Bankers have said they have been closely monitoring transactions of Politically Exposed Persons (PEP), with the Money Laundering Punishment Act requiring banks to conduct enhanced due diligence of such individuals.

From within the country, the president, vice-president, ministers, lawmakers, officials of constitutional bodies, bureaucrats holding secretary-level and higher posts, judges of appellate and higher courts, central committee members of political parties and those holding high level position in state-owned or semi-stated-owned enterprises fall under the PEP category.

International PEPs are those who hold high-level positions in the management of international institutions such as board members, directors, deputy directors and managers.

The bankers said they have maintained a list of such persons even if they are not their customers. “We first seek more disclosure from the PEPs, including source of income for opening the account,” said Sudesh Khaling, chief executive officer of Laxmi Bank.

“After the opening of the account, we keep certain threshold on transactions. We seek explanation from them if they deviate from that threshold. If they fail to give satisfactory information, we report to the Financial Information Unit (FIU) of Nepal Rastra Bank (NRB) as suspicious transactions.”

The bankers said they maintain the list of the PEPs from government websites, newspaper reports and even purchase such database from third parties.

The bankers, however, complained as a common list of the PEPs is not available, there might be lapses while maintaining such record. “We have been asking officials from NRB and FIU to maintain a system in which the government authorities could make available the list of people who have to be monitored closely,” said Khaling.

However, NRB officials said the government providing list of the PEPs was not a good idea as doing so could lead to banks only monitoring those on the list, increasing the chances of potentially more riskier individuals going unnoticed. “Nowhere in the world the government makes available such a list to banks,” said the NRB official.

As per the Act, banks have to make efforts to find whether a PEP has property and cash in the names of other individuals and monitor them regularly while maintaining business relations.

According to bankers, an enhanced due diligence means monitored transactions vigorously. The banks appoint dedicated staffers to monitor the database of individuals doing suspicious transactions.

Rajan Amatya, deputy general manager of Nepal Investment Bank, said his bank’s board holds a meeting on high-risk customers every three months and their list of PEPs and those conducting suspicious transactions is reviewed at board-level every six months. “We provide the updated list to both our board and the FIU,” said Amatya.

According to bankers, their foreign exchange transactions carried out by the PEPs, in particular, are monitored closely. Based on transactions, the list is updated.

“We update the database based on locally-available information and those coming from our group’s international operations,” said Diwakar Poudel, head of Brand & Marketing and Corporate Affairs at Standard Chartered Bank Nepal.