Nepal faces risks of non-compliance


When global body Financial Action Task Force (FATF) let Nepal to remain in a ´grey´ zone on February 17, officials boasted they have saved the country from being tagged as ´fertile ground for financial crime´.

But refusal of two large banks in the US to handle Nepali Embassy´s accounts in two months indicate how international community views Nepal for not complying with anti-money laundering norms.

First it was Citibank, which about 2 months ago, asked Nepali embassy to move its accounts saying it was an institution that strictly adhered to anti-money laundering policy. While this forced the Embassy to move its account to WashingtonFirst Bank, it too sent similar message.

“It´s two banks in a row in less than two months. The situation is alarming – particularly because banks do not make such denial just like that,” said an official at Financial Information Unit (FIU) – a money laundering watchdog – at Nepal Rastra Bank.

As banks operate under broader policy of respective governments, a senior official at Ministry of Foreign Affairs (MoFA) said he would not be surprised if other banks in the US and other countries following US policy line too refused to handle Nepal´s official accounts.

The incident has given one clear message: Nepal might have averted the global anti-money laundering body´s tag of being a country that is ´fertile ground for financial crime´, but banks in the US are not ready to give the benefit of that doubt.

Worse for the country, officials fear such action could spread rapidly to banks in Europe, Canada and other G20 countries – that are the core members of FATF. “We cannot say such situation won´t come,” said Durga Bhattarai, Foreign Secretary.

Until Citibank withdrew its service, which was prior to the FATF´s February meeting, officials had perceived it as pressure tactics coming from one of the FATF members. But similar action by WashingtonFirst even after getting its (FATF´s) clean cheat´ has rattled them to the core.

The actions of Citibank and WashingtonFirst Bank so far have not spread to the private sector operations, but officials fear it will eventually move in that direction.“

“There is only one way to save ourselves from such adversity – that is to comply with the FATF instructions at the earliest,” said Finance Secretary Krishna Hari Baskota.

What the banks too have pressed for is Nepal must prove itself in action that it does not allow its territory to be used for money laundering and terrorism financing within two months, as pledged by FATF.

FATF issuing a letter to the government last week also cautioned that the two months deadline given to it was the final chance. “If we do not comply, we will face the inevitable – we will be listed as high risk county,” said Baskota.

If that happens, banks in developed countries will find no difference between Nepal, North Korea and Iran, alongside other black listed countries.

Despite acknowledging the risk, Baskota, however, expressed surprise over US banks taking such rigid approach to Nepal, particularly as the country is still in ´grey´ zone and ´not dark grey or black´.

Given the situation, the government has adopted two fold measures to deal with the problem. First, it is requesting the US not to be harsh on Nepal and is making all efforts to fulfill FATF´s deadline.

“We will make the request through diplomatic channel,” said a MoF source.

Second, it is stepping up talks with all the political parties in the parliament for the ratification of three bills.

To escape itself from FATF´s wrath, Nepal would need to implement 49 different recommendations that it prescribed over two years ago.

Though the government has complied with a part of those recommendations and also developed clear action plan for fulfilling other, officials said enactment of three different bills — Bill on Control of Organized Crime, Bill on Extradition and Bill on Mutual Legal Assistance — into law stands as a bone of contention.

 The government has already tabled all those bills in the parliament. However, sources said they were facing problems to get them approved particularly as UCPN Maoist, the party leading the present government, was dead against it.

“We will soon start series of interactions and brief the leaders about the contents of those laws to win their confidence,” said the MoF source, expressing hope that a favorable environment to endorse them will be created soon.

Source: Republica


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