Financial Crime World

Nepal’s Financial Watchdogs: AML/CFT Regulators Shielding the Himalayan Economy

In the land-locked Himalayan nation of Nepal, the battle against financial crime takes centerstage with the establishment of key regulatory bodies dedicated to ensuring the stability and security of the country’s banking and financial sectors. These watchdogs, including the Nepal Rashtra Bank (NRB), Securities Board of Nepal (SBN), and Financial Information Unit (FIU-Nepal), stand united against the threats of money laundering and terrorism financing.

Nepal Rashtra Bank (NRB) – The Central Bank Guardian

  • Inception: Established in 1956
  • Role: Formulates and manages monetary and foreign exchange policies
  • Mission: Maintains stability in Nepal’s banking and financial sectors
## History
- Incorporated in 1956

## Role & Responsibilities
- Formulates and manages monetary and foreign exchange policies
- Maintains stability in Nepal's banking and financial sectors

Securities Board of Nepal (SBN) – Regulating the Securities Market

  • Established: 1993
  • Objective: Regulates the securities market
  • Functions: Supervises and regulates matters related to securities
## History
- Established in 1993

## Role & Responsibilities
- Regulates securities market
- Supervises securities regulations and directives
- Ensures investor protection and market integrity

Financial Information Unit (FIU-Nepal) – Nepal’s Financial Sentinel

  • Established: 2008
  • Role: Receives and analyzes financial intelligence
  • Objective: Disseminates financial information to law enforcement agencies and foreign FIUs
## History
- Established in 2008

## Role & Responsibilities
- Receives, processes, analyzes, and disseminates financial intelligence
- Acts as Nepal's central database and analysis center for money laundering and terrorism financing
- Collaborates with international partners to exchange financial intelligence

Complying with AML/CFT Regulations: Steps for Designated Service Providers

  1. Establish consistent procedures: Develop and implement robust anti-money laundering/counter-terrorism financing (AML/CFT) policies, plus comprehensive customer due diligence (CDD), risk profiling, and monitoring processes.

  2. Implement proper management oversight and supervision:

    • Provide strong leadership and management oversight
    • Adhere to clear processes and controls
    • Segregate duties appropriately
    • Train teams continously

  3. Identify ultimate beneficial owners (UBOs):

    • Know your customers and UBOs
    • Regularly update framework to account for changes
    • Maintain a list of high-ranking officials and politically exposed persons (PEPs)

Customizing Initiatives for Nepal’s Unique Market

  • Registered entities should consider factors like the local market, corporate structure, clients, and transaction types when adopting AML/CFT initiatives.

Building the Foundation for a Robust AML/CFT Framework

  • Nepal’s AML/CFT regulatory bodies have made significant strides, laying the groundwork for a robust system.
  • Ongoing capacity-building activities and public awareness campaigns strengthen the country’s stance against financial crimes.

AML/CFT Reporting Obligations: What Designated Service Providers Need to Know

Threshold Transaction Reports (TTR)

  • File within fifteen days
  • Deposits, withdrawals, and currency exchanges exceeding specific limits

Suspicious Transaction Reports (STR)

  • File within three days of determination
  • Based on Asset (Money) laundering prevention act (ALPA) 2008
    • Commercial banks account for most STRs

Recordkeeping

  • Maintain records for a minimum of five years, or as required by new orders and policies.