As the mutual evaluation of Nepal’s compliances to anti-money laundering and terrorist financing is due in 2020, the Financial Information Unit, an entity formed for financial intelligence, is taking the reporting system to automation.

It has installed goAML software, developed by the United Nations Office of Drugs and Crime last year, and started the automated system for receiving reports and analysing them, starting from commercial banks in the test phase for the last six months.

Although the software was acquired in September 2014, its installation was delayed due to the failure to buy compatible hardware. The software was installed only last year.

“Reporting entities have so far been reporting suspicious transactions to us manually, by sending the hard copy,” said Ramu Poudel, director at the Financial Information Unit. “Now most of the commercial banks have also made necessary preparations and started reporting to us both online as well as manually.”

The FIU has plans to conduct formal reporting about suspicious transactions and transactions over the threshold.

Any deposit or withdrawal of money over Rs1 million should be reported to the FIU as per the existing regulations.

The FIU is a body that keeps records of suspicious financial transactions and coordinates with other national and international anti-money laundering bodies. It is responsible for receiving, processing, analysing and disseminating financial information and intelligence on suspected money laundering and terrorist financing activities to the departments concerned for investigation.

Automating FIU is part of Nepal’s commitment to the Financial Action Task Force (FATF), the global anti-money laundering body.

According to Poudel, they have plans to start online-only reporting from the commercial banks by the end of the current fiscal year.

“We also aim to test reporting from development banks and finance companies from the beginning of the next fiscal year,” he said.

Besides automation of the FIU, the government is required to make a number of reforms before the mutual evaluation begins, according to government officials.

One of the shortcomings is poor reporting of suspicious transactions along with deficiencies in the areas of legislation, regulatory mechanisms and enforcement to combat money laundering and terror financing.

The Money Laundering Prevention Act has designated the government agencies, such as the Office of the Company Registrar, the Land Revenue Offices and the Customs Department as reporting agencies but hardly any of them reports to the FIU, according to sources.

Banks and financial institutions, money changers and remitters, cooperatives, insurance companies, and securities business persons, dealers in precious stones and metals, casinos, independent accountants and legal professional, notary public, trust and company service providers have also been designated as reporting entities.

“Commercial banks cover 80-90 percent of total reporting while development banks and finance companies have also been reporting to a certain extent,” said a source at the FIU. “But reporting from other entities is either negligible or zero.”

In the fiscal year 2017-18, the intelligence unit received as many as 45,93,5817 reports on transactions above the threshold set by the FIU.

With a large number of reporting entities continuing to ignore their legal requirement on reporting, the number of reports fell to 887 last fiscal from 1,053 in the year 2016-17.

The number of such transactions hit a record high of 1,589 in fiscal year 2015-16, according to the FIU.

“But we expect a higher instance of reporting in the current fiscal year in the context of mutual evaluation in 2020,” said Poudel.

In 2015-16, reporting set a record because of high unofficial transactions, according to the FIU.

When the country faced an Indian border blockade in 2015, Poudel said, unofficial transactions flourished, which reflected in the reporting of suspicious transactions.