Anti-Money Laundering Deficiencies: No Act means problems for Nepal: Govt officials

KATHMANDU, JAN 21 -

Government officials attending the Financial Action Task Force’s (FATF) Regional Review Group (RRG) meeting have warned that Nepal may have to face dire consequences if the country fails to introduce the Ordinance on Organised Crime at the earliest.

Nepal had committed to introduce the Act on Organized within 2010 to FATF, the global anti-money laundering body, but has so far failed to do so. The government, however, has forwarded the ordinance to the President for endorsement.

Other two committed Acts, including the Mutual Legal Assistance Act and Act on Extradition Treaty, have already been introduced through ordinance in June 2012. Due to disagreement between political parties, the Ordinance on Organised Crime was not sent to the President then.

“Nepal will have to face dire consequences for its inability to introduce this Act,” said Maha Prasad Adhikari, deputy governor of the Nepal Rastra Bank and a member of the Nepali delegation that returned home on Saturday night after attending the meeting that took place in Hong Kong from January 14-18.

“Even the power countries like Turkey, Indonesia and Pakistan have been blacklisted. And, we, being relatively a weaker country, are sure to face action,” Adhikari added.

If blacklisted, Nepali financial institutions will lose their credibility in the international arena and foreign banks may not approve the letters of credit issued by Nepali banks. A blacklisting will also diminish Nepal’s prospects of getting foreign aid and investment. Nepal, which is currently on the grey list, might also be downgraded to the dark grey list.

During the face-to-face, RRG officials raised the issue of why Nepal has been failing to introduce the Act on Organised Crime despite committing repeatedly. And, the Nepali officials replied that the ordinance has been sent to the President for endorsement and expressed confidence for an early endorsement. Nepali officials also informed the RRG officials that the delay was due to the need for adopting a new process for introducing the Act after the dissolution of the Constituent Assembly.

In a press release, the Ministry of Finance has said there is no alternative to introducing the Act before the FATF’s plenary to be held in Paris in February. “If the Act is introduced before the upcoming FATF plenary, it will be considered a big progress. Otherwise, Nepal’s status as a country failing to fulfil its commitment will continue,” stated the ministry.

Joint Secretary of the ministry Baikuntha Aryal, who was also in the delegation, said the RRG officials were mainly concerned about the delay in the endorsement of the ordinance and that early endorsement of the ordinance was essential.

Besides this Act, the FATF has also gave Nepal a deadline until June 2013 to amend the existing Anti-Money Laundering Act and introduce a Act on confiscation of property earned by those involved in money laundering and terrorist financing. “If these Acts are not introduced by June, Nepal may have to face grilling in the next FATF meeting to be held in October 2013,” said Adhikari.

The government, however, has completed drafting these two Acts. During the face-to-face, Nepal informed the RRG that the second amendment to the Anti-Money Laundering Act has been drafted and discussions on the draft has begun, according to the Finance Ministry. “During the discussion on the provisions mentioned in the draft, RRG officials termed them positive,” states the press release.

The FATF has been stressing effective criminalisation of activities related to money laundering and terrorist financing through legal measures.

The FATF plenary held in October 2012 had pointed out some of Nepal’s Anti Money Laundering and Combating Financing to Terrorist (AML/CFT) deficiencies, including criminalising money laundering and terrorist financing; establishing and implementing adequate procedures to identify and freeze terrorist assets and confiscate them, enacting and implementing appropriate mutual legal assistance legislation; ensuring a fully operational and effectively functioning of FIU; and establishing adequate suspicious transaction reporting obligations.

During the Hong Kong meeting, Nepali officials informed the RRG about the progress made in the areas of restructuring of the Department of Money Laundering Investigation, ensuring autonomy of the Financial Information unit and its automation.

The officials also informed about the issuance of a directive by the Insurance Board and Securities Board of Nepal on money laundering and terrorist financing.

According to Aryal, as per the new organisational structure proposed, there will be eight investigation units at the Department of Money Laundering Investigation. The FIU, which works as the focal point for collecting information about AML/CFT, has been made completely autonomous although its office has been stationed at the NRB. “The automation work is also in the process of beginning,” said Adhikari. On the sidelines of the meeting, the Nepal officials also held talks with Hong Kong Police officials on AML/CFT laws, investigation, and the process of investigation and confiscation of property of those involved in money laundering.

Source: The Kathmandu Post