Nepal Rastra Bank Spearheads Inter-Agency Drive to Fortify Financial Governance and Combat Rising Financial Crime

In a significant move to bolster Nepal's financial integrity and combat the escalating threat of financial crime, the Nepal Rastra Bank (NRB) recently hosted a crucial inter-agency dialogue in Kathmandu. Held on Ashwin 4, 2083, the interaction program brought together key regulatory, supervisory, law enforcement, and prosecution agencies, underscoring a collective commitment to strengthening financial governance across the nation. This proactive initiative is particularly vital for investors, as a robust and transparent financial system is fundamental to market stability and confidence.

The high-level gathering was chaired by NRB Governor Prof. Dr. Biswo Nath Poudel, with Attorney General Dr. Narayan Datta Kadel gracing the event as the chief guest. The presence of senior officials from diverse institutions, including Deputy Attorneys General Sanjiv Raj Regmi and Lok Raj Parajuli, Nepal Government Secretary and Nepal Insurance Authority Chairperson Chandrakala Poudel, Inspector General of Police Dan Bahadur Karki, NRB Deputy Governors Kiran Pandit and Dirgha Bahadur Rawal, and Central Investigation Bureau (CIB) chief Uma Prasad Chaturvedi, highlighted the 'whole-of-government approach' being adopted to tackle complex financial challenges.

Attorney General Dr. Kadel emphasized the ongoing efforts at the ministry level to amend existing laws, addressing identified shortcomings in prevailing legislation. He reiterated the Office of the Attorney General's unwavering commitment to actively participate in the fight against financial crimes and fortify Nepal's financial governance framework. Governor Poudel echoed this sentiment, stressing that financial governance is a shared responsibility, not solely that of the NRB. He highlighted the importance of regular inter-agency interaction and coordination to reconcile differing interpretations and ensure a unified approach. Poudel further cautioned against financial resources falling into the wrong hands, advocating for vigilance and a common direction among all government agencies.

A critical aspect of the dialogue revolved around Nepal's efforts to exit the Financial Action Task Force (FATF) grey list. Governor Poudel expressed confidence that enhanced inter-agency coordination would significantly contribute to maintaining financial governance and developing a common understanding of anti-money laundering (AML) measures, thereby supporting the nation's objective of being removed from the grey list. For investors, exiting the FATF grey list is paramount, as it signals improved financial transparency and regulatory compliance, potentially attracting greater foreign direct investment and enhancing Nepal's standing in the global financial community.

Inspector General of Police Dan Bahadur Karki acknowledged the alarming increase in both the number and complexity of financial crimes in recent years. He asserted that controlling these crimes necessitates joint efforts and highlighted the increased priority given to financial crime investigations, alongside capacity-building initiatives for the Central Investigation Bureau and law enforcement personnel.

The program featured three insightful sessions. Dilliram Neupane, Deputy Director at NRB's Legal Division, presented on "Regulation and Supervision of the Banking Sector," detailing NRB's supervisory jurisdiction, prudential regulation, market conduct, and AML measures, while clarifying the distinction between supervision and criminal investigation. This provides clarity on the regulatory environment for financial institutions, a key factor for investors.

Senior Superintendent of Police Rishiram Kandel of the Nepal Police Central Investigation Bureau presented a stark picture of "The Current State, Trends and Challenges of Economic and Financial Crime Investigation." He revealed a staggering four-and-a-half-fold increase in financial crime cases over the past five fiscal years. Economic and financial crimes now constitute approximately 28% of total cases, with about 84% of these being banking offenses, predominantly related to cheque dishonour. Kandel also highlighted the Financial Information Unit's forwarding of 132 intelligence reports to Nepal Police this fiscal year, covering areas like hundi transactions, virtual currency, and technology-based fraud. The rapid growth of technology-based fraud and the expansion of "money mule" networks were identified as critical emerging challenges, signaling evolving risks that require sophisticated countermeasures.

In the third session, Nirmal Dhakal, Director General of the Department of Money Laundering Investigation, elaborated on "The Anti-Money Laundering System: The Perspective of Law Enforcement Agencies." Dhakal discussed the dynamic nature of financial crimes, including the increasing use of technology, transnational organized crime, and the misuse of complex ownership structures. He outlined immediate priorities for Nepal's FATF grey list exit, including completing required actions by January 2027, improving risk-based supervision, strengthening investigation and prosecution of complex offenses, and advancing asset freezing, confiscation, and recovery. Dhakal underscored the necessity of connecting reporting entities, regulatory bodies, the Financial Information Unit, and law enforcement agencies through a common "intelligence cycle" and advocated for joint financial investigations based on the principle of "follow the money, follow the assets, asset recovery."

The comprehensive discussions that followed these presentations, facilitated by NRB Deputy Governor Dirgha Bahadur Rawal, involved representatives from a wide array of institutions, including SEBON and the Financial Information Unit. This collaborative spirit and the detailed insights shared during the dialogue underscore Nepal's serious commitment to building a resilient and secure financial ecosystem. For investors, these efforts translate into a more predictable and trustworthy market environment, reducing systemic risks and fostering long-term growth potential within the Nepalese economy.