E-Kantipur

KATHMANDU, FEB 02 -

Nepal faces high risk of being blacklisted by the Financial Action Task Force (FATF), a global anti-money laundering body, as the Parliament is yet to endorse the three Acts that Nepal had committed to get approved within 2010.

Of the three Acts, the Mutual Legal Assistance Bill and the Bill on Extradition Treaty have been registered at the parliamentary secretariat, while the bill on Organised Crimes is stuck in the Cabinet—for a long time now. Although the first two bills were supposed to be tabled at the Parliament two weeks ago, it was postponed due to the obstruction of the house.

At a recent meeting held in Australia to review Nepal’s progress in addressing its deficiencies, FATF officials warned that Nepal could be blacklisted if it failed to make a tangible progress in endorsing the three Acts. Nepali officials tried to convince FATF, citing Nepal political transition, but to no avail. “We had thought we could convince them, but we could not do this time,” said a senior government official who took part at the meeting. “Nepal faces a high risk of being blacklisted if a significant progress is not made within the next three months.”

Another participant of the meeting said FATF is likely to place Nepal in its ‘dark- grey list’—a high-risk zone—during the upcoming plenary of FATF to be held in Paris from February 13-17. According to the FATF website, Nepal is still among the countries whose status is ‘Improving Global Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)-Ongoing Progress.’

FATF, formed by G20 countries, has called its member countries to apply counter-measures to protect the international financial system from the ongoing and substantial money laundering and terrorist financing risks posed by blacklisted countries.

Iran and North Korea figure in the FATF blacklist, while Cuba, Bolivia, Ethiopia, Kenya, Myanmar, Nigeria, Sao Tome and Principe, Sri Lanka, Syria and Turkey are placed in the high-risk zone.

If blacklisted, Nepal’s financial system will lose its credibility as FATF has warned its member countries to take stringent measures against countries failing to address their AML/CFT deficiencies. “Foreign banks may not accept the letters of credit issued by Nepali banks,” said Baikuntha Aryal, joint secretary at the Finance Ministry. “Nepal may have to go for cash transactions which are complicated.” Even if foreign banks hold transactions with Nepali banks, the business will be costly, said a government official, adding that foreign banks may also seek advanced payment for any transaction. “Nepal will also find it hard to attract foreign aid and investment at a time when the country is marking Nepal Investment Year,” said Aryal.

The issuance of a press release by the Nepal Rastra Bank, clearly mentioning about the FATF warning also depicts the gravity of the issue. “Nepal’s attention has been drawn towards the possible blacklisting if the three Acts are not endorsed soon,” read the NRB’s press release.

The Extradition Bill registered at parliamentary secretariat has provisioned that Nepal should extradite international culprits to countries with which it has signed extradition treaty or the country to which Nepal should extradite as per the international treaty and conventions.

The Mutual Legal Assistance Bill has provisioned of taking/giving legal assistance among countries. “If these two bills are endorsed before the Paris plenary, Nepal can avoid blacklisting,” said Aryal. FATF officials had also put forth 25 additional conditions during the talks in Australia. However, they were reduced to four after a long discussion, according to Nepali officials.

The additional conditions are the central bank should monitor banks and financial institutions on money laundering and terrorist financing; the government should improve the Anti Money Laundering Act, strengthen the Financial Information Unit and other agencies working in the area of AML/CFT and implement other laws related to AML/CFT, according to NRB.

Posted on: 2012-02-02 09:14

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