Financial Crime World

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Nepal’s KYC Regulations: A Guide to Compliance

Kathmandu, Nepal - In recent years, Nepal has taken significant steps to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. The country’s financial watchdogs, including the Nepal Rashtra Bank (Central Bank of Nepal), Securities Board of Nepal, and Financial Information Unit (FIU-Nepal), have implemented strict Know Your Customer (KYC) regulations to prevent illegal activities.

Designated Services Must Comply

Under Nepalese law, designated service providers must develop and implement a comprehensive compliance program. This includes:

  • Establishing consistent procedures for customer due diligence, risk profiling, and monitoring
  • Implementing proper management oversight and supervision
  • Determining the identity of ultimate beneficial owners
  • Updating their frameworks regularly

Risk-Based Approach

Nepal’s AML/CFT regulations require a risk-based approach to ensure that measures are effective in preventing illegal activities. Each registered entity must consider its unique market, corporate structure, clients, and transaction types when adopting initiatives and procedures.

Reporting Obligations

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

  • Threshold Transaction Report (TTR)
  • Suspicious Transaction Report (STR)

Entities must also maintain records of all transactions, customer details, and activity logs for a minimum of five years.

TTR and STR Requirements

The TTR requires reporting entities to file within 15 days from the date of transaction for deposits, withdrawals, and currency exchanges. The threshold limit for various reporting entities differs, with examples including:

  • Banks and financial institutions (deposit or withdrawal of more than Rs 1 million)
  • Real estate businesses (purchase or sale of a property for Rs 10 million or more)

The STR must be filed within three days of determining that a report needs to be filed. In the last four years, two-thirds of STRs have been received from commercial banks.

Compliance is Key

In conclusion, compliance with Nepal’s KYC regulations is crucial for designated service providers. By understanding their reporting obligations and implementing effective AML/CFT measures, entities can help prevent illegal activities and maintain a secure financial system.