Banker's Academy AML Training by Country

Anti Money Laundering (AML) By Country: Nepal

Anti Money Laundering (AML) in Nepal

Although Nepal’s money laundering regulations have been rather underdeveloped in the past, this has recently changed. However, Nepal still faces a host of money laundering threats, including money laundering resulting from narcotics-trafficking, corruption, smuggling, tax evasion, fraud and human trafficking. Along with this, the threat of money laundering has increased due to numerous factors, such as the country’s large-scale cash economy, large informal sector and extremely porous border with India, the presence of unregulated casinos and the ongoing Maoist insurgency.

In 2005, Nepal was evaluated in the Asia/Pacific Group on Money Laundering’s (APG’s) first round of Anti-Money Laundering and combating the financing of terrorism evaluations. The evaluation presented Nepal as desirous to combat money laundering, but with no real laws or regulations focused on combating money laundering activities, including the fact that at the time of the evaluation neither money laundering nor terrorist financing were criminalized under the laws of Nepal. As a result of this evaluation, Nepal worked to pass laws to combat money laundering.

Nepal is currently still working on developing its Anti-Money Laundering system. Nepal has ratified the UN Vienna Convention 1988 and in 2008 the country passed increased Anti-Money Laundering laws, including the establishment of the Financial Information Unit, Nepal’s Financial Intelligence Unit (FIU), under the Asset (Money) Laundering Prevention Act, 2008.

The Economy of Nepal

Nepal has a poor, underdeveloped economy. Nevertheless, Nepal’s economic output has increased in recent years.

Agriculture makes up three-fourths of the population’s employment and accounts for roughly one-third of the country’s GDP. In 2008, increased industrial activities, along with increased security, transportation and tourism, pushed growth past 5% for the year, an increase from the previous three years’ 3% growth.

Nepal’s economy has further opportunities to grow in the future through the development of hydropower, tourism and further foreign investment interest.

Banking in Nepal

The Nepal Rastra Bank (NRB) is the Central Bank of Nepal, established in 1956 through the Nepal Rastra Bank Act of 1955. A new Nepal Rastra Bank Act was put into effect in 2002, replacing the previous act and providing the Bank with operational independence and autonomy.

The 2002 Act presented the Bank as responsible for serving four main functions: formulating necessary monetary and foreign exchange policies to maintain price stability and lower balance payments for the development of Nepal; developing a secure, healthy and efficient payment system; supervising the banking and financial system to ensure its stability and development; and enhancing public confidence in Nepal’s banking and financial system.

Nepal's Currency

The currency in Nepal is the rupee, commonly abbreviated as Rp or Rs. First introduced in 1932, replacing the silver mohar at a rate of 2 mohar to 1 rupee, the rupee was originally called the “mohru,” in Nepalese. The rupee can be divided into 100 paisa.

The rupee comes in both banknotes and coins. Coins are currently in circulation with denominations of 1, 5, 10, 25 and 50 paisa, and 1, 2, 5 and 10 rupees. Banknotes are currently available with denominations of 1, 2, 5, 10, 20, 50, 100, 500 and 1000 rupees.