their source of income has been a hindrance for enough investment," the Chamber president Shrestha said, adding that the provision is the key reason for the failure to create an environment for investment.
The Money Laundering Prevention Act makes it mandatory to disclose the source of income and government investment. Banks are required to report every transaction of over Rs 1 million to the Financial Intelligence Unit (FIU) of the central bank. Hinting that the provision of the Act has been a factor deterring investment, the NCC prodded the government to list property lacking sources.
The Chamber has urged to archive the domestic property lacking source and to create an environment to invest them.
"It requires a huge investment in order to achieve 7.2 per cent growth," the report reads, adding that the provision of legal source has deterred domestic investment. "The environment for domestic investment will improve a lot, if the existing domestic sources could be recorded."

Nepal needs to amend 50 laws by 2018

Nepal needs to amend some 50 laws within next two years to abide by its international commitment to fight against the flow of dirty money.
The laws also need to be amended to help the country stop funding for criminal activities. If these laws are not amended, the Financial Action Task Force (FATF) will put Nepal in the black list, unlike in the 2014 when it was in the watch list only.
The FATF removed Nepal from the watch list in June, 2014, indicating that the international body that creates standards for fighting financial crime is satisfied with efforts made by the country in combating money laundering and terror financing. The decision was taken by the plenary meeting of the FATF held in Paris.
Though removal of Nepal from the watch list helped enhance the country’s image as a financially disciplined country, the country has a lot to do in preparing and amending the laws, according to a high ranking official of the Finance Ministry.
FATF removed Nepal from the watch list after the parliament ratified the amendment to several acts including the Money Laundering Prevention Act, Proceeds of Crime (Confiscating, Seizing and Freezing) Act, Mutual Legal Assistance Act, Organised Crime Control Act and Extradition Act that are  related to anti-money laundering and combating terror financing.
Blacklisting by the FATF would make the country’s financial institutions unable to collaborate with international financial institutions, add extra transaction costs as the country’s goods are put under scanner, and dispel foreign investment and aid like in the case of Democratic People’s Republic of Korea (DPRK).
The FATF – the global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT) – today identified Democratic People’s Republic of Korea (DPRK) for its strategic deficiencies for anti-money laundering and combating the financing of terrorism regime, and the serious threat this poses to the integrity of the international financial system. It has also called on its member countries to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the DPRK.
Likewise, it will continue to engage with Iran and closely monitor its progress, adds the FATF press note. "The review in Paris today also listed nine countries for their strategic deficiencies in combating the flow of dirty money,” it added.
If laws are not amended by 2018, to update them and give teeth to the country’s fight against money laundering and terror financing, Nepal this time runs the risk of falling back into the black list unlike earlier, the official added.
The FATF will review Nepal’s case again in 2019, the official said, adding that anti-money laundering rules not only include drug money, human trafficking money or terrorism transfers and illegal weapons deal but also compliance with cross-border transactions and paying taxes.
Though Nepal is not a direct member of FATF, it is under the Asia/Pacific Group on Money Laundering (APG) that ensures the adoption, implementation and enforcement of internationally accepted anti-money laundering and counter-terrorist financing standards as set out in the FATF Forty Recommendations and some Special Recommendations.
The APG is helping Nepal in enacting laws to deal with the proceeds of crime, mutual legal assistance, confiscation, forfeiture and extradition; providing guidance in setting up systems for reporting and investigating suspicious transactions and helping in the establishment of financial intelligence units.
There are currently 37 members of the FATF – 35 jurisdictions and 2 regional organizations. Financial Information Unit (FIU) under the central bank is Nepal’s financial intelligence unit. The national agency responsible for receiving, processing, analysing and disseminating financial information and intelligence on suspected money laundering and terrorist financing activities to the Investigation Department, other relevant law enforcement agencies and foreign FIUs is working with various agencies including Finance Ministry, Foreign  Ministry, Home Ministry and Law Ministry to  amend the laws before  the FATF review in 2019.

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. 

Nepal still under grey list, FATF asks to pass Acts to stop flow of dirty money

Financial Action Task Force (FATF) continued to keep Nepal under Grey List or jurisdiction to watch.

The FATF plenary that ended today in French capital Paris has decided not to remove from International Cooperation Review Group (ICRG) monitoring for the time being as the country has not yet passed the Acts to check the flow of dirty money, according to deputy governor of the central bank Maha Prasad Adhikari.

The three-day plenary – that started on February 12 – sought all ordinances be enacted as permanent law, Adhikari said in email from Paris.

Nepal has earlier in the October meeting escaped from being blacklisted at the last moment by bringing the ordinance. However, the status quo since the last October meeting continued due to lack of parliament that could pass the ordinances and stamp them as permanent law.

The second Constituent Assembly (CA) election in November has elected the Legislature-Parliament that has just started to enter into regular business. The parliament needs to enact the five ordinances as permanent law in 60 days of the starting of the parliament.

Nepal had earlier committed to the international community to bring anti-money laundering acts by 2010 to check the flow of dirty money. However, prolonged political transition has delayed the process and in October the government had brought the ordinance to narrowly escape the black listing.

The Legislature-Parliament has to approve ordinances – Mutual Legal Assistance, Procedures of Crime, Extradition Treaty and Anti-money Laundering Act (second amendment) and made them a permanent law.

The ordinances have been tabled in the parliament a week ago.

According to the law, they have to be endorsed to make them Act within 60 days.

A team from the FATF – a global anti-money laundering body – had recently visited Nepal to study country's progress in anti-money laundering measures and status of the ordinances.

The Paris FATF Plenary discussed on the report and the next meeting in June will decide the fate of Nepal.

"However, Nepal's recently elected Parliament will need to consider the ordinances and ratify them as permanent parliamentary statues," the FATF said, encouraging Nepal to urgently enact the ordinances as Parliamentary statutes within the statutory time frame. "Until then, FATF will continue to monitor Nepal."

"Nepal has made significant progress to improve its AML/CFT regime by adequately criminalising money laundering and terrorist financing, establishing and implementing adequate procedures to identify and freeze terrorist assets, implementing adequate procedures for the confiscation of funds related to money laundering, enacting and implementing appropriate mutual legal assistance legislation, ensuring a fully operational and effectively functioning Financial Intelligence Unit (FIU) and establishing adequate suspicious transaction reporting obligations for money laundering and terrorist financing," the FATF statement read, adding that it was able to confirm all of the technical requirements are in place and Nepal's strong commitment to implementing the reforms.

If blacklisted a country can not be able to get foreign aid, international trade as the banks and financial institutions will not be able to open letter of credit for importer and the countrymen will have to pass through the red channels while travelling abroad.

Currently, North Korea and Iran are in the black list – with counter measure –of the FATF that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

According to the FATF statement, some 19 countries are in grey list, whereas two are in dark grey, nine in black list and two countries are in blacklist with counter measures.

President endorses ordinance on Organised Crime

President Dr Ram Baran Yadav today endorsed an ordinance on Organised Crime forwarded by the government.

The approval will not only help Nepal escape being blacklisted by the Financial Action Task Force (FATF) — the global anti-money laundering watchdog — but also give teeth to Nepal Police to handle organised crime.

Currently, the police are facing difficulties in strongly charging criminals of organised crimes as most of them are tried under Public Offences Act, which is weaker.

"If three or more people in a group commit a crime or are involved in destruction of public property, the Organised Crime Act will be attracted and the police will prosecute them under the organised crime law," according to a high official at the Ministry of Law.

"It will, however, not bar anyone from forming a group for peaceful political activities," he added, adding tht the Act will also help check the rising donation terror and organised crime that have of late targetted the business community.

The country had committed to FATF that it would approve the Bills — Mutual Legal Assistance Bill, Extradition Bill, and Bill on Organised Crime — on three key UN conventions through parliament by December 2010, but they remained pending. The constituent assembly that also acted as a parliament was dissolved on May 27, 2012, forcing the government to recommend ordinances to the President, who had approved the Mutual Legal Assistance Bill and Extradition Bill, last July.

But the Ordinance on Organised Crime was still pending due to differences within the ruling UCPN-Maoist and other political parties.

"The approval will help us escape being blacklisted by FATF as it will reflect the country's international commitment in fighting the flow of dirty money," said deputy governor of the central bank Maha Prasad Adhikari before flying to Paris, where the FATF plenary and working group is meeting on February 18-22.

According to a press release issued by the Office of the President today, the head of the state approved the ordinance under Article 88 (1) of the Interim Constitution taking into account national interest and commitments expressed by Nepal to the international community.

"Though Nepal has escaped being blacklisted for the time being, the country has to continue to prepare instruments to fight the flow of dirty money," he added.

The country has to report again at the 16th APG annual meeting and annual forum on Technical Assistance and Training that is scheduled to be held in Shanghai, China, on July 15 -19. The meeting will discuss the structure and operation of the Asia/Pacific Group (APG), — a regional member of FATF — mutual evaluation procedures, and the scheduling of on-site visits to APG members, implementation issues and their relevance to FATF's International Cooperation Review Group, technical assistance and training issues both for specific APG members and for wider policy-related matters, emerging and evolving money laundering, terrorist financing and proliferation financing typologies and special issues of significance to individual APG members and to the whole membership.

"By June, Nepal has to amend the 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, he said, adding that it will also streamline all others seizures and management of confiscated assets procedures in various Acts. "Both are in the pipeline."

The third important task for Nepal is to automate the Financial Information Unit (FIU). "Though it is also in the process, the software procurement process for the FIU — that will connect all FIUs of other FATF member countries and territories — has taken a long time due to technical reasons," Adhikari added. "Now we have finalised UNODC's software and are in the process of procuring it."

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.