Financial Crime World

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Nepal Needs to Strengthen Anti-Money Laundering and Counter-Terrorist Financing Measures

Kathmandu, Nepal - In its latest report, Nepal’s anti-money laundering and counter-terrorist financing (AML/CFT) efforts have been found to be partially compliant with international standards. While progress has been made, significant gaps remain in key areas.

National Strategy and Action Plan

The National Coordination Committee is overseeing Nepal’s AML/CFT policies through the implementation of a risk-based national strategy and action plan. However, the country needs greater resources and prioritization to fully align its activities with its money laundering (ML) and terrorist financing (TF) risks.

Financial Intelligence Unit

Nepal’s financial intelligence unit (FIU) has made significant efforts to enhance its functions, including the use of goAML software. However, there is still room for improvement in reporting by non-commercial bank financial institutions and no reporting from designated non-financial businesses and professions (DNFBPs).

Money Laundering Investigation

The country’s ML investigation agency, DMLI, has investigated 58 cases with 45 prosecutions and 32 convictions. However, the majority of these cases are related to self-laundering and banking offenses, with few investigations and convictions for other high-risk predicate crimes.

Confiscation and Terrorist Financing

In terms of confiscation, Nepal requires greater commitment, with a total value of recovered confiscation orders amounting to NPR 2.6 billion (approximately USD 19.5 million) in the period under review. The country has also failed to maintain consolidated confiscation-related information and statistics.

Nepal’s legal framework for terrorist financing is also found to have shortcomings, including a lack of integration with its broader counter-terrorism strategies and limited ability to identify potential TF cases. Additionally, the country’s Targeted Financial Sanctions (TFS) regime has moderate shortcomings, and its implementation is not risk-based.

Areas for Improvement

The report highlights several areas for improvement in Nepal’s AML/CFT regime, including:

  • The need for a risk-based approach to preventing TF abuse of non-profit organizations
  • Major shortcomings in its legal framework for implementing TFS for proliferation financing

Preventive Measures

In terms of preventive measures, Nepal has technical shortcomings in place, particularly in relation to financial institutions (FIs) and DNFBPs. The country’s understanding of ML/TF risks and AML/CFT obligations varies among FI sectors, with a notable gap in awareness among some FIs.

Conclusion

Overall, while progress has been made in Nepal’s AML/CFT efforts, significant gaps remain in key areas. The country must continue to strengthen its regime to effectively combat money laundering and terrorist financing.