Financial Crime World

Nepal’s Efforts to Combat Money Laundering and Terrorist Financing Face Challenges

Introduction

Kathmandu, Nepal - A recent report has shed light on the challenges faced by Nepal in combating money laundering (ML) and terrorist financing (TF). Despite efforts to implement a risk-based strategy, the country’s National Coordination Committee is struggling due to a lack of resources and prioritization.

Challenges in Combating Money Laundering

  • Lack of Resources: The report highlights that greater resources are needed for all competent authorities to be fully aligned with Nepal’s ML/TF risks.
  • Prioritization: Prioritization of activities is also essential to ensure that the country’s efforts are focused on high-risk ML threats and vulnerabilities.
  • Gaps in Law Enforcement Agencies’ Powers: Some law enforcement agencies lack the power to initiate investigations, leading to inconsistencies in referrals to the Directorate of Money Laundering Investigation (DMLI).
  • Few Investigations and Prosecutions: Nepal has few ML investigations, prosecutions, and convictions for high-risk predicate crimes.

Challenges in Combating Terrorist Financing

  • Limited Ability to Identify Potential TF: Nepal lacks the ability to identify potential terrorist financing cases in line with its risk.
  • Operational-Level Cooperation: The country is yet to establish operational-level cooperation through the Counter-Terrorism Mechanism and border security cooperation and coordination mechanism with India.
  • Targeted Financial Sanctions (TFS): Nepal’s legal framework for implementing TFS has moderate shortcomings, and financial institutions display varying understanding of their TFS obligations.

Confiscation and Asset Forfeiture

  • Gaps in Institutional Policies: While Nepal has built capacity at the Department of Management of Proceeds of Crime, it has yet to translate into institutional-level policies and procedures.
  • Inconsistent Freezing and Seizing Actions: Law enforcement agencies’ freezing and seizing actions are not consistent with Nepal’s risks.

Recommendations

The report concludes that Nepal needs increased resources and prioritization to combat ML and TF effectively. To achieve this, the country should:

  • Enhance operational cooperation on high-risk ML threats and vulnerabilities
  • Strengthen law enforcement agencies’ powers to initiate investigations
  • Increase capacity building for confiscation and asset forfeiture
  • Implement a risk-based approach to preventing TF abuse of non-profit organizations

By addressing these challenges and implementing the necessary reforms, Nepal can improve its efforts to combat money laundering and terrorist financing.