As the world woke up to the “Panama Papers”, an unprecedented leak of 11.5 million files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca, on Monday, with documents showing the myriad ways in which the rich can exploit secretive offshore tax regimes, they caused some eyebrows to raise in Nepal as well, as questions were being asked whether Nepali firms and individuals are getting investments from “tax havens”.

Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens, says the documents. While there is no mention of any Nepali company, individual or politician in the documents, talks about a company named Nepal Ventures Limited were doing the rounds. Citing Peruvian TV programme Panorama, El Comercio Politics, a newspaper from Peru, has stated that ‘Nepal Ventures’ is registered in the British Virgin Islands, a tax haven in the Caribbean.

Interestingly, a company with the same name is registered with the Office of the Company Registrar Nepal. It is not clear whether the one said to be registered in the British Virgin Islands has any Nepali connection.

The International Consortium of Investigative Journalists (ICIJ), which leaked the documents, is a collective of 190 journalists spanning more than 65 countries seeks to root out cross-border crime, corruption and abuse of power. “The ‘Panama Papers’ has drawn our attention,” said Damodar Regmi, director general of the Department of Money Laundering Investigation (DMLI). “I held discussions with the Financial Intelligence Unit (FIU) of Nepal Rastra Bank (NRB)”.

The DMLI, said Regmi, will launch an investigation into the matter. “Through the FIU, we will try to get information about Nepal’s connection with ‘Panama Papers’ revelations,” he added.

Bankers and chartered accountants say capital flight and investment routed through tax havens are not new in Nepal. A leading banker said there has been a huge capital flight during the protracted political transition. “Private banking”, a form of wealth management service offered to ultra-high-net-worth individuals, has been on the rise in Nepal.

“Private banking generally thrives during conflict and post-conflict period. And, Nepal is one of the hotspots for private bankers,” said a leading banker. “Each year, representatives of private banks from Singapore, Hong Kong, London and Dubai come to Nepal and meet high-net-worth individuals.”

According to bankers, money earned from corruption and commissions received for being agents of big infrastructure projects and aircraft purchase deals are deposited in offshore accounts. Political leaders and bureaucrats who become a party of profits from such deals also park their money in tax havens.

Nepali law prohibits Nepali citizens from depositing money in foreign banks unless they have earned the money abroad. Nor are they allowed to invest in foreign countries.

An earlier report by the ICIJ titled “The SwissLeaks” had revealed that eight Nepalis had stashed $54 million in HSBC’s Swiss private banking arm in 2006-07. According to the SwissLeaks, Nepali nationals had used 36 bank accounts to deposit black money.  A senior official at NRB said number of suspicious transactions has been on the rise this fiscal year.

According to the FIU, which monitors suspected money laundering and terrorist financing activities, reporting of suspicious transactions has grown by around 40 percent in the first nine months of the current fiscal compared to the figure in the entire last fiscal.

In the past few years, Nepal has been getting more foreign direct investment (FDI) commitments from countries known as tax havens. Of the total FDI commitments till last fiscal year, around 20 percent has come from the tax havens that the ICIJ has mentioned in the “Panama Papers”.

The ICIJ has identified British Virgin Islands, Panama, Bahamas, Seychelles, Niue, Samoa, British Anguilla, Nevada, Hong Kong and the United Kingdom as top 10 tax havens.

“Cyprus, Mauritius and Singapore are primary routes for FDI in India. In Nepal also, we’re now seeing the same pattern,” said a senior chartered accountant.

While it is legal to register companies in tax havens as world’s leading companies follow this practice, FDI inflow in Nepal from tax havens, especially during this political transition, should be taken seriously, he said.

Many countries have been working to find out whether their taxpayers are stashing money in offshore accounts, but little has been done by the Nepal government to investigate into such accounts, or the account/company holders. Despite setting up the DMLI, there has not been much progress when it comes to investigating whether money deposited in tax havens was earned legitimately.

“If the government wants, Nepal can obtain information about Nepalis siphoning off money in the British Virgin Islands. As per our Mutual Legal Assistance Act, the government can seek information based on reciprocal basis,” said an official at the FIU.