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.

Government approves anti-money laundering legislations

The country is finally out of the risk of being blacklisted by Financial Action Task Force (FATF) as it has fulfilled its international commitments, albeit three years late.
The cabinet today approved second amendment of Assets Laundry Prevention Act and Proceeds of Crime Bill — the key concern of the FATF in fighting dirty money flow — as ordinances and has sent it to the President Dr Rambaran Yadav for his final seal of approval. The president also endorsed the two ordinances late in the evening to save the country from being blacklisted.

"Nepal is out of the danger zone of being blacklisted by global anti-money laundering watchdog," deputy governor of central bank Maha Prasad Adhikari said.

FATF — the global standard setter for anti-money laundering and countering the financing of terrorism — had asked Nepal to amend Assets Laundry Prevention Act (ALPA) according to the international standard and bring Proceeds of the Crime Bill that will help in the management of seized property and give enough teeth to authorities to fight organised crime.

However, the country will still be under continuous observation for a couple of plenary before International Co-operation Review Group (ICRG) — a body under FATF that analyses high-risk jurisdictions and recommends specific actions against them — reports to the FATF plenary.

"The ICRG will now review the recently approved Conventions and amended and new Act, and report them to the FATF plenary," Adhikari said, adding that the FATF plenary will then decide to send Nepal out of regular observation of ICRG. "After about two plenaries, Nepal will be completely out of the regular observation too."

Meanwhile, the government is sending a team led by law and justice secretary Bhesh Raj Sharma to FATF Plenary and Working Group meeting that will be held on June 16. the team will report the country's latest developments and compliance.

Earlier, Nepal had escaped the blacklisting in February and remained under continuous observation as it had on at the last minute approved the Organised Crime Bill, the last of the three Bills — Mutual Legal Assistance Bill, Extradition Bill and Organised Crime Bill — under the country's international commitments since 2009.

The FATF plenary had then kept Nepal under a status quo – improving global AML/CFT compliance ongoing process which is the grey zone – under the ICRG recommendation.

The successive meetings of Asia-Pacific Group (APG) — of which Nepal is a member — and plenaries of FATF — an inter-governmental anti-money laundering watchdog consisting of 36 member-jurisdictions and a number of observers — has been showing basic concerns on Nepal's slow response to UN security council resolutions like terrorist financing, seizing, freezing and confiscation of organised crime assets.

The country was already placed under the high-risk and non-cooperative jurisdictions — which means almost blacklisted — in October 2012 for AML/CFT deficiencies and no substantial progress on FATF's 40+9 recommendations that can also help combat corruption. Once blacklisted, the country will have difficulties to trade internationally, getting foreign aid and in traveling abroad as they will be rigorously checked.

Nepal escapes being blacklisted, under continuous observation

Though Nepal escaped being blacklisted by the Financial Action Task Force (FATF) plenary today, the country will be under continuous observation as it has repeatedly failed to fulfill international commitments in the fight against the flow of dirty money.

The FATF plenary has kept Nepal in a status quo – improving global AML/CFT compliance ongoing process which is the grey zone – as recommended by the International Co-operation Review Group (ICRG), a body under FATF that analyses high-risk jurisdictions and recommends specific actions against them.

Earlier in the afternoon, ICRG had recommended the FATF plenary to keep Nepal in a status quo.

"Nepal has escaped being blacklisted this time thanks to the last minute approval of the Organised Crime Bill on February 15," said deputy governor of the central bank Maha Prasad Adhikari via email from Paris, where the FATF plenary was being held from February 18 and which concluded today.

"However, the next plenary and working group meeting of FATF in Oslo, Norway, on June 17-21, could be a tougher one," he added.

FATF, which is a global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT), has asked Nepal to pass the amendment of the Assets Laundry Prevention Act, apart from the Proceeds of Crime Bill that will help in the management of seized property and give enough teeth to authorities to fight organised crime.

The meeting has shown basic concerns on Nepal's slow response to UN security council resolutions like terrorist financing, seizing, freezing and confiscation of organised crime assets, said Adhikari, adding that the country has to pass the Proceeds of Crime Bill and amend the legislation to fight money laundering to escape from public statement, which means blacklisting. "FATF has asked Nepal to implement its Action Plan that is to introduce and enact both the AML/CFT legislations — which are in the pipeline — by June."

The country has remained in a status quo also due to its earlier delays in fulfilling international commitments. The country was already placed under the high-risk and non-cooperative jurisdictions — which means almost blacklisted — in October 2012 for AML/CFT deficiencies and no substantial progress on FATF's 40+9 recommendations that can also help combat corruption.

The meeting in Paris has identified jurisdictions with strategic deficiencies in their AML/CFT system and reviewed progress made by jurisdictions which were identified at the October 2012 plenary.

Nepal personally cannot raise its voice in the FATF plenary as it is a member of the Asia/Pacific Group that represents Nepal in FATF. "The APG conveyed Nepal's reasons, role and cooperation with the APG and the constitutional problem in the delay in approving the legislations," Adhikari added.