'Co-ops violating anti-money laundering laws'

KATHMANDU, April 20: A number of saving and credit cooperatives (SCCs) that are found to be violating the Cooperatives Act are also breaching the anti-money laundering laws introduced to ensure  good financial practice in the country.



Increasing trend of flouting cooperative laws and anti-money laundering laws have emerged as a big problem in effective monitoring of the cooperative sector that needs to be brought under strict regulatory system given the rapid rise in the number of SCCs in recent years, say experts.[break]



Dharma Raj Sapkota, chief of Financial Information Unit of the Nepal Rastra Bank (NRB), said SCCs that are accepting deposits and issuing loans to non-members, going against the Cooperatives Act, are also violating Anti-Money Laundering Act 2007 and its Anti-Money Laundering Regulations 2009.



“A sizeable number of SCCs is run by influential persons. But we´ve not been able to monitor whether or not they are adhering to the anti-money laundering laws due to human resource crunch,” said Sapkota.



Though the government had directed the SCCs to regularly submit their financial reports to Nepal Rastra Bank (NRB) - the central monetary authority -- and Department of Cooperatives (DoC) -- the cooperative sector regulator, hardly two dozen cooperatives are submitting their reports to the NRB on regular basis.



“The SCCs are not informing the central bank about their members, who have been doing transactions worth Rs 1 million or more, ignoring the mandatory provisions,” Sapkota added.



He further said the cooperatives were also violating the anti-money laundering laws by appointing members on temporary basis to issue loan and use the loaned amount for other purposes.  Sapkota said SCCs investment on mega projects like department stores, housing and real estate also goes against the anti-money laundering laws.



The new standard for cooperatives recently issued by the DoC has made it mandatory for all SCCs to follow Anti-Money Laundering Act 2007 and its Anti-Money Laundering Regulations 2009.



“We have also included a compulsory provision that asks SCCs to keep detailed record of their members under ´Know Your Clients (KYC)´ theme to ensure clean financial image of cooperative members,” Sudarshan Dhakal, registrar of the DoC, told Republica on Tuesday.

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