Suspicious transactions and activities are on the rise in Nepal, with the number of reported cases increasing nearly sevenfold in the past five years, according to the Financial Intelligence Unit (FIU) Nepal. The surge comes at a time when Nepal has landed on the Financial Action Task Force (FATF) grey list for failing to effectively control money laundering and terrorist financing.
The FIU’s latest annual report for Fiscal Year 2023/24, released on Sunday, reveals that financial institutions and businesses submitted 7,338 suspicious transaction reports last year, a 24% increase from the previous fiscal year. In comparison, only 1,090 reports were filed in FY 2019/20. This sharp rise has been attributed to heightened awareness of anti-money laundering regulations and stricter enforcement by regulatory authorities.
Although suspicious transactions have surged, the number of reports on high-value transactions exceeding a specified limit has slightly declined. In FY 2022/23, a total of 1.698 million reports were submitted, which fell marginally to 1.697 million in FY 2023/24. Under current regulations, financial institutions must report cash transactions exceeding Rs 1 million in a single day.
Additionally, purchases of life insurance policies with annual premiums over Rs 100,000, non-life insurance policies exceeding Rs 300,000, and real estate transactions above Rs 10 million must be reported. The same applies to share transactions, casino spending, and gold and silver purchases exceeding Rs 1 million. Even transactions below these thresholds must be flagged if deemed suspicious, with details submitted to the FIU within three days.
Following an initial review of reported cases, the FIU forwards relevant information to various agencies for further investigation. In the last fiscal year, the FIU referred 889 suspicious transaction cases to different government bodies. Among them, 615 cases were sent to Nepal Police, 197 to the Revenue Investigation Department, 60 to the Department of Money Laundering Investigation, 38 to the Inland Revenue Department, 37 to Nepal Rastra Bank, 19 to the Commission for the Investigation of Abuse of Authority, three to the Securities Board of Nepal, two to the Social Welfare Council, and one to the Nepal Insurance Authority.
Most suspicious activities and transactions were linked to finance, banking, foreign exchange, insurance, and cooperatives, with 633 cases flagged in these sectors. The report also highlighted a significant number of cases related to money laundering, tax evasion, gambling, lottery scams, and charity fraud.
Nepal has been on the FATF grey list since mid-February 2024 after failing to meet international anti-money laundering and counter-terrorism financing standards. The government has since adopted a seven-point action plan approved by FATF to exit the grey list. While FATF has set a two-year timeline for compliance, government officials claim efforts are underway to meet the requirements within a year.
Nepal was previously placed on the FATF grey list in 2008 and was only removed after six years in 2014.
(Updated news with more details)
