Financial Crime World

Nepal’s Crime-Fighting Landscape: A Focus on Economic Crimes and Money Laundering

By: Suryanath Prakash Adhikari

Introduction

Financial crimes and money laundering have become significant challenges in today’s interconnected world. These issues can have serious repercussions for economies and societies at large. Nepal, a country situated at the heart of South Asia, also grapples with these issues. In this article, we discuss Nepal’s measures to address economic crimes, with a particular focus on money laundering.

Economic Crimes in Nepal

Acquiring illicit money is a primary motive behind various criminal activities. The impacts of such financial crimes extend beyond an individual’s actions and pose threats to the national economy and development. In Nepal, crimes such as corruption, fraud, tax evasion, counterfeiting, human trafficking, and drug trafficking have all contributed to the national woes in varying degrees.

Corruption

Corruption has long been considered a significant problem in Nepal. The government has taken several measures to address this issue, including establishing institutions like the Commission for Investigation of Abuse of Authority and revamping the anti-corruption law.

  • The new laws criminalize activities leading to illicit financial gains.
  • A special judicial tribunal has been established for the expedited trial of corruption cases.

Fraud

Traditional forms of fraud, such as bank fraud and fraud in foreign employment, are prevalent in Nepal.

Bank Fraud

  • Legislation like the Income Tax Act, Excise Duties Act, and Value Added Tax Act impose penalties for such acts.

Fraud in Foreign Employment

  • The Foreign Employment Act of Nepal imposes penalties for fraudulent activities in foreign employment.

Tax Evasion

Avoiding tax payments is another common financial crime in Nepal.

  • The Nepalese authorities have enacted stringent measures against tax evasion, including the Income Tax Act, Excise Duties Act, and Value Added Tax Act.

Counterfeiting

Although reported seldom, counterfeiting of Nepali banknotes and foreign currencies like the Indian Rupee and US dollar remains an issue.

  • The Nepalese government has established laws against this illegal activity and imposes severe penalties.

Money Laundering

Money laundering is a complex process that helps criminals conceal the proceeds of illegal activities and ultimately bring them back into the legal economy. Criminals such as corrupt officials, drug dealers, and human traffickers have an increased incentive to launder money due to the ease of the process.

Modes of Money Laundering in Nepal

Three primary stages involved in money laundering—placement, layering, and integration—are common across various methods. For instance:

Hawala

  • Hawala is a popular method of money laundering in Nepal, where money can be taken to any location and provided anywhere in the world through a secret order.
  • The increased number of Nepalese working in foreign employment has facilitated the growth of hawala networks.
  • A substantial portion of remittances are now being channeled through these systems.

Combating Money Laundering in Nepal

To combat money laundering, several measures have been implemented in Nepal.

  • The revocation of bank secrecy laws has provided more transparency in financial transactions.
  • Investigating authorities now have access to critical information when probing suspected illicit financial activities.

International Cooperation and Intelligence Sharing

  • International cooperation and the sharing of intelligence are crucial roles in combating money laundering.
  • Organizations such as the Financial Action Task Force (FATF) are mandated to create global networks for the exchange of information on money laundering and the implementation of anti-money laundering measures.
  • Nepal has been an active member of FATF since 2002.

Conclusion

The fight against economic crimes and money laundering involves cooperation from various stakeholders, including lawmakers, law enforcement agencies, and international organizations. Nepal, despite facing economic challenges in this realm, remains committed to strengthening its regulations and collaborating with global partners to effectively combat these transnational issues.