"Anti-MoneyLaunderingConference-4thAnnualSummit(Nepal)2019"
Kathmandu, February 1, 2019
1. It gives me a great pleasure to deliver my address at the opening
ceremony of this conference on Anti Money Laundering and Combating
the Financing of Terrorism (AML/CFT). I would like to congratulate the
National Banking Institute as well as other concerned International
Agencies for organizing such an important program on a topical issue.
2. As is well known, the impact of money laundering and terrorism financing
to the financial institutions and financial system has serious implications
to the overall financial system, which jeopardizes
socio-economic
development for the country. At the global level, the IMF estimated the
extent of money laundering to be around 2% to 5% of global GDP. A
country's rating on compliance with standards set by Financial Action
Task Force (FATF) on AML/CFT, is often considered as a key measure of
the country's AML/CFT regime. An unfavorable rating would mean that
the businesses, including financial institutions, would face greater
scrutiny, higher costs of doing business, delays and other time consuming
including unnecessary barriers when doing business with overseas
counterparts.
3. While Nepal had received satisfactory rating in our last mutual evaluation
in 2014 by APG, after the various efforts and reforms in respective sectors
since the second mutual evaluation 2010, we have to do a lot for upcoming
evaluation in 2020 which will be based on a more holistic methodology
where greater focus will be on the effectiveness of our implementation. If
we do not attain good rating, the consequences could be high and Nepal
will be listed in the FATF Public Statement as a country with significant
deficiency in AML/CFT.
4. Bank and Financial Institutions (BFIs), being the important partner
most
for financial transactions, can play an important role of deterring as well
as detecting money laundering and activities related to terrorism
financing. Compliance with AML/CFT law and regulations in these
financial institutions require high commitments with non-compliances
being seriously dealt with. At the international level, we have witnessed
that banks have been penalized billions of dollars for failure to comply
with AML/CFT directives. In Nepal, Nepal Rastra Bank (NRB), the Central
Bank of Nepal, has been taking strong actions upon NRB licensed BFIs that
have failed to comply and implement such directives related to AML/CFT.
(For instance, the financial penalty that normally applies for
noncompliance ranges from one to fifty million rupees.)
Ladies and Gentlemen,
5. Money laundering can take different forms, and is not limited to tax
evasion, cybercrime, identity fraud, phishing, card fraud, skimming,
advance fee scams, fund transfer schemes, fake prizes, international
lottery fraud, wills and legacies and loan fraud and international transfers
etc. The technologies adopted by BFIs are making them increasingly
vulnerable to various risks in money laundering. Generally, vulnerability
to money laundering is greater when there is inadequate internal control
system, poor risk management practices, weak good governance,
inadequate board and senior management oversight, inadequate policy,
procedure and monitoring the functional activities and breach of contract
and trust etc. Although the banking system is stringent in Know Your
Customer (KYC), it is not sufficient as expected to identify the beneficial
owner and to apply the risk based approach. NRB has observed that
money laundering is largely the result of weak internal control and poor
risk management and practices of the respective banks. This highlights the
need of efficient internal audit, strong internal control system and better
risk management practices within the BFIs in addition to compliance to
regulation and supervision for prevention, control and detection of
financial crime.
6. BFIs must adopt strategic approach and also comply with the KYC
regulations based on risk based approach, real time transaction
monitoring and transaction analysis for prevention and timely detection of
financial crimes. The Board and senior management of BFIs should be
proactive in understanding the potential risks and also put in place a
crime prevention, control and detection mechanism. They should have a
deep understanding of the institution's strengths and weaknesses and be
able to move their respective BFI in right direction. The prevention and
corrective measures should also be a key concern to minimize the impact
of financial loss that impact our economy.
Ladies and Gentlemen,
7. Nepal has established legal and institutional foundation to comply with
AML/CFT standards. The whole of the legal and organizational framework
of AML/CFT revolves around FATF's 40 recommendations. In that regard,
NRB has been extensively working to strengthen its legal and
organizational framework. In this regime BFIs can play a very important
role, not just because launderers have been abusing the financial system
but also because as victim of such crimes, they are always at various risks
such as legal, regulatory, concentration and reputational.
8. In the case of Nepal stakeholders including the NRB and FIU-Nepal, have
been proactively working to implement the preventive measures of
financial crime, so as to investigate and disseminate the cases of money
laundering and terrorist financing (ML/TF) to Law Enforcement Agencies
(LEAs). FIU-Nepal received 45,93,5817 TTRs' and 887 STR's in FY
2017/18 and out of the total STRs' that has been received; almost 312
were disseminated to the LEAs. I hope that FIU-Nepal and LEAs will
continue to coordinate to further investigate the cases for prosecution and
convictions. I understand that FIU-Nepal has already installed the goAML
system for strengthening the receiving, reporting and dissemination
mechanism of information and reports from commercial banks and is now
reporting under the test environment. I am confident banks will soon
move to live environment of goAML in reporting of STR and TTR to
FIUNepal.
9. Hence, leadership of Government of Nepal and joint and coordinate efforts
among the regulators, BFIs, LEAs, FIU, civil society and support agencies
such as ISP, Telecommunication companies, vendors, etc. including with
the public private partnership can play an important role to control the
financial crime and help to maintain the financial stability in country.
Ladies and Gentlemen,
10. At last, but not least, I would convey my best wishes that the conference
will be successful and reach a concrete conclusion about the
implementation of robust mechanism of AML compliance. In addition to
this, I believe that, this program will able to help improve your knowledge
on the risks associated with of ML/TF. It will also help to further continue
discussions on plan of action to help prepare for the upcoming mutual
evaluation scheduled in 2020.
11. With this note, let me close my remarks by congratulating and thank you
all for your gracious presence and attention.
Thank you.