Govt assesses the lapses in AML efforts

Kathmandu, Feb. 20: The government is reviewing the overall status of money laundering in different sub-sectors of the Nepali economy to find out the lapses in the anti-money laundering (AML) efforts and trace the areas that need reform.

Currently 16 sectoral committees are assessing the situation of the economic sub-sectors, and they will submit their reports to the government by mid-April this year.

“This is a self-evaluation process, which will show the lapses that we have in our AML efforts – in institutions, policies, actions and laws,”said Ramsharan Pudasaini, Joint-Secretary at the Ministry of Finance and chief of Anti-Money Laundering Unit at the ministry.

“It will guide us towards future actions that we need to take before the Financial Action Task Force (FATF) begins its mutual evaluation on Nepal.”

The FATF is an inter-governmental ‘policy-making’ body which sets standards and promotes effective implementation of legal regulatory and operational measure to combat money laundering, terrorist financing and other related threats to the integrity of the international financing system.

According to Pudasaini, the FATF could be satisfied by Nepal’s self-evaluation report or it may begin a mutual assessment of the country’s effort in combating the flow of dirty money. Either way, the self-evaluation report can be a base for an international review.

The FATF is likely to begin its assessment in 2020/21.

The 16 sub-committees had a mandate of a year to conduct a study of their respective sectors. The report will be submitted to the National Coordination Committee, led by the finance secretary, and will then be moved to the Prime Minister’s Office.

Deputy Director of the AML Unit, Hari Nepal said that the sub-sector includes banks and financial institutions and other organisations involving economic actors, and private sector companies will also be assessed.

Earlier review of the FATF had concluded that although Nepal enacted some fundamental policies, their implementation was very poor.

In order to meet the FATF recommendation and to create a better AML regime in the country, Nepal must amend or formulate about fourdozen laws.

Should Nepal be unable to amend the existing laws and create new laws as per the requirement, the FATF will put Nepal on the black list, which will have severe repercussion on the country’s economy as it will discourage genuine Foreign Direct Investment (FDI) and Official Development Assistance (ODA), reduce the credibility of the Letter-of-Credit (LC), and the cost of remittance will also go up.

If the cost of remittance goes up, the illegal money-transfer system, the ‘hundi’, would be promoted.

The FATF had removed Nepal from its ‘Watch List’ in 2014 after the latter satisfied the international community with laws and standards for fighting financial crimes, but according to sources, the country has to fulfil many obligatory terms of creating a better legal regime.

Nepal said that the self-assessment would show us the future path, and the government would formulate better strategies to make reforms.

He said that more legal instruments, such as anti-terrorism laws, are the immediate needs.

“A better AML regime will increase economic transparency and revenue, bring stability in the financial sector, and help curb financial crimes,” he said.

According to the Department of Money Laundering Investigation (DMLI), tax-evasion, human trafficking and corruption are the major sources of black money that needed cleaning.

The DMLI has signed a Memorandum of Understanding (MoU) with more than 10 organisations, such as the Crime Investigation Bureau, Office of the Company Registrar, Department of Industry and Department of Revenue, said Binod Lamichhane, spokesperson of the DMLI.

Published in The Rising Nepal on 21 February 2018.