VOL. 04, NO. 17, Feb 25 2011 (Falgun 23, 2067)
The Clock Is Ticking
Officials hope their response this week in Paris will satisfy the Financial Action Task Force (FATF) against moving to black-list the country in international financial market
By SANJAYA DHAKAL
After a bashing of sorts they received in Canberra, Australia in late January, the Nepali officials are girding up their loin to face the incisive queries from the global anti-money laundering body FATF in Paris, this week.
When they reach Paris, they may not be able to enjoy the beauty of the city as they are sure to remain preoccupied with the pre-interrogation jitters.
This time, officials claim, they are better prepared to satisfy the FATF member states comprising three dozen countries including almost all of the donors of Nepal.
The officials have said that the ‘progress report’ they have prepared are aimed at showing the FATF their efforts to fulfill global standards on control of money laundering and terror financing are on right track.
The major concern of the FATF is the apparent lack and delay thereof in formulation of essential laws that can control money laundering and terror financing along with failure of Nepal to sign some key international conventions related to corruption and organized crime control.
Risk of Sanction
The FATF had made clear that in case Nepal did not bring in at least half a dozen such laws, they will move towards ‘sanctioning’ the country or putting Nepal effectively in a ‘black-list.’
Such a move could have disastrous implications for the Nepali economy as well as the dignity of the nation and its citizens.
Says, Dharma Sapkota, the chief of the Nepal Rastra Bank’s Financial Intelligence Unit (FIU), “If we are blacklisted, then the LCs opened by Nepali banks could be derecognized by international banks. Our foreign assistance could suffer. More importantly, the image of the nation could receive a blot. Nepali citizens could suffer from increased scrutiny at the immigration and customs abroad.”
Such a move could be made as early as later this year in October if the FATF is not satisfied.
That is why the meeting this week in Paris is going to be so significant.
The officials at the Ministry of Finance have said that in their progress report – which will be presented by deputy Governor Maha Prasad Adhikary and a joint secretary of the Ministry – they have underscored the recent efforts at fulfilling the FATF recommendations.
“The pace of legal and structural reforms has been accelerated,” says Mahesh Dahal, director general of Department of Revenue Investigation and Anti-Money Laundering.
He pointed out the creation of FIU in NRB and the changing of the name of his department (earlier known only as Department of Revenue Investigation) as some examples of the structural adjustments made to pacify the FATF.
“In the last three years since the Anti Money Laundering Act came into being, we have also taken a number of actions to control this scourge. We had received 62 cases of money laundering. Some have been resolved but we are still investing around 45 of those. Therefore, we hope that the FATF will be satisfied with our response and no action will be taken to black list Nepal,” Dahal said.
The FATF – which has laid down 40+9 guidelines to deal with money laundering and terror financing worldwide – has been most concerned with the lack of legal and structural mechanisms to deal with such crimes of global implications in Nepal.
They had called Nepal to sign a couple of international conventions, change money laundering laws and formulate new ones to deal with organized crime.
But the major challenge before Nepali officials is the way the parliament has been turned dysfunctional – as far as formulation and passage of bills are concerned – in the last one year.
In fact, since the election for new Prime Minister was started in mid-June last year, there has been not a single other agenda – excepting the budget that had to pass through tremendous challenge to get approved – that entered the House.
The FATF had been writing to the Finance Minister numerous times reminding the urgency of passing the bills to formulate new laws.
The former Finance Minister Surendra Pandey who was replaced by a new one only two weeks ago received those letters and had a tough time convincing the international partners.
“Our parties and the members of parliament have different priority at the moment. They are largely unaware about the urgency and the warnings of black-listing of their country. The FATF has one priority and we have other problems,” said Pandey.
But he was hopeful that since the new government has been formed, such obstructions will be eased in the coming days.
His optimism aside, there are two practical reasons why Nepal may not be able to fulfill FATF conditions at the soonest.
First, the new government itself is in extremely unstable position. Second, its priority and the priority of the members of the parliament – who are also playing the role of the members of the Constituent Assembly (CA) – will be in completing the peace process and the writing of the new constitution within the extended deadline of May 28, 2011.
If they want to complete their tasks at hand, they will need to be busy round the clock for the coming several months.
They may be least impressed by the deadline of the FATF.
And if that happens, then the next regional meeting of the FATF in July could deal a bloody blow to the country and move to start a process that will end up with Nepal being sanctioned later this year.
One may not need longer to see a clearer picture as the tone and direction of the Paris meeting that ends this week would decide that. And decide it would whether the Nepali delegates will be able to enjoy the city at least on their return.
“We Have To Convince Them About Our Intentions”
- Surendra Pandey
You received a number of FATF warning letters. Why didn’t the government act upon them on time?
The situation of our country is very different from what the international friends perceive. Our parties and the members of parliament have different priority at the moment. They are largely unaware about the urgency and the warnings of black-listing of their country. The FATF has one priority and we have other problems.
But then the country could be black-listed, isn’t it?
I don’t think they will ever take such a decision. Main thing is we have to convince them about our intentions. I have interacted with the teams of the FATF in the past and I have repeatedly assured them that our intention is clear. We do not intend to become a country that condones money laundering or terror financing. Our problem is only technical. Due to the unique transitional phase we are experiencing, we have not been able to pass laws.
Were they convinced?
It is up to us how to convince them. I feel that many times officials just mislead them. Instead of telling them about our ground realities, the officials simply tell them about difficulties and hindrances. That is not a complete picture. For example, for months I could not even present a budget in the parliament. Even after reaching pact with the opposition, I was physically attacked when I went to the House to present the budget. What could I have done? Such are the laws that till we completed the election of prime minister, not a single bill could enter the House.
So what happens now?
Since a new government has come into existence, I hope that all the outstanding matters will be resolved. The Maoists have also said they will join the government. That will settle a lot of problems. The pending bills can be passed and everything will be okay. But the most important thing I want to reiterate is that the international partners must be convinced that our intention is good. That is what counts in the end.
What Nepal Needs To Do (And What It Has Done Till Now) To Avoid FATF penalty?
1. Mutual Legal Assistance Act ( bill pending in the House)
2. Revised Extradition Act (bill pending in the House)
3. Organized Crime Control Act (under consideration at Home Ministry)
1. Anti Terrorism Convention 1999 (waiting for House to endorse it)
2. Anti Organized Crime Convention 2000 (waiting for House to endorse it)
3. Anti Corruption Convention 2003 (waiting for House to endorse it)
1. Anti Money Laundering Act (bill pending in the House)
1. Creation of special cell in the central bank (FIU already established)
2. Special body to take action (renaming and restructuring of the Department of Revenue Investigation and Anti Money Laundering already accomplished)