Banks Report Sharp Increase in Trade-Linked Suspicious Transactions: FIU Report

Reports of suspicious transactions linked to import and export trade have risen sharply, raising concerns that trade is increasingly being used as a channel for money laundering, according to the Financial Information Unit (FIU).

The FIU, the national agency responsible for collecting and analysing information related to money laundering, said trade-based suspicious transaction reports increased significantly in the last fiscal year (FY 2024/25), its annual report shows.

Reporting institutions submitted a total of 9,565 suspicious transaction and activity reports during fiscal year 2024/25. Of these, 43 cases were related to import and export trade. In the previous fiscal year (FY 2023/24), institutions had submitted 7,338 suspicious transaction reports, of which only 22 were linked to import and export trade.

According to the FIU, trade-related reports accounted for 0.45 percent of the total suspicious transaction reports in 2024/25, up from 0.30 percent in the previous fiscal year.

Under directives issued by Nepal Rastra Bank, banks and financial institutions are required to identify, assess and report suspicious transactions based on risk assessment, customer identification, transaction monitoring and risk-based systems.

Banks are required to conduct preliminary analysis of suspicious transactions and classify them accordingly. Cases involving politically exposed persons are reported as STR-PEP, while those related to potential money laundering through import and export trade are categorised as STR-TBML. Other suspicious transactions are classified as STR-High, STR-Medium or STR-Low before being submitted to the FIU.

The report shows that during the review period, the FIU received 12 STR-PEP reports, 1,558 STR-High reports, 3,614 STR-Medium reports and 1,445 STR-Low reports. In addition, 1,004 reports related to suspected money laundering activities were received.

The FIU noted that the number of suspicious transactions linked to import and export trade has been rising as banks have been increasingly complying with classification requirements set by Nepal Rastra Bank.

The unit said the growth in international trade has also contributed to an increase in suspicious transaction reporting.

According to the report, many trade-related reports submitted by banks involve suspected money laundering, fraud, fake shipments, misdeclaration of goods, under-invoicing, forged documents and double billing.

Under existing provisions, banks, financial institutions and cooperatives are required to report any cash transaction exceeding Rs 1 million conducted by an individual in a single day as a threshold transaction. Transactions below this amount must also be reported if deemed suspicious. Institutions are required to submit details of both threshold and suspicious transactions to the FIU within 30 days.