Dhakal, Bajgain deny report on unlawful deposits in foreign land

At least four individuals – out of some 55 Nepalis, who are said to be investing in offshore companies and bringing in foreign direct investment (FDI) into Nepal from tax havens – have defended themselves by saying that they have not any unlawful activities.
Chairman of IME Group of Companies Chandra Prasad Dhakal – organising a press meet – defended that the report of Centre for Investigative Journalism-Nepal (CIJ-Nepal) is misleading as he has been running the remittance business according to the law of the land. 
He owns International Money Express (IME) UK Ltd – a British company – which according to him has been under operations after the central bank's approval to open the office in London to bring the remittance into Nepal through banking channel. “It was established to bring in remittance from the UK and other EU countries,” he said.
"I have opened a company in the UK, complying with all applicable laws of the country," Dhakal said, adding that he had taken the approval of central bank to open a company in 2002 in order to bring remittances to Nepal from the UK. "There was no violation of any law of the country."
If opening a company to bring remittances through formal channels is a crime, I have nothing to say, he added. "Otherwise, bringing up my name suddenly and lumping it with others including those with deposits in Swiss banks is unfair.
The report reads that Dhakal purchased the Sunbrid Compter Consultant Ltd, which was later rechristened IME UK Ltd.
"We have neither established companies in tax haven countries nor have we brought foreign direct investment from such countries," Dhakal said, adding that neither he nor his companies has any account in the Swiss bank. "IME UK Ltd was established after obtaining approval from Nepal Rastra Bank."
Likewise, Rajendra Bajgain – a central committee member of the Nepali Congress and a tourism entrepreneur – whose name has appeared in the list of Nepalis with investments abroad has also taken exception to allegations made against him. He is also alleged that he had brought foreign direct investment (FDI) from the British Virgin Islands.
Bajgain said that he has not flouted Nepali laws to bring FDI into the country. But the report of CIJ-Nepal released yesterday claimed that Bajgain channelised Rs 1.755 billion into the country from the British Virgin Islands thorough Silver Heritage Group, a Hong Kong-based company.
Likewise, sugar mill operator Shashikanta Agrawal and businessman Arun Kumar Chaudhary have also objected to the CIJ-Nepal report and denied that they have violated any law of the land.
Dismissing the report, all four of them said that have been unfairly targeted by media reports even though they have not done anything illegal. Denying that they have committed any wrongdoing, they both said the CIJ report has puts them in a negative light and tarnished their image. The report, 'Nepal Leaks 2019: Illegal Wealth Watch', released by the CIJ-Nepal yesterday should not have contained such flaws, they said, though CIJ claims that the report was the outcome of year-long investigations. However, most of the names Nepal Leaks claims to have disclosed also featured in the 'Panama Papers Leak' two years ago in 2017.
All Nepalis making investments in foreign land should not be put into a single basket as some of them may have secured permits from the central bank, while others may have become investors while living abroad, and some may be NRNs.

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.