https://english.aarthiknews.com/news/detail/17727/

Despite apparent efforts by the Nepalese government to address money laundering on paper, the practical implementation of anti-money laundering (AML) laws remains weak. Nepal's score in anti-money laundering assessments is significantly lower than that of India. While India scored 50 out of 100, Nepal's score is below 33. Experts in the field believe that Nepal is now certain to be placed on the 'grey list' for money laundering.

Last year, the Asia Pacific Group (APG), a subsidiary of the Financial Action Task Force (FATF), conducted a mutual evaluation of Nepal. The evaluation revealed that Nepal's progress in preventing money laundering was inadequate, granting the country an additional year to enact and implement new laws. However, a report released by the APG on December 20 showed that Nepal has complied with only 4 out of 40 criteria, raising serious concerns.

At a recent FATF Asia Pacific meeting in Dubai, Indian officials expressed concerns to their Nepali counterparts about potential trade difficulties. A representative from Nepal's Ministry of Finance told aarthiknews.com that while India has made significant progress in combating money laundering, Nepal has only managed to enact laws without proper implementation. Without substantial improvement, Nepal could face restrictions on foreign exchange transactions with countries like India, potentially leading to increased costs and complications.

According to a recent report, Nepal's performance on 11 indicators of the APG’s effectiveness assessment system for preventing money laundering was found to be weak. These indicators assess a country’s effectiveness in preventing money laundering, terrorist financing, and the financing of proliferation.

The report highlighted that Nepal's weaknesses lie in risk identification and policy, and it has struggled to effectively utilize international cooperation. Additionally, progress in controlling the misuse of legal entities and arrangements remains disappointing due to very fragile supervision.

By January 2025, Nepal was expected to conduct a national risk assessment and develop a national strategy and action plan to prevent money laundering. This includes regulating cross-border financial transactions, establishing effective customer identification strategies, creating joint task forces for criminal investigation and prosecution, and addressing trade-based money laundering.

Although Nepal’s Money Laundering Prevention Act, 2008, allows for the formation of joint investigation teams, these teams are not authorized to file cases in court. The amended Act has granted investigative powers to agencies handling related offenses, but some members of the House of Representatives believe that only the Department of Money Laundering Investigation should handle money laundering cases.

The Financial Action Task Force (FATF) sets international standards for combating money laundering, terrorist financing, and the financing of weapons of mass destruction. Nepal became a FATF member in 2059, agreeing to adhere to its standards.

Nepal is among 25 countries worldwide at risk of being placed on the FATF’s 'Jurisdictions Under Increased Monitoring' (grey list). Discussions at a recent meeting suggested that Nepal should present its political commitment and reform initiatives at the APG’s face-to-face meeting in the Philippines in January to avoid being placed on the grey list. However, due to Nepal's weak law enforcement record and the lack of successful prosecutions in recent years, officials are skeptical about the country’s chances of avoiding the grey list.

Even within the banking sector, compliance with anti-money laundering regulations is lacking. A report submitted by Nepal Rastra Bank's Financial Intelligence Unit (FIU) in January 2024 revealed that 3,266 cases of money laundering were reported, yet no individuals or institutions faced penalties. Similarly, no action was taken against the 1,664 cases of tax evasion and tax-related offenses.

The FIU also reported 725 money laundering cases in the banking, foreign exchange, and insurance sectors, 165 cases in various partnership companies, 85 cases in the education, transportation, and pharmaceutical industries, and 34 cases in consumer industries. Additional cases of money laundering were reported in real estate, passport and citizenship offices, human trafficking, various agencies, information technology, kidnapping, theft, murder, and other sectors.

According to the Department of Money Laundering Investigation, 789 complaints related to money laundering were received last year, with 732 being individual complaints — the highest number in the past three years. Of these, 596 complaints were preliminarily investigated, 30 cases were referred to various agencies for further investigation, involving 39 individuals as defendants, and charges were pressed in 12 cases. However, no action has been taken in any of these cases as of yet.