Financial Crime World

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Nepal’s AML/CFT Regulations: What You Need to Know

The Central Bank of Nepal, also known as the Nepal Rashtra Bank, was established in 1956 with a mandate to formulate and manage monetary and foreign exchange policies. The bank plays a crucial role in maintaining stability in the country’s banking and financial sectors.

Key Regulators in Nepal

In addition to the central bank, other key regulators in Nepal include:

  • Securities Board of Nepal: Established in 1993 to oversee the securities market and prevent insider trading and other illicit activities.
  • Financial Information Unit (FIU-Nepal): An independent unit within the central bank, set up in 2008 to collect, analyze, and disseminate financial information related to suspected money laundering and terrorism financing.

Complying with AML/CFT Regulations in Nepal

As a designated service provider in Nepal, it is essential to develop and implement a robust anti-money laundering (AML) and counter-terrorism financing (CFT) program. This includes:

  • Establishing procedures for customer due diligence, risk profiling, and monitoring.
  • Implementing proper management oversight and controls.

Each registered entity must tailor its AML/CFT program to the unique nature of its market, corporate structure, clients, and transaction types. Nepal has made significant progress in laying the groundwork for its AML/CFT system by:

  • Establishing sound legal and institutional structures
  • Conducting capacity building activities
  • Raising awareness among stakeholders

Risk-Based Approach

AML/CFT programs must be risk-based, with a risk assessment serving as the foundation for the entire program. The program must clearly demonstrate the connections between defined risks and the processes, practices, and controls that address those risks.

Reporting Obligations

As a designated service provider in Nepal, you are required to notify FIU-Nepal of any suspicious activities. Your reporting obligations 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 records of all transactions, customer details, and activity logs for at least five years.

Conclusion

In conclusion, understanding Nepal’s AML/CFT regulations is crucial for designated service providers in the country. By implementing effective AML/CFT programs and complying with reporting obligations, entities can help prevent money laundering and terrorism financing activities.