Kathmandu, June 16: Nepal Rastra Bank’s Financial Intelligence Unit (FIU) has raised concern over a steady increase in money laundering risks linked to cross-border trade, pointing to the growing use of trade channels for illegal financial flows.
A recent FIU study, drawing on assessments by the Financial Action Task Force (FATF), says Nepal is facing rising exposure to trade-based money laundering (TBML). FATF describes TBML as a method where illicit proceeds are moved and hidden through trade transactions, making illegal funds appear legitimate. This is often done by manipulating key trade details such as price, quantity, or product quality in import and export records.
The FIU report outlines several common techniques used in such schemes. One is over-invoicing, where exporters declare inflated prices for goods. Importers pay the higher amount, allowing excess funds to be shifted abroad under the cover of legitimate trade. In some cases, related businesses on both sides of a transaction are used to move money disguised as payment for goods.
Under invoicing works in the opposite direction. Goods are shown at lower prices than their real value. Importers pay the reduced amount officially, then resell the goods at market rates, keeping the difference as undeclared profit that is later integrated into the formal financial system.
Another method is multiple invoicing, where a single shipment is billed more than once. Even though goods cross the border only once, multiple payments are made through one or several financial institutions, often using repeated or slightly altered documents.
The report also highlights over-shipment and under-shipment practices. In an overshipment, more goods are sent than declared, allowing sellers to earn unaccounted revenue. Under shipment involves declaring higher quantities than are actually exported, enabling funds received from abroad to be justified on paper. Misdescription of goods is also used, where low-value items are declared while higher-value goods are actually traded.
Nepal’s Asset (Money) Laundering Prevention Act, 2008, classifies such concealment and manipulation of proceeds as illegal.
A 2024 Asian Development Bank study further notes that trade routes between Nepal, India, and China show higher vulnerability to TBML. Products frequently linked to suspicious activity include kitchenware, small cardamom, chemicals, and automobile parts
People’s News Monitoring Service
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