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FATF Statement re AML Strategic Deficiencies:
Date: 16 February 2012
In February 2010, Nepal made a high-level political commitment to
work with the FATF and APG to address its strategic AML/CFT
deficiencies. The FATF has determined that certain strategic
AML/CFT deficiencies remain. Nepal should continue to work on
implementing its action plan to address these deficiencies,
including by: (1) adequately criminalising money laundering and
terrorist financing (Recommendation 1 and Special
Recommendation II); (2) establishing and implementing adequate
procedures to identify and freeze terrorist assets (Special
Recommendation III); (3) implementing adequate procedures for
the confiscation of funds related to money laundering
(Recommendation 3); (4) enacting and implementing appropriate
mutual legal assistance legislation (Recommendation 36); (5)
ensuring a fully operational and effectively functioning Financial
Intelligence Unit (Recommendation 26) and (6) establishing
adequate STR reporting obligations for ML and FT
(Recommendation 13 and Special Recommendation IV). The
FATF encourages Nepal to address its remaining deficiencies and
continue the process of implementing its action plan.
____________________________________________________
Sanctions:
None applicable
____________________________________________________
Offshore Jurisdiction Blacklists:
Information unavailable.
____________________________________________________
US State Department Money Laundering Report - 2011:
Nepal is not a regional financial center. Government corruption,
poorly regulated trade, weak financial sector regulation, and a
large informal economy make the country vulnerable to money
laundering and terrorist financing. The major sources of
laundered proceeds stem from tax evasion, corruption, counterfeit
currency, smuggling, and invoice manipulation. There is a large,
unregulated, informal remittance system in Nepal, which is also
vulnerable to money laundering and terrorist financing.
DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY
TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS
TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US
CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN
THE US OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.
S.: NO
CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate
crimes: All crimes approach
Legal persons covered: criminally: YES civilly: YES
CRIMINALIZATION OF TERRORIST FINANCING:
Ability to freeze terrorist assets without delay: YES
UN lists of designated terrorists or terrorist entities distributed to
financial institutions: YES
KNOW-YOUR-CUSTOMER RULES:
Covered entities: Banks, securities agents, insurance agents,
casinos, money remitters and changers, cooperatives, some
government agencies, lawyers and notaries, auditors and high
value metals and stone traders
Enhanced due diligence procedures for PEPs: Foreign: NO
Domestic: NO
SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:
Covered entities: Banks, securities agents, insurance agents,
casinos, money remitters and changers, cooperatives, some
government agencies, lawyers and notaries, auditors, and high
value metals and stone traders
Number of STRs received and time frame: Over 200 in 2010
Number of CTRs received and time frame: Over 1,000 per month
in 2010
MONEY LAUNDERING CRIMINAL
PROSECUTIONS/CONVICTIONS:
Prosecutions: One over one year
Convictions: One over one year
Assets forfeited: criminally: None civilly: None
RECORDS EXCHANGE MECHANISM:
With U.S.: YES
With other governments/jurisdictions: YES
Nepal is a member of the Asia/Pacific Group on Money
Laundering (APG), a Financial Action Task Force (FATF)-style
regional body. As of September 2010, Nepal is undergoing a
mutual evaluation by the APG. Its most recent completed mutual
evaluation can be found here: http://www.apgml.
org/documents/docs/8/Nepal%20MER%20Executive%20Summary.
pdf
ENFORCEMENT AND IMPLEMENTATION ISSUES AND
COMMENTS:
Nepal has enacted anti-money laundering laws and has
established a financial intelligence unit (FIU), but is still in the
beginning stages of implementing an effective anti-money
laundering/combating the financing of terrorism (AML/CFT)
regime. Much of the financial sector lacks basic awareness of the
new AML/CFT requirements and suspicious transaction reporting
requirements and procedures. While the Assets Laundering
Prevention Act was passed in 2008, Nepal’s FIU is still putting in
place the required directives. Due to gaps in the Act, the KYC
rules may not be enforceable, and the FIU directives’ provisions
on customer due diligence lack sanctions for failure to comply. In
addition, the Government of Nepal (GON) lacks human resource
expertise and skills in the responsible agencies, particularly in
investigation techniques. Nepal also lacks a comprehensive anti-
terrorism law, undermining enforcement efforts.
Coordination among the key government agencies is weak. The
Nepal Police have no direct role in money laundering
enforcement, which is the responsibility of the Department of
Revenue Investigation, which also oversees tax enforcement. Tax
evasion is rampant in Nepal, and the Department of Revenue
Investigation’s dual role inhibits money laundering enforcement as
financial institutions and individuals are reluctant to provide
relevant information.
As a matter of practice, only banks receive the UN list of
designated terrorists and terrorist entities; most money
transmitters, foreign exchange dealers, cooperatives, and other
non-bank financial institutions do not receive the lists. In addition,
most financial institutions do not have real-time checks of UN
designated entities.
FIU officials have identified under-and-over invoicing as a major
money laundering challenge. The FIU is in the process of
developing an e-reporting system to help improve data collection,
but the system will not be functional for another one or two years.
____________________________________________________
US State Dept Narcotics Report 2012:
Although Nepal is neither a significant producer of, nor a major
transit route for narcotic drugs, some hashish, heroin, and
domestically produced cannabis and opium are trafficked to and
through Nepal every year. Nepal’s Narcotics Drug Control Law
Enforcement Unit (NDCLEU) reports that more Nepalis are
investing and taking a larger role in managing trafficking
operations. Customs and border controls in Nepal remain weak,
but international cooperation has resulted in increased narcotics-
related apprehensions in Nepal and abroad. Officials claim law
enforcement efforts have improved in 2011 over previous years,
but limited resources still hinder the development of a robust
counternarcotics program. Narcotics-related legislation has been
pending for several years.
Police confirm the cultivation of cannabis is on the rise in the
southern areas of Nepal, most destined for the Indian market.
Abuse of locally grown and wild cannabis and locally produced
hashish, which are marketed in freelance operations, remains
widespread. Heroin from Southwest and Southeast Asia is
smuggled into Nepal across the porous border with India and
through Kathmandu’s international airport. Legal, medicinal drugs
continue to be diverted and abused. Nepal is not a producer of
chemical precursors, but serves as a transit route for precursor
traffic between India and China. The GON has committed to
enhance overall law enforcement; however, the GON has given
little attention to narcotics-specific initiatives.
Nepal’s basic drug law is the Narcotic Drugs Control Act, 2033
(1976, last amended in 1993), making the cultivation, production,
preparation, manufacture, export, import, purchase, possession,
sale, and consumption of most commonly abused drugs illegal.
The government plans to amend the Act to incorporate provisions
for psychotropic substances, demand reduction, treatment and
rehabilitation. In 2006, the GON updated its Narcotics Control
National Policy. The policy consists of five strategies to control
drug production, abuse and trafficking: (1) supply control, (2)
demand reduction through treatment, rehabilitation, and
prevention, (3) risk reduction, (4) research and development, and
(5) collaboration and resource mobilization.
To coordinate narcotics control activities, the 2006 policy called
for the creation of a Narcotics Control Bureau, but the GON has
not decided when or how to implement this planned new bureau.
The policy also called for restructuring a high-level Narcotics
Control National Guidance and Coordination Committee and a
Narcotics Control Executive Committee to oversee all narcotics
control programs, law enforcement activities, and legal reforms.
However, the committees appear to exist more on paper than in
fact.
NDCLEU has the lead in law enforcement efforts and is focused
on supply control. It improved its capacity in recent years, and
made quality arrests and seizures, particularly through stationing
more personnel at the Tribhuvan International Airport (TIA).
NDCLEU also regularly conducts drug investigation training
programs for various law enforcement groups – sometimes in
collaboration with the UN Office for Drugs and Crime. However, it
is still handicapped by technology and resource shortages.
In 2011, the overall number of police arrests decreased, while
drug seizures overall rose. From January to September 2011,
police arrested 112 individuals (83 Nepalis and 29 foreigners) on
the basis of drug trafficking charges. The non-Nepalis arrested
were primarily Indian nationals. The seizure of hashish in 2011
was at an all-time high with 1,923.4 kilograms (150 percent
increase from 2010). The government seized 5.8 grams of heroin
(down 27 percent from 2010), and 32,859 vials of diverted
pharmaceutical drugs (an increase of 31 percent over 2010).
Trafficking of hashish via TIA decreased due to the deterrent
affect of frequent seizures and arrests. No seizures of chemical
precursors have been recorded by police in 2011. There have
been no reports of the illicit use of licensed, imported, dual-use
precursor chemicals, but Nepal is used as a transit route to move
precursor chemicals between India and China.
According to NDCLEU, evidence from narcotics seizures suggests
that narcotics transit Nepal from India, Pakistan, and Afghanistan
to China, Iran, Europe, the United States, Australia, Canada, and
other countries in Asia. Drugs are typically routed through
Thailand, China, Indonesia, Spain, Denmark, and Sweden. Media
reports claim that most narcotics are bound for India and most
seizures occur at the porous India/Nepal border, where customs
and border controls are weak. Recent case investigations
conducted by the DEA New Delhi County Office established that a
small percentage of narcotics, especially hashish is sent to the
United States by individuals involved in trafficking through the use
of the international express parcel services.
U.S. policy is to strengthen Nepal’s law enforcement capacity to
combat narcotics trafficking and related crimes, to maintain
positive bilateral cooperation, and to encourage Nepal to enact
and implement appropriate laws and regulations to meet all
objectives of the 1988 UN Drug Convention. The United States is
committed to working with the Nepali government to provide
expertise and training in law enforcement, particularly to border
and customs services. The United States continues to provide
support to various parts of the justice sector to combat corruption
and improve the rule of law. The United States also encourages
Nepal to enact drug legislation. Nepal does not have any
extradition or mutual legal assistance treaties with the United
States. The Government of Nepal does not encourage or facilitate
illicit production or distribution of narcotics and psychotropic
substances, nor does it encourage or facilitate the laundering of
proceeds from illegal drug transactions. The USG is not aware of
any senior officials engaged in drug trafficking.
____________________________________________________
US State Dept Trafficking in Persons Report 2011
(introduction):
(Tier 2)
Nepal is mainly a source country for men, women, and children
who are subjected to forced labor and sex trafficking. Some
Nepali women and girls are subjected to sex trafficking in Nepal,
India, and the Middle East, and also are subjected to forced labor
in Nepal and India as domestic servants, beggars, factory
workers, mine workers, and in the entertainment industry,
including in circuses and in pornography. They are subjected to
sex trafficking and forced labor in other Asian destinations,
including Malaysia, Hong Kong, and South Korea. Nepali boys
also are exploited in domestic servitude and – in addition to some
Indian boys – are subjected to forced labor in Nepal, especially in
brick kilns and the embroidered textiles industry. One NGO is
concerned that China is an emerging sex trafficking hub for Nepali
girls. There were reports of traffickers in the remote Karnali region
who deceive families into sending their children to urban areas
with false promises of schooling. Many of these children, however,
are never sent to schools and some end up in forced labor,
including forced begging. Bonded labor exists in agriculture, brick
kilns, and the stone-breaking industry. Particularly in agriculture,
this is often based on caste lines, where traditional landlord
castes use debt bondage to secure unpaid labor from Dalit
laborers. Traffickers generally target uneducated people,
especially from socially marginalized and traditionally excluded
groups. However, a growing number of victims are relatively well-
educated and from traditionally privileged groups.
Many Nepali migrants seek work in domestic service, construction,
or other low-skilled sectors in Gulf countries, Malaysia, Israel,
South Korea, Afghanistan, and Libya with the help of Nepal-based
labor brokers and manpower agencies. They travel willingly but
some subsequently face conditions indicative of forced labor such
as withholding of passports, restrictions on movement,
nonpayment of wages, threats, deprivation of food and sleep, and
physical or sexual abuse. Some are deceived about their
destination country, the terms of their contract, or are subjected
to debt bondage, which can in some cases be facilitated by fraud
and high recruitment fees charged by unscrupulous agents. Many
workers migrate via India; this is illegal, due to the 2007 Foreign
Employment Act that requires all workers to leave for overseas
work via the Kathmandu airport. Many migrants leave by land
because it is easier and cheaper than traveling by air, and to
avoid legal migration registration requirements, the scrutiny of a
labor migration desk in the airport, and bribes that some officials
reportedly require at the airport to secure migration documents. A
recent survey of returned migrants served by the NGO Maiti
Nepal assessed that 67 percent of female Nepali workers who
returned from the Gulf were unhealthy; most disorders were
psychological illnesses. Nepali officials have reported a large
increase of Bangladeshis transiting through Nepal in recent years
due to increasing migration restrictions of Bangladeshis by foreign
countries. Officials believe many Bangladeshis illegitimately obtain
Nepali visas and work permits for employment in the Gulf, and
noted, because these Nepali documents are often produced
fraudulently, the Bangladeshis are at risk of being trafficked.
The Government of Nepal does not fully comply with the minimum
standards for the elimination of trafficking; however, it is making
significant efforts to do so, despite limited resources. During the
year, the government established the Central Crime Investigative
Bureau’s special unit to investigate trafficking and increased its
direct financial support for protective services in Nepal and
abroad. Incidents of trafficking-related complicity by government
officials were not documented by the government, but reported by
civil society. The lack of proactive victim identification remained a
serious problem in Nepal.
For full report click here
____________________________________________________
US State Dept Terrorism Report 2010
Overview: Nepal experienced no acts of terrorism during the past
year, though the government's limited ability to control the open
border with India was of concern, since terrorist groups have used
Nepal as a transit point into India. The increased presence of
Nepali security services in the southern Terai region led to a
decrease in violence there, but the security situation remained
problematic, particularly in central and eastern Terai. The United
Communist Party of Nepal-Maoist (UCPN-Maoist), designated as a
Specially Designated Global Terrorist by the U.S. government
under Executive Order 13224, became a partner in the coalition
government. The group has not forsworn violence nor has it taken
several of the other steps required for delisting, that is it has not
renounced violence and terrorism, its youth group has not
abandoned violence and reformed, nor has it fully demonstrated a
commitment to the peace process by complying with Nepali courts
investigating emblematic human rights cases.
Legislation and Law Enforcement: Nepal improved its security
monitoring capabilities at official border crossings along the
southern border with India and at Kathmandu's Tribhuvan
International Airport, while also increasing the Armed Police Force
and Nepal Police presence at several crossings along the
southern border. Violence in the southern Terai plains decreased
due to increased deployment of both the Armed Police Force and
the Nepal Police throughout the Terai along with a renewed
working relationship with Indian security forces. The government’s
Special Security Plan, created in July 2009, sought to bridge a
gap between the Nepal Police, Armed Police Force, and local
communities through promotion of better working relationships,
but has fallen short in building sustained public confidence.
Countering Terrorist Finance: Nepal was not a regional financial
nexus, and there were no indications that the country was used as
a major international money laundering center in 2010. However,
government corruption, poorly regulated trade, weak financial
sector regulation, and a large informal economy made the country
vulnerable to money laundering and terrorist financing. The major
sources of laundered proceeds stemmed from tax evasion,
corruption, counterfeit currency, smuggling, and invoice
manipulation. The Financial Information Unit within the Nepal
Rastra Bank (Nepal’s Central Bank) continued to investigate
money laundering and terrorist financing; however, its efforts were
limited by a lack of technical capabilities and government support.
Terrorist financing legislation was drafted, and at year’s end, the
Cabinet was reviewing it before sending it to the legislature. Nepal
is a member of the Asia/Pacific Group on Money Laundering, a
Financial Action Task Force-style regional body. The Government
of Nepal has the authority to freeze suspected terrorist assets
and has implemented UNSCR 1373. There was one arrest and
conviction for money laundering in 2010.
Regional and International Cooperation: Nepal hosted the U.S.-
sponsored "South Asia Conference on the Use of Financial
Sanctions in Countering Violent Extremism," which brought
together government officials from every country in South Asia to
discuss the issues involved with financial sanctions and the
importance of maintaining and respecting those sanctions once
imposed.
____________________________________________________
Links:
Worldwide AML Legislation (International Bar Association)
Date: 16 February 2012
In February 2010, Nepal made a high-level political commitment to
work with the FATF and APG to address its strategic AML/CFT
deficiencies. The FATF has determined that certain strategic
AML/CFT deficiencies remain. Nepal should continue to work on
implementing its action plan to address these deficiencies,
including by: (1) adequately criminalising money laundering and
terrorist financing (Recommendation 1 and Special
Recommendation II); (2) establishing and implementing adequate
procedures to identify and freeze terrorist assets (Special
Recommendation III); (3) implementing adequate procedures for
the confiscation of funds related to money laundering
(Recommendation 3); (4) enacting and implementing appropriate
mutual legal assistance legislation (Recommendation 36); (5)
ensuring a fully operational and effectively functioning Financial
Intelligence Unit (Recommendation 26) and (6) establishing
adequate STR reporting obligations for ML and FT
(Recommendation 13 and Special Recommendation IV). The
FATF encourages Nepal to address its remaining deficiencies and
continue the process of implementing its action plan.
____________________________________________________
Sanctions:
None applicable
____________________________________________________
Offshore Jurisdiction Blacklists:
Information unavailable.
____________________________________________________
US State Department Money Laundering Report - 2011:
Nepal is not a regional financial center. Government corruption,
poorly regulated trade, weak financial sector regulation, and a
large informal economy make the country vulnerable to money
laundering and terrorist financing. The major sources of
laundered proceeds stem from tax evasion, corruption, counterfeit
currency, smuggling, and invoice manipulation. There is a large,
unregulated, informal remittance system in Nepal, which is also
vulnerable to money laundering and terrorist financing.
DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY
TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS
TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US
CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN
THE US OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.
S.: NO
CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate
crimes: All crimes approach
Legal persons covered: criminally: YES civilly: YES
CRIMINALIZATION OF TERRORIST FINANCING:
Ability to freeze terrorist assets without delay: YES
UN lists of designated terrorists or terrorist entities distributed to
financial institutions: YES
KNOW-YOUR-CUSTOMER RULES:
Covered entities: Banks, securities agents, insurance agents,
casinos, money remitters and changers, cooperatives, some
government agencies, lawyers and notaries, auditors and high
value metals and stone traders
Enhanced due diligence procedures for PEPs: Foreign: NO
Domestic: NO
SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:
Covered entities: Banks, securities agents, insurance agents,
casinos, money remitters and changers, cooperatives, some
government agencies, lawyers and notaries, auditors, and high
value metals and stone traders
Number of STRs received and time frame: Over 200 in 2010
Number of CTRs received and time frame: Over 1,000 per month
in 2010
MONEY LAUNDERING CRIMINAL
PROSECUTIONS/CONVICTIONS:
Prosecutions: One over one year
Convictions: One over one year
Assets forfeited: criminally: None civilly: None
RECORDS EXCHANGE MECHANISM:
With U.S.: YES
With other governments/jurisdictions: YES
Nepal is a member of the Asia/Pacific Group on Money
Laundering (APG), a Financial Action Task Force (FATF)-style
regional body. As of September 2010, Nepal is undergoing a
mutual evaluation by the APG. Its most recent completed mutual
evaluation can be found here: http://www.apgml.
org/documents/docs/8/Nepal%20MER%20Executive%20Summary.
ENFORCEMENT AND IMPLEMENTATION ISSUES AND
COMMENTS:
Nepal has enacted anti-money laundering laws and has
established a financial intelligence unit (FIU), but is still in the
beginning stages of implementing an effective anti-money
laundering/combating the financing of terrorism (AML/CFT)
regime. Much of the financial sector lacks basic awareness of the
new AML/CFT requirements and suspicious transaction reporting
requirements and procedures. While the Assets Laundering
Prevention Act was passed in 2008, Nepal’s FIU is still putting in
place the required directives. Due to gaps in the Act, the KYC
rules may not be enforceable, and the FIU directives’ provisions
on customer due diligence lack sanctions for failure to comply. In
addition, the Government of Nepal (GON) lacks human resource
expertise and skills in the responsible agencies, particularly in
investigation techniques. Nepal also lacks a comprehensive anti-
terrorism law, undermining enforcement efforts.
Coordination among the key government agencies is weak. The
Nepal Police have no direct role in money laundering
enforcement, which is the responsibility of the Department of
Revenue Investigation, which also oversees tax enforcement. Tax
evasion is rampant in Nepal, and the Department of Revenue
Investigation’s dual role inhibits money laundering enforcement as
financial institutions and individuals are reluctant to provide
relevant information.
As a matter of practice, only banks receive the UN list of
designated terrorists and terrorist entities; most money
transmitters, foreign exchange dealers, cooperatives, and other
non-bank financial institutions do not receive the lists. In addition,
most financial institutions do not have real-time checks of UN
designated entities.
FIU officials have identified under-and-over invoicing as a major
money laundering challenge. The FIU is in the process of
developing an e-reporting system to help improve data collection,
but the system will not be functional for another one or two years.
____________________________________________________
US State Dept Narcotics Report 2012:
Although Nepal is neither a significant producer of, nor a major
transit route for narcotic drugs, some hashish, heroin, and
domestically produced cannabis and opium are trafficked to and
through Nepal every year. Nepal’s Narcotics Drug Control Law
Enforcement Unit (NDCLEU) reports that more Nepalis are
investing and taking a larger role in managing trafficking
operations. Customs and border controls in Nepal remain weak,
but international cooperation has resulted in increased narcotics-
related apprehensions in Nepal and abroad. Officials claim law
enforcement efforts have improved in 2011 over previous years,
but limited resources still hinder the development of a robust
counternarcotics program. Narcotics-related legislation has been
pending for several years.
Police confirm the cultivation of cannabis is on the rise in the
southern areas of Nepal, most destined for the Indian market.
Abuse of locally grown and wild cannabis and locally produced
hashish, which are marketed in freelance operations, remains
widespread. Heroin from Southwest and Southeast Asia is
smuggled into Nepal across the porous border with India and
through Kathmandu’s international airport. Legal, medicinal drugs
continue to be diverted and abused. Nepal is not a producer of
chemical precursors, but serves as a transit route for precursor
traffic between India and China. The GON has committed to
enhance overall law enforcement; however, the GON has given
little attention to narcotics-specific initiatives.
Nepal’s basic drug law is the Narcotic Drugs Control Act, 2033
(1976, last amended in 1993), making the cultivation, production,
preparation, manufacture, export, import, purchase, possession,
sale, and consumption of most commonly abused drugs illegal.
The government plans to amend the Act to incorporate provisions
for psychotropic substances, demand reduction, treatment and
rehabilitation. In 2006, the GON updated its Narcotics Control
National Policy. The policy consists of five strategies to control
drug production, abuse and trafficking: (1) supply control, (2)
demand reduction through treatment, rehabilitation, and
prevention, (3) risk reduction, (4) research and development, and
(5) collaboration and resource mobilization.
To coordinate narcotics control activities, the 2006 policy called
for the creation of a Narcotics Control Bureau, but the GON has
not decided when or how to implement this planned new bureau.
The policy also called for restructuring a high-level Narcotics
Control National Guidance and Coordination Committee and a
Narcotics Control Executive Committee to oversee all narcotics
control programs, law enforcement activities, and legal reforms.
However, the committees appear to exist more on paper than in
fact.
NDCLEU has the lead in law enforcement efforts and is focused
on supply control. It improved its capacity in recent years, and
made quality arrests and seizures, particularly through stationing
more personnel at the Tribhuvan International Airport (TIA).
NDCLEU also regularly conducts drug investigation training
programs for various law enforcement groups – sometimes in
collaboration with the UN Office for Drugs and Crime. However, it
is still handicapped by technology and resource shortages.
In 2011, the overall number of police arrests decreased, while
drug seizures overall rose. From January to September 2011,
police arrested 112 individuals (83 Nepalis and 29 foreigners) on
the basis of drug trafficking charges. The non-Nepalis arrested
were primarily Indian nationals. The seizure of hashish in 2011
was at an all-time high with 1,923.4 kilograms (150 percent
increase from 2010). The government seized 5.8 grams of heroin
(down 27 percent from 2010), and 32,859 vials of diverted
pharmaceutical drugs (an increase of 31 percent over 2010).
Trafficking of hashish via TIA decreased due to the deterrent
affect of frequent seizures and arrests. No seizures of chemical
precursors have been recorded by police in 2011. There have
been no reports of the illicit use of licensed, imported, dual-use
precursor chemicals, but Nepal is used as a transit route to move
precursor chemicals between India and China.
According to NDCLEU, evidence from narcotics seizures suggests
that narcotics transit Nepal from India, Pakistan, and Afghanistan
to China, Iran, Europe, the United States, Australia, Canada, and
other countries in Asia. Drugs are typically routed through
Thailand, China, Indonesia, Spain, Denmark, and Sweden. Media
reports claim that most narcotics are bound for India and most
seizures occur at the porous India/Nepal border, where customs
and border controls are weak. Recent case investigations
conducted by the DEA New Delhi County Office established that a
small percentage of narcotics, especially hashish is sent to the
United States by individuals involved in trafficking through the use
of the international express parcel services.
U.S. policy is to strengthen Nepal’s law enforcement capacity to
combat narcotics trafficking and related crimes, to maintain
positive bilateral cooperation, and to encourage Nepal to enact
and implement appropriate laws and regulations to meet all
objectives of the 1988 UN Drug Convention. The United States is
committed to working with the Nepali government to provide
expertise and training in law enforcement, particularly to border
and customs services. The United States continues to provide
support to various parts of the justice sector to combat corruption
and improve the rule of law. The United States also encourages
Nepal to enact drug legislation. Nepal does not have any
extradition or mutual legal assistance treaties with the United
States. The Government of Nepal does not encourage or facilitate
illicit production or distribution of narcotics and psychotropic
substances, nor does it encourage or facilitate the laundering of
proceeds from illegal drug transactions. The USG is not aware of
any senior officials engaged in drug trafficking.
____________________________________________________
US State Dept Trafficking in Persons Report 2011
(introduction):
(Tier 2)
Nepal is mainly a source country for men, women, and children
who are subjected to forced labor and sex trafficking. Some
Nepali women and girls are subjected to sex trafficking in Nepal,
India, and the Middle East, and also are subjected to forced labor
in Nepal and India as domestic servants, beggars, factory
workers, mine workers, and in the entertainment industry,
including in circuses and in pornography. They are subjected to
sex trafficking and forced labor in other Asian destinations,
including Malaysia, Hong Kong, and South Korea. Nepali boys
also are exploited in domestic servitude and – in addition to some
Indian boys – are subjected to forced labor in Nepal, especially in
brick kilns and the embroidered textiles industry. One NGO is
concerned that China is an emerging sex trafficking hub for Nepali
girls. There were reports of traffickers in the remote Karnali region
who deceive families into sending their children to urban areas
with false promises of schooling. Many of these children, however,
are never sent to schools and some end up in forced labor,
including forced begging. Bonded labor exists in agriculture, brick
kilns, and the stone-breaking industry. Particularly in agriculture,
this is often based on caste lines, where traditional landlord
castes use debt bondage to secure unpaid labor from Dalit
laborers. Traffickers generally target uneducated people,
especially from socially marginalized and traditionally excluded
groups. However, a growing number of victims are relatively well-
educated and from traditionally privileged groups.
Many Nepali migrants seek work in domestic service, construction,
or other low-skilled sectors in Gulf countries, Malaysia, Israel,
South Korea, Afghanistan, and Libya with the help of Nepal-based
labor brokers and manpower agencies. They travel willingly but
some subsequently face conditions indicative of forced labor such
as withholding of passports, restrictions on movement,
nonpayment of wages, threats, deprivation of food and sleep, and
physical or sexual abuse. Some are deceived about their
destination country, the terms of their contract, or are subjected
to debt bondage, which can in some cases be facilitated by fraud
and high recruitment fees charged by unscrupulous agents. Many
workers migrate via India; this is illegal, due to the 2007 Foreign
Employment Act that requires all workers to leave for overseas
work via the Kathmandu airport. Many migrants leave by land
because it is easier and cheaper than traveling by air, and to
avoid legal migration registration requirements, the scrutiny of a
labor migration desk in the airport, and bribes that some officials
reportedly require at the airport to secure migration documents. A
recent survey of returned migrants served by the NGO Maiti
Nepal assessed that 67 percent of female Nepali workers who
returned from the Gulf were unhealthy; most disorders were
psychological illnesses. Nepali officials have reported a large
increase of Bangladeshis transiting through Nepal in recent years
due to increasing migration restrictions of Bangladeshis by foreign
countries. Officials believe many Bangladeshis illegitimately obtain
Nepali visas and work permits for employment in the Gulf, and
noted, because these Nepali documents are often produced
fraudulently, the Bangladeshis are at risk of being trafficked.
The Government of Nepal does not fully comply with the minimum
standards for the elimination of trafficking; however, it is making
significant efforts to do so, despite limited resources. During the
year, the government established the Central Crime Investigative
Bureau’s special unit to investigate trafficking and increased its
direct financial support for protective services in Nepal and
abroad. Incidents of trafficking-related complicity by government
officials were not documented by the government, but reported by
civil society. The lack of proactive victim identification remained a
serious problem in Nepal.
For full report click here
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US State Dept Terrorism Report 2010
Overview: Nepal experienced no acts of terrorism during the past
year, though the government's limited ability to control the open
border with India was of concern, since terrorist groups have used
Nepal as a transit point into India. The increased presence of
Nepali security services in the southern Terai region led to a
decrease in violence there, but the security situation remained
problematic, particularly in central and eastern Terai. The United
Communist Party of Nepal-Maoist (UCPN-Maoist), designated as a
Specially Designated Global Terrorist by the U.S. government
under Executive Order 13224, became a partner in the coalition
government. The group has not forsworn violence nor has it taken
several of the other steps required for delisting, that is it has not
renounced violence and terrorism, its youth group has not
abandoned violence and reformed, nor has it fully demonstrated a
commitment to the peace process by complying with Nepali courts
investigating emblematic human rights cases.
Legislation and Law Enforcement: Nepal improved its security
monitoring capabilities at official border crossings along the
southern border with India and at Kathmandu's Tribhuvan
International Airport, while also increasing the Armed Police Force
and Nepal Police presence at several crossings along the
southern border. Violence in the southern Terai plains decreased
due to increased deployment of both the Armed Police Force and
the Nepal Police throughout the Terai along with a renewed
working relationship with Indian security forces. The government’s
Special Security Plan, created in July 2009, sought to bridge a
gap between the Nepal Police, Armed Police Force, and local
communities through promotion of better working relationships,
but has fallen short in building sustained public confidence.
Countering Terrorist Finance: Nepal was not a regional financial
nexus, and there were no indications that the country was used as
a major international money laundering center in 2010. However,
government corruption, poorly regulated trade, weak financial
sector regulation, and a large informal economy made the country
vulnerable to money laundering and terrorist financing. The major
sources of laundered proceeds stemmed from tax evasion,
corruption, counterfeit currency, smuggling, and invoice
manipulation. The Financial Information Unit within the Nepal
Rastra Bank (Nepal’s Central Bank) continued to investigate
money laundering and terrorist financing; however, its efforts were
limited by a lack of technical capabilities and government support.
Terrorist financing legislation was drafted, and at year’s end, the
Cabinet was reviewing it before sending it to the legislature. Nepal
is a member of the Asia/Pacific Group on Money Laundering, a
Financial Action Task Force-style regional body. The Government
of Nepal has the authority to freeze suspected terrorist assets
and has implemented UNSCR 1373. There was one arrest and
conviction for money laundering in 2010.
Regional and International Cooperation: Nepal hosted the U.S.-
sponsored "South Asia Conference on the Use of Financial
Sanctions in Countering Violent Extremism," which brought
together government officials from every country in South Asia to
discuss the issues involved with financial sanctions and the
importance of maintaining and respecting those sanctions once
imposed.
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Links:
Worldwide AML Legislation (International Bar Association)
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| Further Tables |
*Please note that FATF deems that a country has significant aml deficiencies if any
of the 'Core' Recommendations, R1, R5, R10, R13, SRII, or SRIV are rated either
Partially of Non-Compliant. These are marked in red.
For FATF to remove a country from the regular follow-up process, it has to be rated
Compliant or Largely Compliant in the above mentioned Core Recommendations
and the following Key Recommendations: -
R3, R4, R23, R26, R35, R36, R40, SRI, SRIII, SRV
Please also note that any risk assessment should take into consideration all
follow-up reports.
of the 'Core' Recommendations, R1, R5, R10, R13, SRII, or SRIV are rated either
Partially of Non-Compliant. These are marked in red.
For FATF to remove a country from the regular follow-up process, it has to be rated
Compliant or Largely Compliant in the above mentioned Core Recommendations
and the following Key Recommendations: -
R3, R4, R23, R26, R35, R36, R40, SRI, SRIII, SRV
Please also note that any risk assessment should take into consideration all
follow-up reports.
| NEPAL |
| KnowYourCountry |
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Key Findings from 2011 MER
1. The key findings of this report are as follows:
Nepal faces a number of money laundering (ML) and terrorist
financing (TF) risks and threats. Primary predicate crimes in Nepal
are drug trafficking, human trafficking, arms trafficking, corruption,
counterfeit currency, tax evasion and gold smuggling. Significant
vulnerabilities relate to the porous Indo-Nepal border including terrorist
activity and TF.
2 Nepal has criminalised ML in the Asset (Money) Laundering
Prevention Act 2008 (ALPA) but there are significant deficiencies
in this offence and the range of predicate offences is not wide
enough to comply with the FATF standards. In addition, ancillary
offences do not extend to conspiracy and counselling and possibly do
not extend to aiding the commission of a predicate offence. Criminal
liability for legal persons, as well, is not clearly enacted nor is it pursued
by law enforcement and prosecution authorities.
3 TF is not criminalised. Despite including TF within the definition of
ML in the ALPA, the structure of the ML offence does not encompass
TF.
4 The mechanism for freezing the assets of terrorists listed
under UNSCR 1267, and for freezing other terrorist assets, is
provided within the framework of subordinate instruments (FIU
Directives) which is not legally binding and is therefore unenforceable.
5 The Nepal FIU is a departmental unit within the Nepal
Rastra Bank (NRB), Nepal’s central bank. However, notwithstanding
that the ALPA provides that the FIU shall be located within the
NRB, the FIU lacks a sufficient administrative basis for its continuing
operations. In addition, the FIU lacks proper skills and resources to
properly undertake analysis of STRs and TTRs (threshold
transaction reports). The FIU also requires operational
independence within NRB.
6 Financial institutions, as well as some non-financial
institutions (including casinos), are required to file STRs and
TTRs but significant deficiencies in the ML offence and the
lack of a TF offence narrows the scope of reporting. In addition, the
implementation of the reporting obligation is ineffective.
7 Nepal has attempted to require financial and non-financial
institutions to adopt AML/CFT preventive measures since 2008,
however the instruments imposing those requirements are not
enforceable and there are gaps in the scope of institutions included –
postal saving banks, commodities brokers, lawyers, accountants,
person acting as real estate agents and precious metal/gem dealers
are not included. Access to beneficial ownership of natural and legal
persons is not ensured and effective measures to protect NPOs from
abuse for terrorism financing purposes are not yet in place.
8 Customer identification and verification is a weakness in
Nepal’s preventive measures. The measures which purport to impose
identification requirements for non-banks are not binding; and
9 Nepal does not have a mutual legal assistance (MLA) law.
Although Nepal has provided very limited MLA it has only done so
on an ad hoc, unstructured, basis and not in compliance with the
requirements of the FATF recommendations. In relation to
extradition, Nepal has not used the Extradition Act (either to extradite a
foreign national or to prosecute Nepal citizens) since its
enactment in 1988. The extradition process enables considerable
executive intervention and is not likely to enable the swift surrender
of requested persons.
Click here to view full Mutual Evaluation Report (pdf file)
1. The key findings of this report are as follows:
Nepal faces a number of money laundering (ML) and terrorist
financing (TF) risks and threats. Primary predicate crimes in Nepal
are drug trafficking, human trafficking, arms trafficking, corruption,
counterfeit currency, tax evasion and gold smuggling. Significant
vulnerabilities relate to the porous Indo-Nepal border including terrorist
activity and TF.
2 Nepal has criminalised ML in the Asset (Money) Laundering
Prevention Act 2008 (ALPA) but there are significant deficiencies
in this offence and the range of predicate offences is not wide
enough to comply with the FATF standards. In addition, ancillary
offences do not extend to conspiracy and counselling and possibly do
not extend to aiding the commission of a predicate offence. Criminal
liability for legal persons, as well, is not clearly enacted nor is it pursued
by law enforcement and prosecution authorities.
3 TF is not criminalised. Despite including TF within the definition of
ML in the ALPA, the structure of the ML offence does not encompass
TF.
4 The mechanism for freezing the assets of terrorists listed
under UNSCR 1267, and for freezing other terrorist assets, is
provided within the framework of subordinate instruments (FIU
Directives) which is not legally binding and is therefore unenforceable.
5 The Nepal FIU is a departmental unit within the Nepal
Rastra Bank (NRB), Nepal’s central bank. However, notwithstanding
that the ALPA provides that the FIU shall be located within the
NRB, the FIU lacks a sufficient administrative basis for its continuing
operations. In addition, the FIU lacks proper skills and resources to
properly undertake analysis of STRs and TTRs (threshold
transaction reports). The FIU also requires operational
independence within NRB.
6 Financial institutions, as well as some non-financial
institutions (including casinos), are required to file STRs and
TTRs but significant deficiencies in the ML offence and the
lack of a TF offence narrows the scope of reporting. In addition, the
implementation of the reporting obligation is ineffective.
7 Nepal has attempted to require financial and non-financial
institutions to adopt AML/CFT preventive measures since 2008,
however the instruments imposing those requirements are not
enforceable and there are gaps in the scope of institutions included –
postal saving banks, commodities brokers, lawyers, accountants,
person acting as real estate agents and precious metal/gem dealers
are not included. Access to beneficial ownership of natural and legal
persons is not ensured and effective measures to protect NPOs from
abuse for terrorism financing purposes are not yet in place.
8 Customer identification and verification is a weakness in
Nepal’s preventive measures. The measures which purport to impose
identification requirements for non-banks are not binding; and
9 Nepal does not have a mutual legal assistance (MLA) law.
Although Nepal has provided very limited MLA it has only done so
on an ad hoc, unstructured, basis and not in compliance with the
requirements of the FATF recommendations. In relation to
extradition, Nepal has not used the Extradition Act (either to extradite a
foreign national or to prosecute Nepal citizens) since its
enactment in 1988. The extradition process enables considerable
executive intervention and is not likely to enable the swift surrender
of requested persons.
Click here to view full Mutual Evaluation Report (pdf file)
| Last Updated: 16 April 2012 |