Entry of corrupt money into the hands of bad elements is a serious challenge

Published On: February 8, 2017 09:41 AM NPT By: Republica  | @RepublicaNepal

Aniruddha Chatterjee, regional director of Dow Jones was recently in Kathmandu to attend a conference to discuss about solutions to mitigate money laundering and white-collar crimes. Sagar Ghimire of Republica caught up Chatterjee on the sidelines of the conference to discuss about the risks and vulnerabilities in Nepal's financial system, challenges of compliance, and infrastructure and regulatory setup to curb such crimes, among other issues. Excerpts: 

Why should the anti-money laundering be a major agenda for a country like Nepal?
Fight against corruption and terrorism has been a core priority for most of the economies of the world. Any economy, who would like to be a part of the globally connected economic system, have to ensure that they are doing the needful, they have proper regulation for the institutions in the country to keep corruption under control, and that their institutions are not being misused by bad elements of the society for laundering money or for funding events which are not desired.  This is the job of law enforcement agencies.

And they are doing their job very diligently and relentlessly. But these intelligent agencies and law enforcement agencies would not be able to work in the ground if they do not get enough information from the institution itself. So, the institutions have the responsibility and stake in the entire operation. To meet that responsibility effectively, they need system and data to identify what is the potential risk of dealing with a customer. That, to me, is a fundamental problem and the foundation of entire solution. 

We have expertise in terms of helping these institutions in identifying the potential bad elements that they may be dealing with. If they are cautious, they should also be providing some information back to the institutions that are responsible for keeping our country safe so that they can take appropriate action. 

What is your assessment about the potential risks and vulnerabilities in the financial system of Nepal?
Nepal is in the process of doing its national risk assessment and I had a privilege to talk with some of the bankers here. My understanding is that the regulators, particularly Financial Information Unit (FIU), in Nepal, have identified corruption, terror financing and tax evasion as big challenges. If you look all of these, corrupt money and the backdoor entry of that money into the hand of bad elements are serious challenges. From the institution point of view, the need is to identify those risky customers who may have potential to influence their position and power to take decision. It is critical for institutions to identify them and also provide information to FIU and law enforcement agencies about those customers that they are dealing with. If they find any suspicious transaction and activity, they have to report back to the system. 

The cost of setting up infrastructure and fighting money laundering is costly as such white-collar crimes are getting sophisticated and complex. Can countries like Nepal afford it?
The cost has always been an issue not only for Nepal, but also for any emerging economies. But, there are different ways of looking for cost issue. First, it's the cost of implementing the solution. The second is the cost of not implementing the solution. At the end of the day, a businessman, or a bank, has to run their business. When they have to run their business, they cannot say, 'fine, I will be isolated from the rest of the globe and run my business only in Nepal'. They have to run their business hand in hand with their global peers. They need to weigh what is the cost of not setting up infrastructure in our country. And, the cost is really huge that they think, 'Ok, I might get delisted or completely blocked from the global trading and entire financial system' and I think that justifies some amount of investment in the system as well. If anyone has invested in compliance, it has always paid back in terms of good business. Your concern is understandable, but you also have to understand the concern of your peers in more developed market. Because, they would like to work with someone who has a system in place that can give them the confidence that you are not dealing with bad elements. If you are dealing with the bad elements, you can get away with a little fine in the local market which may not be the case in the international market. 

What are the scope and areas of support for Dow Jones that you see in Nepal?
We are a premier provider of business information and news. We have been doing that for the last 125 years. Our information is valuable not only for consumers in the United States, but across the world. To this particular aspect, we have taken some of the best practices from our media organization, which is The Wall Street Journal, and applied those understanding to create a very robust and high quality database of individuals and companies. This is the continuous process that we do. We have got five research centers across three different continents. They would be looking millions of records every day to identify the individuals and create a profile around those individuals or entities which pose serious threats to the institutions and we would kind of update those particular profiles on our database. Now, whether these individuals are in Nepal or in India or elsewhere does not matter. So the information that we produce everyday is as effective for a global bank and would be effective as much as for a Nepali bank. 

There are also arguments that compliance has been an obstacle in increasing financial access?
Financial inclusion and compliance to anti-money laundering rules are not in conflict with each other. I think all regulators, including in Nepal, are open in terms of advising the institutions. They need to adopt some kind of risk-based measurements while they create compliance programs. Financial inclusion and compliance can happen together. 

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