Nepal’s Struggle Against Money Laundering: A Complex Web

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Nepal is grappling with corruption and illegal activities, and the issue of money laundering has emerged as a significant challenge. In recent years, individuals involved in hawala transactions have been able to use the money as if it were legally earned.

Hawala Transactions: A Common Method of Money Laundering

Hawala is a common method of money laundering in Nepal, which involves transferring funds through a network of agents worldwide without carrying physical cash. The increase in Nepalese workers abroad has created an opportunity for hawala operators to funnel remittances into their illegal activities.

Intermingling Illegal Proceeds with Legal Income

Another method used by money launderers is intermingling illegal proceeds with legal income, making it difficult to trace the source of the funds. A recent case involving a former Minister’s corruption charges highlighted this issue, as investigators found that his known sources of income did not match the value of his assets.

Lack of Specific Legislation and Bank Secrecy Laws

The absence of specific legislation addressing money laundering has led to a lack of effective measures to counter this crime. The Foreign Exchange (Regulation) Act, 1962, regulates transactions, but it is limited in its scope and does not specifically address money laundering.

Bank secrecy laws also contribute to the problem, allowing individuals to deposit illegal funds without disclosing their source. While there is a policy requiring disclosure of large deposits, it has yet to be implemented. The newly enacted Prevention of Corruption Act, 2002, provides some relief by authorizing investigating authorities to freeze bank accounts and impose fines on institutions that fail to comply.

Statistics: A Glimpse into the Problem

According to the Department of Revenue Investigation, a total of 406 cases related to foreign exchange regulations violations were investigated during the fiscal year 2059/60. Of these, 361 cases were prosecuted, while 45 remained pending.

Conclusion

Money laundering remains a significant challenge for Nepal’s law enforcement agencies. While some measures have been taken to counter this crime, more needs to be done to effectively investigate and prosecute cases. The implementation of specific legislation addressing money laundering and strengthening bank secrecy laws are crucial steps towards tackling this complex issue.

To effectively combat money laundering, Nepal requires a strong strategy that involves:

• Enacting specific legislation addressing money laundering
• Strengthening bank secrecy laws
• Implementing effective investigation and prosecution methods
• Increasing public awareness about the risks of money laundering