Financial Crime World

Nepal’s Banks Under Scrutiny: Understanding AML/CTF Regulations

Nepal’s financial institutions are under scrutiny to prevent money laundering and terrorism financing by adhering to stringent Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) regulations.

Framework for Compliance

The country’s central bank, Nepal Rashtra Bank, along with other regulatory bodies such as the Securities Board of Nepal and Financial Information Unit (FIU-Nepal), has implemented a robust framework to ensure compliance. Designated service providers in Nepal must develop and implement a comprehensive compliance program that includes measures to prevent money laundering and terrorism financing.

Key Measures

  • Establish consistent procedures for customer due diligence, risk profiling, and monitoring
  • Implement proper management oversight and segregation of duties
  • Consider unique market, corporate structure, clients, and transaction types when adopting AML/CFT initiatives and procedures

Filing Requirements

Under Nepal’s AML/CFT regulations, all designated service providers are required to file:

  • Threshold Transaction Reports (TTRs) with FIU-Nepal within 15 days of a transaction
  • Suspicious Transaction Reports (STRs) with FIU-Nepal within three days of determining that a report needs to be filed

Record Keeping

Entities must maintain a record of all transactions, customer details, and activity logs for a minimum period of five years, unless new orders or policies require otherwise.

Role of the Financial Information Unit (FIU-Nepal)

The FIU-Nepal is responsible for:

  • Receiving, processing, analyzing, and disseminating financial information on suspected/potential money laundering and terrorism financing activities to law enforcement agencies and foreign FIUs
  • Providing support to designated service providers in implementing their AML/CFT compliance programs

Importance of Compliance

It is essential that banks and other designated service providers remain vigilant in their compliance efforts. Failure to comply with regulations can result in severe penalties, including fines and even license revocation.

Conclusion

Nepal’s AML/CFT regulations are designed to prevent financial crimes and protect the integrity of the country’s financial system. By understanding these regulations, banks and other designated service providers can ensure that they are meeting their obligations and contributing to a safer and more secure financial environment.