Financial Crime World

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Nepal’s AML/CFT Regulations: A Comprehensive Guide

The Financial Information Unit (FIU-Nepal) and Nepal Rashtra Bank (Central Bank of Nepal) have established a robust Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) framework in Nepal. To ensure compliance with these regulations, designated service providers must develop and implement a comprehensive AML/CFT program.

Compliance Requirements

As a designated service provider, you are required to establish consistent procedures for:

  • Customer Due Diligence (CDD)
  • Risk profiling
  • Monitoring
  • Management oversight
  • Supervision
  • Processes
  • Controls
  • Segregation of duties
  • Training

You must also determine and confirm the identity of ultimate beneficial owners, update your framework regularly, and maintain a list of high-ranking officials and politically exposed persons.

Risk-Based Approach

Each registered entity should consider its unique market, corporate structure, clients, and transaction types when adopting initiatives and procedures to ensure their effectiveness. Nepal has made significant progress in laying the groundwork for the AML/CFT system by:

  • Devising sound legal and institutional structures
  • Organizing incremental capacity building activities
  • Raising awareness among stakeholders and the general public

AML/CFT Programs

All AML/CFT programs must be risk-based. The risk assessment serves as the foundation for your entire anti-money laundering/counter-terrorism financing program. Your program must demonstrate clearly the connections between defined risks and the processes, practices, and controls that address those risks.

Reporting Obligations

As a designated service provider, you are required to notify FIU-Nepal regarding any suspicious activities. Notable ongoing reporting responsibilities include:

  • Threshold Transaction Report (TTR):
    • Reporting entities must file within 15 days from the date of transaction for deposits, withdrawals, and currency exchanges.
  • Suspicious Transaction report (STR):
    • Each STR must be filed within three days of determining a report needs to be filed.
  • Recordkeeping:
    • Entities must maintain a record of all transactions, customer details, and an activity log for a minimum of 5 years.

The threshold limit for various reporting entities differs. For example:

  • Banks and financial institutions: Rs 1 million
  • Real estate businesses: Rs 10 million

Conclusion

Nepal’s AML/CFT regulations are designed to prevent money laundering and terrorism financing. By understanding the compliance requirements, risk-based approach, and reporting obligations, designated service providers can ensure successful implementation of their AML/CFT programs.