See More on Facebook

Current affairs

Myriad factors Nepalese hamper probe into offshore investment, money laundering

Businessmen exploiting legal loopholes while channelising illicit cash into the country.


Written by

Updated: January 22, 2019

A damning report by the Centre for Investigative Journalism-Nepal (CIJ-Nepal), released on Wednesday, said around two-thirds of the foreign direct investment was coming into Nepal from tax haven countries and that around 55 Nepalis and non-Nepali residents had invested in offshore companies, setting off alarm bells in the country.

Government agencies were quick to respond, saying they will launch a probe.

But investigation into a similar case—the Panama Papers released in April 2016 that said as many as 19 Nepalis and non-residents Nepalis had invested in offshore companies—has barely made any progress. Officials blame various factors, including ineffective agencies and lack of information and legal loopholes, for slow progress in investigation into such cases.

Finance Minister Yubaraj Khatiwada admits that the Department of Money Laundering Investigation (DMLI) largely failed to carry out its work in an effective manner when it was under the Ministry of Finance. “It has been 10 years since the department was established, but it has failed to take up the cases in the desired numbers,” says Khatiwada. The DMLI is now under the Prime Minister’s Office.

“We have been looking into [money laundering] cases since the Panama Papers. We are investigating whether those who have parked their money in foreign countries have taken the central bank approval or not. We have to make sure whether those named in the leaks are Nepalis or not. We also need to find where they are currently settled,” says Khatiwada, hinting that there is a myriad issues that need to be dealt with while investigating into cases related to offshore investments and money laundering in the name of the FDI.

Khatiwada, however, did point out that some businessmen were exploiting legal loopholes. As per the Non-resident Nepali Act, anyone staying in a foreign country continuously for 182 days gets the status of non-resident Nepali and that person’s earning during that time is counted as a non-resident’s earnings. “When this money comes into Nepal, its status is foreign investment; and the person concerned can take the capital, interest and profit out of the country. This Act was brought with good intentions,” he said. “While we want to make our laws stricter, we have also left legal loopholes.”

But that aside, many say nexus between unscrupulous businessmen and politicians is the biggest bane of good governance and transparency in Nepal and that a web of factors is helping some powerful people turn their black money into white.

The DMLI has lost its teeth largely due to political interference, said former finance secretary Shanta Raja Subedi.

“Frequent leadership change at the behest of politicians always makes an institution weak. And at times chiefs of the agency have their own personal interest,” he said. “The DMLI should be developed as a constitutional body to prevent political influence so that it can take on the powerful people.”

The DMLI has seen 10 directors general in the last nine years.

Another highly placed government source agrees that most of those indicted in the leaks enjoy political protection. “One of the reasons why many of those indicted in such leaks have not been brought to book is: they have strong political connections,” the source said. “As soon as the names are in the public domain, such individuals start lobbying, and the case fails to take off.”

But a DMLI official told the post that investigation into those who were indicted in the Panama Papers is still on and that the agency was still gathering proof.

“We don’t have solid proof against them,” Binod Lamichhane, information officer at the DMLI, told the Post. As per him, none of the 19 persons named in the Panama Papers face any cases as of now “for the lack of proof”.

In the aftermath of the Panama Papers leak, world’s most powerful were spooked while many high profile politicians, including the prime ministers of Pakistan and Iceland had fallen from grace. But Nepal’s biggest leak last week seems to have minimal effect.

Lack of information exchange is one reason for slow investigation in Nepal, says Khatiwada. Nepal also has not signed Mutual Legal Assistance Treaty with many of those countries which are known as tax havens. “We need to work on this. Firstly, we need to sign Mutual Legal Assistance Treaty with the countries [from where money is said to have entered Nepal]. When information exchange is difficult, it affects the investigation process,” he said.

 



Enjoyed this story? Share it.


The Kathmandu Post
About the Author: The Kathmandu Post was Nepal’s first privately owned English broadsheet daily and is currently the country's leading English-language newspaper.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Current affairs

Over 2 million students affected as haze reaches critical levels in Malaysia

Over 2,000 schools have been closed as a result. Close to two million students in over 2,000 schools will be affected by school closures in several states this week, following the worsening haze condition. A total of 2,459 schools in Selangor, Putrajaya, Kuala Lumpur, Penang, Kedah, Perak, Negri Sembilan and Sarawak are scheduled to be closed, following the Air Pollutant Index (API) exceeding 200 in these areas on Wednesday (Sept 18). The school closure affects a total of 1,732,842 students, said the Education Ministry in its latest statement on Wednesday night (Sept 18). The schools in Kedah, Perak, Negri Sembilan and Sarawak will only be closed on Thursday (Sept 19), whereas those in Selangor, Putrajaya, Kuala Lumpur and Penang will be closed on Thursday (Sept 19) and Friday (Sept 20). Selangor has the most number of schools closed at 939, and also the largest number of students involv


By The Star
September 19, 2019

Current affairs

Hong Kong police deploy water cannon, tear gas to disperse radical protesters

More protests erupted this week, the third month of continuous weekend protest. Hong Kong police fired water cannons and volleys of tear gas to break up protesters throwing petrol bombs and bricks near the Legislative Council (LegCo) building and central government offices on Sunday (Sept 15), the latest in weeks of sometimes-violent unrest. One water-cannon truck parked behind water-filled barriers surrounding the government headquarters complex caught fire after being hit by a petrol bomb, but the flames were quickly put out by police. After repeated warnings failed to disperse the protesters, police fired water cannons laced with blue dye as well as volleys of tear gas to break up the demonstrators. In other countries, dye is added to the water to help identify protesters later. Meanwhile, the LegCo Secretariat issued a red alert informing all persons to evacuate the LegCo Complex immediately.


By The Straits Times
September 16, 2019

Current affairs

1 killed, at least 30 injured in Yokohama derailment

The train crashed into a truck at a road crossing. One person was killed and at least 30 injured when the first three cars of an express train on the Keikyu Line derailed after the train collided with a truck at a crossing in Kanagawa Ward, Yokohama, at around 11:40 a.m. Thursday. The person killed was believed to be the 67-year-old male driver of the truck. Black smoke and flames were seen at the crossing, which is located between Kanagawa-Shinmachi Station and Nakakido Station on the Keikyu Line. According to the Kanagawa prefectural police and Keikyu Corp., the train departed from Aoto Station bound for Misakiguchi Station. It collided with the truck, which entered the crossing from the train’s right side just after the train passed Kanagawa-Shinmachi Station. The train’s next scheduled stop was Yokohama Station.


By The Japan News
September 6, 2019

Current affairs

Hong Kong leader Carrie Lam says scrapping extradition Bill ‘first step’ in breaking deadlock

Protesters have not said how they will react to bill being scrapped. Hong Kong leader Carrie Lam said on Thursday (Sept 5) that her decision to scrap the extradition legislation was only the “first step” to addressing the city’s unrest, after protesters said the Chief Executive’s concessions fell short of their demands. Mrs Lam told a news conference that her decision to formally withdraw the controversial Bill allowing extraditions to China, and other moves, would only be the “first step to break the deadlock in society”. The legislation sparked almost three months of protests and its withdrawal has been a key demand of demonstrators who were engaged in increasingly violent clashes with police. Denying she changed her mind, Mrs Lam said the decision to withdraw


By The Straits Times
September 6, 2019

Current affairs

No SIM card for Rohingyas

BTRC tells mobile phone operators to stop providing sim cards in refugee camps.  To stop Rohingya refugees from using mobile phones, the BTRC and carriers yesterday decided to halt sale of SIM cards in Ukhia and Teknaf upazilas of Cox’s Bazar until further notice. They also decided to suspend 3G and 4G services in the upazilas between 5:00pm and 5:00am every day and make sure that signal from Bangladesh’s carriers cannot be received from Myanmar, officials said. Since there are about 8-9 lakh active SIMs in the Rohingya camp areas, the cell phone carriers were asked to check the database of national identity cards and find out to whom the SIMs were registered. The decisions came at a meeting between the cell phone carriers and Bangla


By Daily Star
September 3, 2019

Current affairs

Curbing Rohingya Crimes: New police unit on cards

The unit will patrol refugee camps for crimes being committed. A brand new 800-member police battalion may soon be formed to deal with the rise in crimes committed by refugees from Myanmar in the 30 Rohingya camps in Cox’s Bazar. It would be the second such special unit in district, as one had already been approved at the end of last year. The new battalion, which is considered needed on an emergency basis, is just one of the suggestions submitted by the district police to the Police Headquarters in May. The others include setting up a temporary court in either Ukhia or Teknaf, forming three police stations and a number of police investigation centres, and installing closed-circuit television (CCTV) cameras at different points in the camp, along with a security fence around the camps’ perimeter. The measures are aimed at reducing the rising crime rates and prevent further untoward situations.


By Daily Star
August 27, 2019