Comprehensive AML Laws and Regulations: Nepal

Nepal has established a comprehensive framework to combat money laundering (ML) and terrorist financing (TF), aligning with international standards. These regulations span various sectors, including banking, insurance, asset management, wealth management, payment processors, fintech, lending, and crypto, ensuring the integrity of the financial system and compliance with global AML/CFT standards.

Key Laws and Guidelines

• Anti-Money Laundering Act, 2008: The Anti-Money Laundering Act of 2008 serves as the primary legislation for combating money laundering in Nepal. The act mandates financial institutions to verify the identity of their clients, maintain accurate records, and report suspicious and large transactions to the Financial Information Unit (FIU) of Nepal Rastra Bank. The act also outlines the procedures for the confiscation and forfeiture of proceeds from money laundering activities.
• Asset (Money) Laundering Prevention Act, 2008: The Asset (Money) Laundering Prevention Act complements the Anti-Money Laundering Act by providing detailed provisions for the prevention and control of money laundering. This act extends AML obligations to a wider range of entities, including real estate agents, dealers in precious metals, and other non-financial businesses and professions
• Bilateral and Multilateral Agreements: Nepal has entered into several bilateral and multilateral agreements to strengthen International Cooperation in combating money laundering and terrorist financing. These agreements facilitate the exchange of information and mutual legal assistance in AML/CFT matters.

Regulatory Bodies

• Financial Information Unit (FIU): The FIU, established within Nepal Rastra Bank, is the central agency responsible for receiving, analyzing, and disseminating suspicious transaction reports. It plays a crucial role in coordinating AML efforts across various sectors and collaborating with international counterparts.
• Nepal Rastra Bank (NRB): NRB is the central bank of Nepal, overseeing the implementation of AML regulations within the banking and financial sectors. It issues directives and guidelines to ensure compliance with AML/CFT standards and conducts regular inspections to enforce these regulations.
• Securities Board of Nepal (SEBON): SEBON regulates the securities market, ensuring that securities firms implement effective AML measures. It issues guidelines for customer due diligence, transaction monitoring, and reporting of suspicious activities within the securities sector.
• Insurance Board (IB): The Insurance Board supervises the insurance sector, mandating companies to implement AML/CFT measures, including customer verification and transaction monitoring. It conducts regular audits to ensure compliance with AML regulations.
• Department of Money Laundering Investigation (DMLI): The DMLI is responsible for investigating money laundering offenses and prosecuting offenders. It collaborates with other Regulatory Bodies and law enforcement agencies to enforce AML laws and prevent financial crimes.

History of Regulations

• 2008: Enactment of the Anti-Money Laundering Act and the Asset (Money) Laundering Prevention Act.
• 2010: Establishment of the Financial Information Unit (FIU) within Nepal Rastra Bank.
• 2014: Amendments to the Anti-Money Laundering Act to include stricter penalties and expanded coverage.
• 2016: Introduction of guidelines by SEBON for securities firms to enhance AML compliance.
• 2018: Issuance of detailed AML guidelines for the insurance sector by the Insurance Board.

Sector-specific Regulations

• Banking and Financial Institutions: Regulated by Nepal Rastra Bank (NRB), the banking and financial institutions sector is required to implement robust AML/CFT programs, including strict KYC protocols, continuous monitoring of transactions, and the reporting of suspicious activities. Banks and financial institutions must also maintain records for a minimum of five years.
• Insurance: The insurance sector, overseen by the Insurance Board (IB), mandates companies to implement effective AML measures, including customer due diligence, transaction monitoring, and the reporting of suspicious activities to the FIU.
• Asset Management and Wealth Management: Regulated by the Securities Board of Nepal (SEBON), asset management and wealth management firms must adhere to stringent AML regulations. These firms are required to implement robust AML programs, conduct thorough customer due diligence, and monitor transactions for suspicious activities. They must also report any suspicious transactions and maintain detailed records.
• Payment Processors and Fintech: Payment processors and fintech companies are subject to NRB regulations. These entities must implement comprehensive AML measures, including customer verification, real-time transaction monitoring, and the reporting of suspicious transactions. They must also comply with guidelines issued by SEBON for securities-related activities.
• Lending: Lending institutions, both traditional and fintech-based, must adhere to AML regulations set by NRB. These institutions are required to conduct customer due diligence, monitor transactions for suspicious activities, and report any suspicious transactions to the FIU. They must also maintain records of all transactions and customer information.
• Crypto: The crypto sector is regulated under guidelines issued by NRB. Virtual asset service providers (VASPs) are required to implement robust AML measures, including customer verification, transaction monitoring, and the reporting of suspicious activities. VASPs must also maintain detailed records of all transactions.