Asset (Money) Laundering Prevention Act, 2064

Overview

The Asset (Money) Laundering Prevention Act, 2064 (authenticated 14 Magh 2064) prevents the laundering of proceeds of crime and the financing of terrorism. It applies across Nepal and to any person, wherever living, who commits these offences. The consolidated text lists six amending Acts. Two matter most for current exams: the 2080 amendment, which raised penalties and reorganised the institutions, and the Third Amendment of 2083.

The offences

Money laundering (s.3): knowing, or having reasonable grounds to believe, that property is proceeds of crime, a person must not

• convert or transfer it to hide its illicit origin or to help an offender escape legal action;
• conceal or disguise its true nature, source, location, movement or ownership; or
• acquire, use or hold it.

Conspiracy, aiding, abetting, facilitating and attempting are also offences.

Terrorist financing (s.4): wilfully providing or collecting property or funds, by any means, knowing they will be used for a terrorist act or by a terrorist person, organisation or foreign terrorist fighter. It is an offence even if no terrorist act takes place and whether the funds came from a legal or illegal source.

An act done abroad is treated as an offence in Nepal if it is also an offence in that country (s.5).

Reporting entities and their duties

A reporting entity is a financial institution or a designated non-financial business or profession, such as casinos, real estate dealers, dealers in precious metals, vehicle sellers, notaries, auditors and accountants.

• No anonymous accounts: no account or transaction in an anonymous or fictitious name (s.6). No dealings with shell banks (s.7).
• Customer identification (s.7A): identify and verify the customer from reliable, independent sources when establishing a business relationship, opening an account, doing an occasional transaction above the prescribed amount, making a wire transfer, or when there is doubt or suspicion.
• Beneficial owner: identify the natural person who ultimately owns or controls the customer.
• Politically exposed persons: senior management approval, source of wealth and ongoing monitoring.
• Record keeping: keep identification, transaction and analysis records for at least five years after the relationship ends or the transaction takes place. Suspicious transaction reports are also kept for five years.
• Suspicious transaction report (STR): report to the FIU promptly after examination, even for an attempted transaction; confirm the current time limit in the Act.
• Threshold transaction report: report within 15 days any transaction above the limit fixed by NRB (s.10A).
• No tipping off: the customer must not be told that a report has been or will be made (s.44A). Reporting in good faith does not breach secrecy law (s.37).

Institutions

Complaints on terrorist financing go to the police; laundering linked to a predicate offence goes to the agency that investigates that offence; other laundering goes to the Department (s.13).

Penalties

• Money laundering: fine of twice the amount and imprisonment of 2 to 15 years (s.30(1)).
• Terrorist financing: fine of five times the amount, or Rs 5 crore if the amount is not known, and imprisonment of 7 to 20 years (s.30(3)).
• A public servant or an officer of a reporting entity gets 10 percent extra punishment.
• The FIU may fine a reporting entity up to Rs 1 crore for not filing reports.
• A regulator may fine financial institutions and casinos Rs 10 lakh to Rs 5 crore, and other reporting entities Rs 1 lakh to Rs 1 crore, or suspend or cancel the licence.
• There is no limitation period for prosecution (s.23), and the Government of Nepal is the plaintiff (s.24).

Exam pointers

• STR has no amount limit and is filed promptly; threshold report within 15 days.
• Records: five years.
• FIU head is appointed by the Governor; the FIU is autonomous.
• Laundering 2 to 15 years; terrorist financing 7 to 20 years.
• No time limit for filing a case.