In a significant move to combat money laundering and strengthen its compliance with international standards, the Law, Justice and Human Rights Committee of Nepal’s House of Representatives has endorsed an anti-money laundering (AML) bill.
This endorsement comes at a critical time for Nepal as it faces the risk of being greylisted by the Financial Action Task Force (FATF), a global anti-money laundering agency. The proposed amendments aim to address deficiencies in AML and counter-terrorism financing (CTF) in Nepal.
One notable change in the endorsed bill is the provision to bar the establishment of new casinos within five kilometers (3.1 miles) of Nepal’s international borders. This amendment, which expands the existing restriction from three kilometers, aims to control possible cross-border crime originating from casinos.
Lawmaker Bimala Subedi, chairperson of the committee, highlighted the importance of this move in mitigating the vulnerability of Nepal to money laundering threats from neighboring jurisdictions due to its porous borders and close economic ties.
The endorsed bill proposes amendments to 19 different laws to align them with international standards on AML and CTF. By doing so, Nepal aims to address the deficiencies identified in the recent Mutual Evaluation Report conducted by the Asia Pacific Group on Money Laundering (APG). The report emphasized the need for legislative changes and enhanced enforcement to improve Nepal’s compliance with AML/CTF standards.
One significant amendment proposed in the bill is the removal of the proposed cap on deposits kept in cooperatives. The government had initially suggested capping the deposit amount at approximately $22,000 to mitigate risks for depositors due to the poor regulation of cooperatives. However, the committee decided to remove the cap, considering it an individual’s choice to determine the amount they wish to deposit in any financial institution.
Nepal’s vulnerability to money laundering risks, particularly through its casino industry, has drawn attention from international bodies. The APG report highlighted the presence of 28 licensed casinos, including 15 mini-casinos, with estimated annual turnovers of approximately $67.5 million. The report categorized Nepal’s casino industry as having “medium-high vulnerability” to money laundering risks, emphasizing the need for enhanced risk-based supervision.
Apart from the casino industry, Nepal’s close economic and trade links with other countries, combined with its porous borders, expose it to foreign money laundering threats. To avoid greylisting by the FATF, Nepal needed to take swift action in passing the amendments to its anti-money laundering laws, strengthening enforcement agencies, and cracking down on major offenders.
Although the bill has been endorsed by the parliamentary committee, it still needs to be passed by both houses of parliament before it becomes law. Upon authentication by the President, Nepal can proceed with the implementation of the proposed amendments, significantly enhancing the capacity of competent authorities to undertake their anti-money laundering and counterterrorism financing functions.
The delay in passing the legislation has been attributed to a lack of high-level political commitment. The upcoming FATF plenary in late October is expected to discuss the deficiencies outlined in the APG report. Nepal’s government officials recognize the importance of taking action against not only money laundering but also the ill-gotten properties of offenders to impress international agencies.
