Financial Crime World

Nepal’s Struggle to Combat Money Laundering: AML/CFT Regulations Under Scrutiny

Introduction

Kathmandu, Nepal - As Nepal continues to grapple with issues related to money laundering and terrorist financing, the country’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations have come under scrutiny. In this report, we examine the key players in Nepal’s AML/CFT landscape and what it takes for businesses to comply with these regulations.

Key Players in Nepal’s AML/CFT Landscape

  • Nepal Rashtra Bank (Central Bank of Nepal): Established in 1956, responsible for formulating and managing monetary and foreign exchange policies, as well as supervising the country’s banking and financial sectors.
  • Securities Board of Nepal: Set up in 1993, regulates the securities market to prevent insider trading and other crimes.

Financial Information Unit (FIU-Nepal)

In 2008, FIU-Nepla was established within the Nepal Rashtra Bank as an independent agency responsible for: + Receiving financial information related to suspected or potential money laundering and terrorist financing activities + Processing, analyzing, and disseminating this information

Compliance Requirements

To comply with AML/CFT regulations in Nepal, designated service providers must develop and implement a comprehensive compliance program, including:

  • Customer Due Diligence (CDD): Establishing consistent procedures for customer due diligence
  • Risk Profiling: Identifying and assessing potential risks
  • Monitoring: Regularly monitoring customer transactions and activities
  • Management Oversight: Implementing proper management oversight and supervision

Unique Considerations

Each registered entity must consider its unique market, corporate structure, clients, and transaction types when adopting AML/CFT initiatives and procedures.

Risk-Based Approach

All AML/CFT programs must be risk-based, with a clear connection between defined risks and processes, practices, and controls that address those risks.

Reporting Requirements

As a designated service provider, companies are required to notify FIU-Nepal of any suspicious activities. Ongoing reporting responsibilities include:

  • Threshold Transaction Reports (TTRs): Filing reports within 15 days of transactions exceeding certain thresholds
  • Suspicious Transaction Reports (STRs): Filing reports within three days
  • Record Keeping: Maintaining records of all transactions, customer details, and activity logs for at least five years

Conclusion

Nepal’s AML/CFT regulations are complex and require careful compliance. Businesses operating in the country must be aware of their obligations and take steps to ensure they are meeting these requirements. As the country continues to work towards strengthening its financial system, a robust AML/CFT framework is crucial for preventing money laundering and terrorist financing activities.