Nepal still under high risk of money laundering
Nepal is still highest risky country in terms of money laundering, according to an international report.
Nepal ranks 14th highest risky country – among the 162 countries – in the 2014 Basel AML Index. The country was 16th highest risky country – among the 159 countries – a year ago in 2013, whereas it was not listed in the 2012 report.
The countries on top of the high risk ranking of Basel AML Index all share an inadequate AML/CTF framework. However, other factors are also common including high rates of perceived corruption, lack of judicial strength, lack of resources to control the financial system, and lack of public and financial transparency, the report noted.
The 2014 Basel Anti-Money Laundering (AML) Index is the third annual release published by the Basel Institute on Governance. The Basel AML Index is an annual ranking assessing country risk regarding money laundering/terrorism financing. The current Basel AML Index edition covers 162 countries, 13 more than the 2013 edition, and assigns each country a score on a scale from 0 (low risk) to 10 (high risk).
The High risk scores in the Basel AML Index generally indicate weak AML/CFT standards, low institutional capacities and a lack of transparency in the financial and public sector. The Basel AML Index assesses a country’s overall risk of money laundering/terrorist financing, and does not measure the actual existence of money laundering activity in a country. The overall risk score for a country indicates the risk level, meaning the vulnerability of a given country regarding money laundering and terrorist financing based on its adherence to AML/CTF standards and other risk categories. It is indeed important to note that money laundering and terrorist financing cannot be quantitatively measured since most of it occurs, due to its illegal nature, in absolute secrecy.
In respect to both high and low risk countries, it should be emphasised that the fact that a country is ranked as high risk or low risk does not automatically mean that it has a high or low, respectively, risk of money laundering and terrorism financing activities. The Basel AML Index does not assess the amount of illicit financial money or transactions, but is designed to assess the risk of money laundering, i.e. to indicate the vulnerability of a country to money laundering and terrorism financing based on selected indicators.
Similarly, high scores indicate a country is more vulnerable to money laundering/terrorist financing based on its anti-money laundering (AML) and counter-terrorism financing (CTF) framework and other risk categories such as rule of law, corruption and financial and public transparency.
Likewise, the Basel AML Index is a composite Index, meaning the overall score is a weighted average of 14 indicators. The Basel Institute does not generate its own data but relies on data from various publicly available sources such as the FATF, World Bank, Transparency International and World Economic Forum.
Since it’s a composite index, Nepal can not challenge the Basel report, according to central bank deputy governor Maha Prasad Adhikari.
Though Nepal has escaped the blacklisting – for the time being – from the Financial Action Task Force in June due to approval of anti money laundering Acts from the Parliament, the report has revealed that the Nepal still has to improve its performance against the flow of illegal money. "Nepal needs to work hard on implementing its commitments," he said, adding that the FATF will do onsite evaluation of Nepal in 2019, when it will take stock of implementation of Acts and 40 recommendations very minutely. "The Basel report should be an eye opener for the implementing agencies."
The government has approved the Acts, and established Department of Money Laundering Investigation that has been investigating and filing the cases of suspected flow of dirty money. "And the department has won all the cases of anti money laundering except one till date," informed the department's director general Chudamani Sharma. However, it is not enough to win the case as the FATF evaluation will go minutely through the process too.
The report has also concluded that Afghanistan ranks second in the AMI Index, making it the South Asian country with the highest risk of money-laundering, whereas Nepal comes in second.
South Asian score
Country – Rank
India – 88
Bangladesh – 57
Sri Lanka – 54
Pakistan – 48
Nepal – 14
Afghanistan – 2
Top 10 highest risk countries
Top 10 lowest risk countries
New Zealand (3.83)