A day after the Panama Papers exposé, the Department of Money Laundering Investigation (DoMLI) on Tuesday said that it would start probe to find whether Nepalis too are holding offshore accounts.

The DoMLI has called a meeting of key stakeholders—the Financial Intelligence Unit (FIU) of Nepal Rastra Bank, the Department of Revenue Investigation (DRI) and Nepal Police—on Wednesday to discuss the matter. The meeting, according to DoMLI Director General Damodar Regmi, will focus on whether Nepalis have offshore accounts and whether the government agencies are aware of such accounts. 

“We will also discuss the ways to plug the loopholes if there are any,” added Regmi.

In one of the biggest leaks in the history, the International Consortium of Investigative Journalists (ICIJ) on Monday made public a huge cache of documents showing how the world’s rich, powerful and famous exploit the secretive offshore tax regimes and hide their money. The documents also named the top 10 destinations, known as tax havens, where the world’s rich and powerful stash their money. 

Along with the DoMLI, the FIU and the DRI are the key government agencies that deal with issues of money laundering, terrorism financing and foreign exchange misappropriation. 

Though no any Nepali individual or company has been mentioned in the Panama Papers, government officials said there is a need of in-depth investigation, given the huge foreign direct investment (FDI) entering Nepal from tax havens in recent years.

As Nepal has been seeing a steady rise in FDI commitments from the countries identified by the ICIJ as tax havens, the DoMLI has said that it will now step up surveillance for FDI coming from these tax havens. 

Statistics of the Department of Industry (DoI) show that of the total FDI commitments till last fiscal, about 20 percent were from tax havens.

Government officials point out the need of proactive supervision of money entering Nepal. They suspect that the rise in the FDI from tax havens could be illegal money stashed abroad by Nepalis.

“Apart from enhancing our supervisory capacity to monitor FDI commitments, we will also work closely with the DoI and the Office of Company Registrar (OCR),” said Regmi. The DoI and OCR are two key agencies that deal with foreign investments. 

Regmi said that now onwards the DoMLI will adopt “risk-based supervision system”, instead of launching investigating after the incident of money laundering surfaces. But, if the track record of the DoMLI is anything to go by, hardly any satisfactory steps have been taken so far when it comes to investigating money laundering cases. In the last fiscal year, the DoMLI did not file any money laundering case at the Special Court. The story is no different this year as well. 

In five years of its existence, the DoMLI has filed only 30 money laundering cases at the Special Court, and all of them are against small players. The DoMLI was established in 2011 in the wake of huge pressure on the government from the Financial Action Task Force (FATF), a global anti-money laundering body. Regmi admitted that the performance of the DoMLI has not been encouraging so far, but was quick to add that it was because of “small and weak organisational structure”. 

According to Regmi, the DoMLI is currently probing 700 cases and 200 of them are “advanced stage”. 

• Government officials say there is a need of in-depth prboe, given huge FDI entering Nepal from tax havens in recent years
• Department of Industry (DoI) data show of the total FDI commitments till last fiscal, about 20 percent were from the countries identified by ICIJ as tax havens
• Government officials suspect that the rise in the FDI from tax havens could be illegal money stashed abroad by Nepalis