Nepal’s Anti-Money Laundering Laws: A Closer Look at the Money Laundering Prevention Act, 2008
In a bid to prevent money laundering and keep criminally earned funds out of the Nepali economy, the Nepalese parliament enacted the Money Laundering Prevention Act, 2008. The Act came into force on January 1, 2008 and includes the following salient features:
Preface
The Money Laundering Prevention Act, 2008 is divided into seven chapters. This section provides an overview of the Act.
- Title: Money Laundering Prevention Act, 2008
- Comes into force: January 1, 2008
- Divided into seven chapters
Chapter 1: Preliminary Provisions
The first chapter of the Act includes the following provisions.
**Section 1:**
- This Act may be called the "Money Laundering Prevention Act, 2008."
- Applies throughout Nepal to any individual or corporate entity having a connection with Nepal, regardless of their place of residence or location of operations.
- Came into effect immediately upon its publication.
**Section 2:** Definitions
The following terms have been defined in this Act:
- Investigation Officer
- Offence
- Transactions
- Non-Financial Institution
- Prescribed
- Department
- Bank
- Financial Institution
- Financial Information Unit
- Rastra Bank
- Public Servant
- Doubtful Transactions
- Assets
- Government Office
Chapter 2: Provisions Relating to Offences
This chapter outlines the offences and penalties under the Act.
**Section 3:**
- Prohibits laundering of assets or causing assets to be laundered.
- Penalty for offender includes fines equal to the amount involved or imprisonment for one to four years.
- Higher penalties for office bearers, chiefs, or staff of banks, financial institutions, or non-financial institutions, and public servants.
Chapter 3: Provisions Relating to Identity, Transactions, and Details of Customers
This chapter outlines the requirements for banks, financial institutions, and non-financial institutions regarding maintaining customer identity and reporting transactions.
**Section:**
Any bank, financial institution, or non-financial institution:
- Must maintain clear customer identity.
- Must submit documents such as citizenship or passport, proof of residential address, and profession or business to prove identity.
- Must record all transactions, including their nature, type of account, and symbol number.
- Must inform the Financial Information Unit about doubtful transactions or transactions made with the motive of asset laundering within seven days.
Chapter 4: Provisions for Coordination Committee and Financial Information Unit
This chapter discusses the Coordination Committee and Financial Information Unit established under the Act.
**Section:**
A **Coordination Committee** was formed to coordinate related entities and provide essential suggestions to the Government of Nepal regarding the prevention of money laundering.
A **Financial Information Unit** was established within Nepal Rastra Bank to collect and analyze information related to money laundering.
The roles and responsibilities of the Financial Information Unit include:
- Conducting preliminary inquiries
- Communicating with international organizations
- Managing training programs for relevant staff
Chapter 5: Provisions for Formation of the Department and its Functions, Duties, and Powers
This chapter discusses the Asset Laundering Prevention Department established under the Act.
**Section:**
The Government of Nepal established the Asset Laundering Prevention Department to conduct investigations and inquiries of offenses under this Act.
The Department may exercise various powers, such as:
- Issuing orders to seize assets or documents
- Conducting searches
- Obtaining explanations
- Arresting suspected individuals
Chapter 6: Provisions for Investigation and Inquiry
This chapter discusses the powers of the Department in conducting investigations and inquiries.
**Section:**
The Department may conduct investigations and inquiries if it obtains information about potential money laundering offenses.
In situations where there is reasonable suspicion that the person involved may abscond or destroy evidence, the Department may take control of relevant documents, assets, or even arrest the suspect.
Chapter 7: Punishment
This chapter outlines the punishment for offenders found to have committed money laundering offenses under the Act.
**Section:**
Offenders found to have committed money laundering offenses will be punished according to the degree of their offense.
Fines equal to the amount involved or imprisonment for one to four years await those guilty.
Assistant or accomplices to money laundering offenses will face penalties amounting to half of the offender's punishment.
Additionally, any official or staff of financial institutions or civil servants found to have committed money laundering offenses are subject to automatic suspension until their case is decided or they are released from custody.