Nepal’s Money Laundering Prevention Act, 2008: Unmasking Financial Crime Regulations

Enacted on: January 1, 2008

In a determined effort to curb money laundering in Nepal, the Parliament passed the Money Laundering Prevention Act, 2063, in 2008. Referred to as Act No. 34, this law came into effect immediately after its authentication and publication.

Preamble

The Money Laundering Prevention Act aims to provide legal provisions to prevent money laundering, which refers to the process of converting proceeds from illegal activities into seemingly legitimate money or assets.

Key Definitions and Terms

Investigation Officer: A person appointed or designated under Section 15.
Offence: An offense as per this Act.
Transactions: Any act or agreement made for carrying out economic or business activities including purchasing, selling, distribution, transfer, or investment, and possession of assets.
Non-Financial Institution: Any firm or company registered for trade or business excluding those specified under Clause (h).
Prescribed or as prescribed: Prescribed or as prescribed under this Act or rules framed under it.
Department: The Asset Laundering Investigation Department, as per Section 11.
Bank: A bank licensed by Nepal Rastra Bank for carrying out ‘A’ class financial transactions.
Financial Institution: Financial institutions licensed by Nepal Rastra Bank for carrying out ‘B’, ‘C’, and ‘D’ class financial transactions, cooperatives, persons, firms, companies, or institutions holding licenses for purchasing and sale of foreign currency, or those holding licenses for insurance business.
Financial Information Unit: The Financial Information Unit constituted under Section 9.
Rastra Bank: Nepal Rastra Bank, as per prevailing Nepal Rastra Bank law.
Public Servant: Any individual supposed to be a public servant as per prevailing laws.
Doubtful Transactions: Transactions that appear improbable economically, commercially, or by business generally.

Prohibition of Money Laundering

Any person is prohibited from laundering assets (Section 3), and individuals who commit such acts are considered to have committed an offense under this Act. Furthermore, assets acquired, held, or utilized through illegal activities are deemed to have been laundered (Section 4). In case transactions appear to be doubtful due to terrorism financing or other listed offenses (Section 4), they are subject to investigation.

Customer Due Diligence and Reporting Requirements

All financial institutions, government entities, or non-financial institutions are required to establish clear identities of their customers while establishing business relationships or transacting amounts exceeding the limit set by Rastra Bank (Section 6). The concerned entities must also report all transactions surpassing these limits to the Financial Information Unit (Section 7).

Role of the Financial Information Unit

The Financial Information Unit is designated to collect and analyze information related to money laundering. It conducts preliminary inquiries and, if necessary, provides information to concerned departments, banks, financial institutions, or non-financial institutions for further investigation (Section 10). International cooperation is emphasized through the exchange of information with foreign organizations and countries (Section 10d).

The Asset Laundering Prevention Department

The Asset Laundering Prevention Department is established to investigate and inquire offenses under the Act (Section 11). The department holds the power to issue orders to seize or prevent the transfer of assets, assets related to offenses, or freeze bank accounts associated with suspected offenses (Sections 18 – 19). During the investigation, the department may also request support from other entities, public corporate bodies, or Nepal police.