By Shanker Man Singh
The recent sessions of the House of Representatives and the Upper House unanimously passed the Bill on Asset Laundering. In the previous meeting, the Minister of Law, Justice, and Parliamentary Affairs, presented a proposal to pass a bill to amend the Act and Laws related to Money Laundering and Promotion of Business Environment.
The approval of this bill has opened the way for amendments in laws such as the Export-Import (Control) Act-2013, Watercraft Registration Act-2027, Revenue Act-2034, Tourism Act-2035, Building Construction Act-2013, Bankruptcy Act-2063, Securities Act-2063, Nepal Rashtra Bank Act-2058, and also Human Trafficking and Traffic (Control) Act-2064, Criminal Assets and Instruments (Seizure, Control and Confiscation) Act-2070, Prevention of Money Laundering Act-2064, Prevention of Organized Crime Act-2070, Cooperatives Act-2074, Foreign Investment and Technology Transfer Act-2075 and Electricity Regulatory Commission Act-2074.
The Mutual Legal Assistance Act-2070 is also being amended with approval. Through the bill, the National Civil (Code) Act-2074 and the National Criminal Procedure (Code) Act-2074 have been amended.
After the House of Representatives approved the Money Laundering Bill, Nepal took a big step to reduce the risk of being graylisted by the Financial Action Task Force (FATF).
Currently, North Korea, Iran, and Myanmar are on the blacklist. According to the mutual evaluation of Nepal done by APG last year, Nepal has followed only five of the 40 recommendations made by FATF. It largely complied with 16 recommendations, partially complying with 16 along with three. One area highlighted by Nepal’s peer review is the weaknesses in our laws.
The passage of the Amendment Bill, which seeks to address these shortcomings, is an important step forward. After passing the HoR, the bill has to go to the National Assembly.
After approval by the upper house, presidential approval will be required for it to become law. The bill to amend some laws related to the prevention of money laundering and promotion of business provides for the amendment of 20 laws to address legislative weaknesses in controlling money laundering and terrorist financing.
Remember, in its mutual evaluation report, APG pointed out the need for Nepal to pass an amendment to give the authority of money laundering investigations to the relevant criminal investigation agency. When passed, Nepal should speed up implementation and significantly increase the capacity of effective competent authorities to carry out the new/revised functions.
According to some, the amendment bill has addressed more than 80 percent of the legislative deficiencies pointed out by the APG. The reality is that the law alone is not enough to save the country from being on the list.
Along with the law, the implementation of the law must be strong and visible. Nepal was on the grey list from 2008 to 2014.
A series of advances in anti-money laundering regimes, including amendments to the Anti-Money Laundering Act of 2008, and other laws, finally removed Nepal from the list in 2014.
The Financial Action Task Force (FATF) is an intergovernmental body that works to prevent financial crime worldwide. Although it does not impose regulations or impose penalties, FATF recommendations and guidelines play an important role in helping financial institutions combat money laundering and terrorist financing.
The FATF also identifies countries that lack adequate financial infrastructure to prevent corruption and other financial crimes.
What is the FATF blacklist?
The FATF blacklist is a collection of nations that the financial watchdog has declared “uncooperative” in efforts to address money laundering and terrorist financing concerns.
The FATF Blacklist helps identify financial vulnerabilities within an organization that may impede anti-money laundering compliance.
Failure to complete the required action points on time puts a ‘country under enhanced monitoring’ on the FATF blacklist. A blacklist is an official document based on findings related to financial crime and its prevention. Subject to regulatory criteria, FATF may remove a country from the blacklist based on the financial infrastructure of a particular sector.
Only a few countries are currently on the FATF blacklist due to their status as illegal activities related to terrorism and nuclear weapons.
What is the FATF Gray list?
Jurisdictions under increased monitoring–also known as the FATF Greylist–include countries with “strategic weaknesses” in combating financial crime. Countries listed on the FATF graylist represent a high risk of money laundering and terrorist financing, but it is also important to officially commit to improving the regulatory infrastructure to prevent financial crime.
These efforts include creating an action plan to address the need for anti-money laundering measures across the country, developing a central regulatory unit that works with other financial institutions and businesses to combat the illicit flow of money, and, in addition to effective implementation efforts of “anti-money laundering” standards, grey listed countries by the FATF itself.
It is increasingly monitored by other regional bodies designated by these organizations that report on a country’s progress in meeting anti-money laundering compliance.
Although grey-list countries represent less risk than blacklisted jurisdictions, the World Bank and other financial institutions may impose certain restrictions.
Graylisted countries by FATF like the Blacklist, the FATF Graylist is updated regularly to take into account the financial crime situation in a particular country. In 2020, the FATF Graylist included about 18 countries.
The purification law regarding the legalization of ancestral property should be softened, and the self-declaration of ancestral property should be clarified. It is necessary to call experts and government department employees to understand the data and the system.
MPs have also raised the question of whether the accountability is to FATF or the Nepalese people. In the past, Nepal has failed in implementation–it is said that the system to prevent investigation, prosecution, asset confiscation, and asset laundering is not fast.
Under the new system, the act has made a provision to establish a committee in the ministry to prevent money laundering. Everyone knows that there is no good coordination between the various ministries, and the question has started to arise whether we are trying to work on it or we are trying to put it aside.
A country like ours cannot remain isolated from the international economy. Similarly, foreign donors may impose more stringent conditions on aid and subsidies after a country is blacklisted.
If the law is introduced before the next full meeting of FATF, it will be considered a big step forward.
Otherwise, Nepal’s status as a country that failed to fulfill its commitments will remain. Nepal should continue to implement its action plan to address these shortcomings, including adequately criminalizing money laundering and terrorist financing; establishing and implementing adequate procedures to identify and freeze terrorist assets; implementing adequate procedures for the confiscation of money laundering-related funds; implementing and enforcing appropriate mutual legal assistance laws; ensuring the fully operational and effective functioning of the Financial Intelligence Unit; and it appears that adequate suspicious transaction reporting obligations should be established to prevent money laundering.
Generally speaking, it is the responsibility of the relevant bodies to take the necessary steps to save Nepal from the grey list. If a strong policy and government lobbying are necessary for this, initiatives should be taken at the regional and bilateral levels for liberality in Nepal.
Corruption, tax evasion, and human trafficking are the greatest money laundering threats in Nepal and have the greatest potential to generate income and generate negative economic and social impacts.
According to the opinion of some people, in the current Act, there should not be a provision to make white money by paying taxes on some wealth earned illegally. Even after the approval of this Act by the National Assembly and verification by the President, Nepal is expected to significantly increase the implementation of all preventive measures and avoid the possibility of being on the grey list.
The views expressed in this article are the author’s own and do not necessarily reflect People’s Review’s editorial stance.
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