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/)

Government directs to keep detail record of customers buying precious metals of over Rs 1 million in a day

 The government has asked the bullion traders to record the identity of customers, who buy precious stones and metals worth more than Rs1 million in a day.

The government claimed to take the move – aiming at making trade transparent and discourage money laundering. Lately, the corruption money has been found to be used in buying precious stones and metals.

The Inland Revenue Department (IRD) – that has been named the regulator of the bullion sector two years ago – plans to implement the directive for a few bullion traders only at present. “The initial target is some 400 to 500 bullion traders – both wholesalers and distributors – and commercial banks," the department informed, adding that it has asked the bullion traders to comply with the directives.

According to the anti-money laundering law – that has been brought two years ago – traders can be subject to a penalty of upto Rs 10 million for failing to abide by the directive. 

The bullion traders have not been reporting the trading of over Rs 1 million of precious stones and metals, though the Money Laundering Prevention Act categorises bullion traders as reporting entities. They need to record – details of customers, who buy precious metals worth over Rs 1 million – and report suspicious transactions to designated authorities, the Act reads.

As per the directive, bullion traders will have to submit a report about any transactions above Rs1 million by a customer in a day to the Financial Information Unit (FIU) – under the central bank – within 15 days of suspicious transaction. In case of suspicious transactions, the bullion trader should submit a report about it to the FIU within three days, the directives reads, “While submitting such a report, the bullion trader should submit the report in a format prescribed in the directive.”

The government’s recent National Risk Assessment Report has also said there is ‘Medium’ risk of money launderers through the bullion market. The bullion traders neither operate with minimum regulations nor are aware of their AML/CFT obligations increasing the risk of anti money laundering, the report reads, adding that Nepal needs to prepare ahead of the planned evaluation of Nepal’s performance against money laundering and terrorism financing by Asia Pacific Group (APG) – under the Financial Action Task Force (FATF) – in June 2021 on money laundering, fraudulent and smuggling activities.

The government has yet to prepare laws and implement the Acts and regulations that it had brought after the last evaluation of Nepal by the APG.

The new directive also requires bullion traders to maintain updated records on ‘politically exposed persons’ (PEPs), who are suspected to channelise their illegal earnings through businessmen. The transactions by PEPs are considered risky also because they are often found indulge in corrupt activities by misusing their positions.

“Bullion traders need to ensure that the PEPs and their family members are properly identified through documents from credible sources,” the directive reads.

According to the Money Laundering Prevention Act, PEPS range from rural municipality vice-chairpersons to the president and senior bureaucrats. “A trader of precious metals needs to develop a risk management system to identify PEPS and also make effort to find the source of funds,” the directive reads, adding that such enhanced due diligence should also be implemented in the case of those who are found involved in suspicious transactions like those who purchase precious metals on a large scale and unusual ways. “If someone buys precious metals on the behalf of others, a bullion trader needs to identify the real customer.”

But the bullion traders say that it is difficult for them to identify PEPs, though they can seek the identification of persons, who buy precious stones and metals above Rs 1 million in a day. 

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.

CIB nabs Deepak Manange on charges of money laundering

Central Investigation Bureau (CIB) under Nepal Police nabbed the runaway don Rajiv Gurung aka Deepak Manange on the charge of money laundering from the City Centre, in Kathmandu tonight.

The Department of Money Laundering had filed charge sheet against Manange (47) for laundering Rs 147.33 million. "And he was on the run," the CIB said, adding that the notorious gangster will be presented before the court on Sunday.

The Special Court has already filed charged sheets against other suspected money launderers – including Ganesh Lama, Abhishek Giri, Chakre Milan and Krishna Banset aka Parshuram – for amassing illegal property through forceful contracts, ransom and commission from smugglers.

The Department of Money Laundering and Investigation had charged Basnet with Rs 110.1 million, Chakre Milan with Rs 70.8 million and Giri with 20.9 million for illegal earnings that has no legal sources of income.

The department, after its formation to probe the illegal earnings without any regular sources of income, had started probe against the notorious gangsters since last three years, though they had been escaping the department and CIB due to political protection.

The earlier government led by Dr Baburam Bhattarai and his home minister Bijaya Kumar Gachhchhedhar including CPN-UML were blamed for protecting the gangster and obstructing the department and CIB to arrest them.
If convicted by the Special Court, they will face jail terms up to four years and will have to pay fines equivalent to the property they have charged being amessed and the property will also be confiscated.

Nepal has committed to the international community to fight against the flow of dirty money. The Financial Action Task Force (FATF) – the global standard setter for anti-money laundering and countering the financing of terrorism – has published 40+9 recommendations to help combat corruption and illegal flow of dirty money. Politically Exposed Persons (PEPs) including the politically protected dons are in the must watch list of the FATF.

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.

 

President likely to approve ordinance on Organised Crime on Thursday

The President is most likely to approve Ordinance on Organised Crime tomorrow to save the country falling from grace.
"The President is serious on saving the country from being black listed by the Financial Action Task Force (FATF) and fulfill the country's long due commitment to the international community in fighting the flow of dirty money," according to a Presidential Office, Shital Niwas source.
Finance Minister Barshaman Pun, after meeting the President today also said that the President has promised not to put country in any disgrace.
Though, the country had committed the FATF that it will approve the three key UN conventions to by 2010 December, the country has been repeatedly failing to fulfill the commitment.
Earlier, the Bills — Mutual Legal Assistance Bill, Extradition Bill and Bill on Organised Crime — could not be passed through the parliament due to intra-part rift in the UCPN-Maoits. But after the Constituent Assembly that also acted as parliament 'died' on May 27, 2012, the President approved two ordinances -- Mutual Legal Assistance Bill and Extradition Bill -- last July to save the country from being blacklisted.
However, the country is yet to approve one key Bill Against Organised Crime before the FATF plenary and working group meetings scheduled to be held in Paris, France, on February 18-22 that will take the decision on whether to send the country to high risk zone or not.
"The country needs to approve the Ordinance on Organised Crime by February 16 to save the country from black listing, according to a source at the central bank. "If Nepal could not approve the ordinance by February 16, a team of high ranking officials from central bank, Finance Ministry and Ministry of Law will have to go to Paris to defend the country, he added.  
The county's listing as a high risk zone will not only send a negative message in the international community but international banks and financial institutions will also hesitate to deal with domestic banks and financial institutions that will hurt the country's international trade. Likewise the development partners will also shy away from assisting Nepal.
FATF — the global anti-money laundering watchdog in fighting money laundering — during its regional face-to-face meeting of Asia/Pacific Group (APG) in Hong Kong on January 17 has also showed serious concern on Nepal's delay in approving Ordinance on Organised Crime.
The intra-party rift in the ruling UCPN-Maoist party has delayed approval of the Bill against Organised Crime in the parliament as they feared it could backfire to the party leaders, who have amassed huge property without any regular source of income.
Likewise, some members of the ruling government were also opposed to ordinance on Organised Crime as they have been blamed to be sheltering the dons, who are under investigation by Central Investigation Bureau of Nepal Police and Department of Anti-Money Laundering Investigation. Such criminals are listed as politically exposed persons (PEPs) under FATF globally.