Financial Institutions Reminded to Report Transactions Within 15 Days
Kathmandu: The Financial Institutions (FIs) in Nepal have been reminded to report transactions that exceed NPR 1 million within 15 days. According to the Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) guidelines, FIs are required to identify suspicious transactions and report them to the authorities.
Tipping Off: A No-Go
FIs have been cautioned against “tipping off” clients about suspected transactions. Tipping off refers to informing customers that their accounts are being monitored or disclosing information to designate authorities. The guidelines emphasize that FIs should not inform customers about suspicious transactions, as this could compromise the investigation.
Penalties for Non-Compliance
FIs found non-compliant with AML/CFT regulations face severe penalties. These include:
- Fines ranging from NPR 1 million to NPR 50 million
- Full or partial restriction on business operations
- Suspension or cancellation of registration/permission/license
- Other appropriate sanctions
Risk Classification of Customers
The guidelines require FIs to categorize new customers into high-risk, medium-risk, and low-risk categories. Risk classification is meant for proper monitoring of accounts and does not reflect on the account holders. The extent of knowledge/information available on customers will determine their risk perception and subsequent risk categorization.
High-Risk Customers
The guidelines identify several types of customers as high-risk, including:
- Those from countries categorized by the Financial Action Task Force (FATF) as having inadequate controls against money laundering, terrorism financing, and other illicit activities
- Politicians
- Businesspeople with suspicious transactions
- Those involved in cash-intensive businesses
Low-Risk Customers
On the other hand, low-risk customers are those whose identity and source of income are clearly disclosed, and their transactions do not raise any suspicions. Examples of low-risk customers include:
- Salaried employees
- Pensioners
- People from lower economic strata
- Government departments
- Financial institutions
Non-Face-to-Face Transactions
The guidelines define non-face-to-face transactions as those conducted over the internet, telephone, or other digital means, including:
- ATM transactions
- Mobile banking
- Wire transfers
- Cross-border transactions
Beneficial Owners
FIs are required to identify beneficial owners, who are natural persons who ultimately own or control a customer and/or conduct transactions on their behalf. The distinction between beneficial owners and account holders is crucial in anti-money laundering guidelines, as the focus is on the person with ultimate control over funds or investments.
Transaction Records
Financial institutions must keep records of every transaction, customer data, and other related information for a minimum of 5 years, or until otherwise prescribed by policy or act. These records include:
- KYC/CDD documents
- Correspondence with customers
- Sources of fund
- Documentation of AML account monitoring