Considering the fate of some of the booming economies in Southeast Asia like Indonesia and Thailand, which were given equal rating as Nepal by the FATF last October but were downgraded to “black list” during Thursday’s meeting in France, Nepal has something to rejoice about. [break]But the country would not have been able to make such a narrow escape had it not expressed commitments at various levels to adopt stringent measures to control money laundering and acts of terror financing, according to Finance Secretary Krishna Hari Banskota.
“The Prime Minister (Baburam Bhattarai) at various forums has pledged to comply with all FATF measures if the country is given some more time to settle political differences. The finance minister (Barshaman Pun) has gone a step forward and sent a letter to the FATF citing Nepal’s commitment to fight money laundering and terror financing,” he told media persons on Friday. “The governor of the central bank and I (finance secretary) have expressed similar commitments with our foreign counterparts.”
During the meeting last October, the FATF -- an intergovernmental body that creates standards for fighting financial crimes -- had asked Nepal to comply with 49 recommendations to avert being labeled as a country that does not check illegal flow of money that may even be used for terrorist activities.
In this regard, Nepal was asked to criminalize acts of money laundering and terror financing before the FATF meeting in France from Feb 15- Feb17. It was also recommended that the country develop mechanisms to identify and freeze terrorist assets, and confiscate funds related to money laundering. Besides, enactment of law on mutual legal assistance was also prescribed so that international authorities investigating financial crime can legally exchange information with Nepal.
In order to comply with these conditions, Nepal had expressed its commitments to make necessary amendments to Acts on Anti-money Laundering and Extradition, and enact laws on Mutual Legal Assistance and Controlling Organized Crime. However, these tasks could not be completed within the deadline due to political wrangling and lackadaisical attitude of various government bodies.
“These laws are not only necessary to get global recognition as a country that has expressed solidarity to fight financial crime, but also to fight corruption and various forms of trafficking in our own country,” said Banskota said.
The FATF has also indicated that crimes such as drug, human and arms trafficking, as well as corruption, circulation of counterfeit currency, tax evasion and gold smuggling are upshots of an absence or non-implementation of various regulatory mechanisms. “Significant vulnerabilities relate to the porous Indo-Nepal border, including terrorist activity and terrorist financing,” the FATF says in its latest report on Nepal.
“To fight these crimes, which have allowed people to hoard black money, we need tools,” Banskota said, stressing the need for endorsing or creating laws to control money laundering and terror financing.
Nepal will now have to formulate or amend laws for controlling financial crime by June. “Nepal will not be able to escape the FATF ax like it did this time as Nepal has a record of falling a notch below to the dark-grey region in Feb 2011,”said Baikuntha Aryal, joint secretary at the finance ministry.
The country had secured its place in the “grey area” in July 2011. “If we fail to fulfill our commitments by June, FATF can pull us down from the current grey to the black list, omitting the dark-grey area,” Aryal said. The FATF meetings are held every three months.
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