The government has formed a special cell to monitor the progress made by various bodies in combating financial crime, such as money laundering and terror financing, in a bid to prevent the country from falling back into the watch-list of the Financial Action Task Force (FATF), an international body that creates standards to fight global financial crime.

The special cell, headed by the chief of the Economic Policy Analysis Division of the Ministry of Finance, will help various regulatory bodies, like the Nepal Rastra Bank, the Insurance Board, the Securities Board of Nepal, and Institute of Chartered Accountants of Nepal, and state agencies, like the Immigration Department and the Customs Department, to conduct self-evaluation of their performance in combating financial crime. Based on these assessments, various measures would be recommended to control money laundering and terror financing in the country. 

To execute these tasks, a committee has been formed under law secretary. Based on outcomes of self assessments, various legal and policy reforms would be made, and capacity of institutions conducting research and analysis into money laundering and terrorist financing would be enhanced.

These initiatives are being taken to prevent the country from being enrolled in the watch-list of the FATF, according to Laxman Aryal, former head of the Economic Policy Analysis Division of the Ministry of Finance, who was recently transferred from the division after being promoted to the post of secretary. A country’s entry into FATF’s watch-list is an indication of financial discipline going haywire. This tarnishes the country’s image in the international market, makes it difficult for Nepali financial institutions to collaborate with international financial institutions, raises various financial transaction costs, and deters foreign investment and aid from entering the country. All these negativities will eventually hit the country’s financial stability.

The FATF had included Nepal in its watch-list in 2010 citing Nepal had not made adequate legal reforms and strengthened institutions to tackle financial crime.

The FATF removed Nepal from its watch-list in June 2014 following introduction of Money Laundering Prevention Act, Proceeds of Crime (Confiscating, Seizing and Freezing) Act, Mutual Legal Assistance Act, Organised Crime Control Act and Extradition Act. 

Despite this, a report published recently by Fintelect, an India-based research firm, and the National Banking Institute said 45 percent of banks do not review money laundering risks at the transaction level unless some specific concerns are raised about the customer or the transaction. This indicates Nepali banks are not investing enough in risk identification and assessment, although risk review should be conducted regularly to curb financial crime.

The FATF will now review Nepal’s performance in controlling financial crime in fiscal year 2019-20. The assessment will continue till 2020-21. During the assessment, the FATF will oversee compliance of its 40 recommendations, which constitute the international standards for anti-money laundering and combating financing of terrorism.

The newly formed cell, which comprises representatives of the Finance Ministry, the Department of Money Laundering Investigation and the Nepal Rastra Bank, will remain in place until the FATF’s assessment is over. 

Nepal to host APG meet

KATHMANDU: Nepal will host the annual meeting of the Asia Pacific Group (APG) on Money Laundering, an autonomous regional inter-governmental anti-money laundering body, in 2018. This is the first time Nepal is hosting the meeting. The APG’s annual meeting generally discusses ways to tackle new threats that can foster financial crime. The meeting also evaluates measures being taken by various countries in the Asia and the Pacific to combat financial crime, and recommends measures to strengthen capacity of various institutions and give more teeth to legal framework to control money laundering and terror financing. The APG, which comprises 41 member countries and a number of international and regional observers, is the de facto Asia-Pacific chapter of the Financial Action Task Force, an international body that creates standards to fight global financial crime.