KATHMANDU, April 1: Nepal Rastra Bank registered 7,338 cases of suspicious transactions in the fiscal year 2023/24, which was 24 percent more than the cases that the central bank received in the previous fiscal year.
A report unveiled by the NRB shows that the banks and financial institutions (BFIs) reported 1,403 more cases of doubtful transactions to the Financial Information Unit Nepal during the review period. In FY 2022/23, the NRB was informed about 5,935 such cases.
According to the NRB, the increased cases surfaced after it tightened the noose against the BFIs to track suspicious financial transactions. Despite witnessing a notable rise in doubtful transactions, the central bank scrutinized only 1,635 cases, which makes up only 22 percent of the total number of cases.
The report shows that the central bank forwarded 889 cases to concerned government authorities for further investigations last year. NRB recommended 505 cases of doubtful transactions for further actions in FY 2022/23.
According to the NRB, the suspicious financial transactions in the country have grown around 10-folds in the past six years. The BFIs reported only 787 such transactions to the central bank in the FY 2018/19.
The NRB says it has been working to comply with the guidelines set by the Financial Action Task Force (FATF) to track suspicious transactions in order to control the incidents of money laundering. After identifying a number of lapses existing in the system, the global money laundering and terrorist financing watchdog has kept Nepal in its greylist since February.
As per the NRB report, a total of 1,639 government entities related to investigations and regulatory bodies have now been incorporated in the goAML system. It is the software system developed by the United Nations Office on Drugs and Crime for Financial Intelligence Units (FIU) worldwide to combat money laundering and terrorist financing.
As per the law, the reporting entities are required to file a threshold transaction report to FIU-Nepal within fifteen days from the date of transaction. In case of the BFIs, they have to report deposit or withdrawal of Rs 1 million or more in cash in a single or series of transactions in one day in a single account.
Likewise, the BFIs need to report to the FIU about the cross border electronic or other transfer of Rs 1 million or more in single or in a series of transactions in one day in a single account and exchange of foreign currency equivalent to Rs 500,000 or more by a customer in a single or in a series of transactions in one day.
In case of cooperatives, cash deposit or cash withdrawal of Rs 1 million or more in a single or series of transactions by a member in one day has been kept under suspicion. Likewise, the threshold is USD 5,000 or more by a customer in a single or series of transactions in a single day for money changers.
For the life insurance sector, purchase of a policy by a client with an annual premium of Rs 100,000 or higher in a single installment or multiple installments in a year is supposed to be reported to FIU. The limit is Rs 300,000 or higher in annual premium for non-life insurers.
Meanwhile, the FIU-Nepal has planned to improve reporting templates based on the sector wise requirements under the enhanced goAML system in the current FY. Under the plan FIU-Nepal has aimed to prioritize improving report quality by analyzing volume, identifying patterns, and applying a risk-based approach.
The refined goAML’s risk-based methodology is expected to improve the detection and classification of suspicious reports for more effective financial crime monitoring, says the NRB report.