Financial Crime World

Nepal’s Anti-Money Laundering and Counter-Terrorist Financing Efforts Face Challenges

Overview

Nepal is facing challenges in effectively implementing its anti-money laundering (AML) and counter-terrorist financing (CFT) measures, despite making progress in some areas.

National Coordination Committee’s Role

The National Coordination Committee (NCC) is overseeing Nepal’s national AML/CFT policies through the implementation of a risk-based strategy and action plan. However, the country still faces significant challenges in:

  • Strengthening its legislative frameworks
  • Building the capacity of relevant authorities
  • Operational activities targeting high-risk threats and vulnerabilities

Financial Intelligence Unit (FIU) and Money Laundering Investigation Department (DMLI)

While Nepal has made efforts to enhance its FIU and DMLI, there is still a need for:

  • Greater resources
  • Prioritization

The FIU, which is housed within the Nepal Rastra Bank, makes significant proactive and reactive disseminations to law enforcement agencies. However, STR reporting from non-commercial bank financial institutions and DNFBPs needs improvement.

Investigations and Prosecutions

The DMLI has investigated 58 ML cases, with:

  • 45 prosecutions
  • 32 convictions

Most of these convictions are related to self-laundering and banking offenses, which are rated high-risk in Nepal’s risk profile. The country requires greater commitment to confiscation, with only a total value of recovered confiscation orders of approximately NPR 2.6 billion (~USD 19.5 million) in the period under review.

Cash Declaration System and Court Judgments

Nepal has faced challenges in implementing its cash declaration system at border crossings and has not enforced court judgments related to terrorist financing (TF) cases.

Risk-Based Approach

The country also lacks a risk-based approach to preventing TF abuse of non-profit organizations.

Conclusion

Nepal needs to address these shortcomings to effectively combat money laundering and terrorist financing. This includes:

  • Strengthening its legislative frameworks
  • Building the capacity of relevant authorities
  • Implementing a risk-based approach to prevention