Controversial businessman Ajeya Raj Sumargi may have formed a shell company called Zhodar Investments Limited in the British Virgin Islands to transfer billions of rupees, amassed through illegal means, to Nepal. This has raised the spectre of the country becoming a breeding ground for financial crime such as money laundering.

Zhodar Investments made 26 fund transfers totalling $63.1 million (approximately Rs6.5 billion as per Thursday’s exchange rate) to different accounts in Nepal Investment Bank and Nabil Bank between July 2011 and September 2013, shows a government report, a copy of which has been obtained by the Post.

The recipients of these funds are firms owned by Sumargi; Sumargi himself and his family members and relatives. Some of these firms and individuals are Nepal Satellite Telecom, Muktishree Private Limited, Muktishree Cement, Sumargi’s wife Samjhana Aryal, and Sumargi’s sister Anita Sumargi Parajuli, according to the report, which was prepared jointly by the Department of the Money Laundering Investigation (DMLI) and the Central Investigation Bureau of Nepal Police with cooperation from the Financial Information Unit of the Nepal Rastra Bank. It is not known whether all the cash has been withdrawn from the bank accounts.

The transfers made by Zhodar Investments indicate the company’s interest in investing in Nepal. But government agencies probing the matter have not been able to gauge Zhodar Investments’ financial ability for investment. What is also surprising is that permissions have not been obtained, as required by the Foreign Exchange Regulation Act, to remit those funds to Nepal.

“So it is highly likely that Sumargi and his family members and relatives are the owners of the company,” reads the 29-page report. This implies that Zhodar Investments is a shell company formed by Sumargi or someone linked to him to cleanse money amassed through illegal means.

A crucial evidence to substantiate this is the $2.43 million remitted by Sumargi himself via Zhodar Investments.

The fund, which landed at the Nepal Investment Bank on April 8, 2013, was routed through Bank of Cyprus of the United Kingdom and JPMorgan Chase, a financial institution based in the United States, says the report. Shell companies are generally formed in offshore tax havens like the British Virgin Islands. They hold assets only on paper and are used to divert or launder money. In the case related to Sumargi, money obtained through illegal means in Nepal may have been shipped out of the country through informal channels and then funnelled back to Nepal via the shell company based in the Caribbean.

Since the fund has entered Nepal via banks, which are formal channels, the government may have to provide foreign exchange facility to the recipients to pay the interest, if the amount is in the form of loan. Also, foreign exchange facility will have to be provided to investors if they wish to repatriate profit generated from investments in Nepal.

“If investments are genuine, it would not be a problem to provide foreign exchange facility. But if the intention is to cleanse the dirty money, it could put a dent in our foreign exchange reserves,” a senior official at the central bank told the Post on condition of anonymity.

Despite the seriousness of the issue and presence of evidence, concerned authorities have not taken action against the suspect. This, according to officials, is because of his connection with politicians.

But DMLI Director General Jiwan Prakash Sitaula said: “We are trying to build a solid case against the suspect. That’s why we are currently verifying data we have obtained so far and ascertaining the asset he holds. If there are lapses in this process, the case might become weak.”

He, however, did not say how long it would take to complete the process of

verifying data and evaluating his assets.