New York appeals court rules in favor of NRB

Published On: June 22, 2016 10:17 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 21: An eight-year saga finally ended on Monday after a US court ruled in favor of Nepal Rastra Bank (NRB) which will now be able to access the $ 1 million from its New York account that had been frozen in 2010.

Ashim Khatri Chhetri had moved the New York Court of Appeals seeking the return of $ 1 million after a New York district court had, on September 2014, ruled in favor of the central bank. 

On July 27, 2008, the central bank had frozen $1 million from Chinese national Wu Lixiang’s account at the Bhaisepati branch of Nepal Bangladesh Bank to investigate if the money was laundered. The amount had been sent by Tarala International through Chase Manhattan Bank in US to the Nepal Bangladesh Bank account. As per regulations, Nepali financial institutions are required to report large transfers or any account activity it finds suspicious. So Nepal Bangladesh Bank had then reported the transfer to Nepal Rastra Bank.

The central bank had then frozen Wu Lixiang’s account. The transfer was later thought to be tied to a multi-million dollar Sudan scam. NRB also referred the case to the Department of Revenue Investigation (DRI) for further investigation. After looking into the matter, DRI filed a case at the Special Court.

In 2010, However, Ashim Khatri Chhetri, representing Tarala International of US, filed a lawsuit at the New York district court accusing NRB illegally freezing money sent to Wu Lixiang’s account by his company.

Chhetri named Nepal Rastra Bank, Nepal Bangladesh Bank and the Department of Revenue Investigation as defendants.

Chhetri presented NRB as a commercial bank that has no right to freeze the money so the court ordered $ 1 million in NRB’s account at Standard Chartered Bank’s New York branch to be frozen while the case was argued. 

Nepal Rastra Bank only discovered this later when it found $ 1 million missing in its balance sheets.

During the trial, NRB explained the court that it was the regulatory authority of the financial sector of Nepal and thus freezing accounts was well within its rights and had frozen the plaintiff’s transfer because it suspected money laundering. NRB argued that it had frozen the account according to the law of the land and that the case was sub judice in the Special Court in Nepal on money-laundering charges.

NRB -- with support from the US government -- got a stay order on transfer of the money from its US account. The district court ruled in favor the defendants in 2014 after which Chhetri moved the Court of Appeals.

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