Nepal Rastra Bank (NRB) on Wednesday issued a ‘warning’ to money changers and money transfer services on suspicion that they might be involved in financing the illegal gold trade. The central bank believes that several such financial intermediaries have been bankrolling gold smuggling.

There have been a growing number of gold smuggling cases in the last few years that could potentially have been financed through various channels, the central bank said.

In the past, smugglers used to sneak in the precious metal through the Tatopani transit point on the Nepal-China border. This route was shut down after Chinese authorities closed the border point following the April 2015 earthquake which caused extensive damage to the infrastructure. The central bank believes that smugglers have shifted operations to Tribhuvan International Airport.

Speaking at a programme organised by the Federation of Nepal Gold Silver Gem and Jewellery Associations, NRB Deputy Governor Chintamani Siwakoti said that an internal investigation carried out by the central bank has revealed that money transfer agencies may have been providing funding to traders engaged in importing gold illegally.

Currently, NRB allows commercial banks to import and distribute up to 20 kg of gold daily. Siwakoti said the central bank was ready to increase the daily quota if traders submitted a plan to increase gold jewellery exports.

“The central bank is ready to improve the gold distribution mechanism if there is any flaw in the transaction of the precious metal,” said Siwakoti. He urged gold traders to buy the yellow metal only from commercial banks designated by NRB.

Siwakoti also expressed dissatisfaction at the negligence of gold traders to report large transactions to the central bank. As per the Money Laundering Prevention Act 2008, financial institutions, non-financial institutions and individuals are required to report suspicious transactions to NRB’s Financial Information Unit (FIU).

The act states that any bank or institution shall maintain clear records and identities of persons while establishing any kind of business relationship or while conducting transactions involving amounts above the threshold, either in a single transaction or in a series of transactions. They shall immediately report suspicious transactions to the Financial Information Unit, the act states.

According to NRB, gold traders have been asked to report transactions valued at more than Rs1 million to the FIU. “However, most gold traders have not been following the rule,” said Siwakoti, urging traders to ensure their transactions were transparent.

Meanwhile, the federation said that traders had not been able to export jewellery as they were short of gold. “Despite the immense potential to increase exports, the shortage of raw materials has hit the jewellery business,” said Ramesh Maharjan, president of the federation.

Maharjan urged the government to help entrepreneurs set up extraction and processing plants for precious stones to boost exports of gold and silver jewellery. According to him, 66 kinds of gems including tourmaline, aquamarine, garnet, kyanite and citrine are found in Nepal.