The guidelines have been issued to banks and financial institutions, money remitters, money changers, security companies, insurance companies, cooperatives, retirement funds, Employee Provident Fund, Citizen Investment Trust and Postal Bank, real estate businesses, trusts and company service providers, casinos or internet casino businesses, dealers of precious stones and metals, auditors and accountants, notary public and law practitioners.

“We have clearly defined what constitutes suspicious transactions,” said an official at the unit who didn’t want to be named. “Most of the provisions have remained unchanged from the past directives.”

The new set of guidelines comes at a time when Nepal is preparing for a mutual evaluation of its compliance to the global standards on anti-money laundering and terrorist financing.

Asia Pacific Group on Money Laundering, a regional anti-money laundering body, of which Nepali is also a member, conducts mutual evaluation through the peer-review process.

In line with the greater efforts being made ahead of the mutual evaluation this year, reporting of the suspicious transactions is also on the rise. In the 2018-19 fiscal year, the Financial Information Unit received leads on 1,351 suspicious transactions, up from 887 a year ago, according to the unit.

Cash transactions of a relatively small amount but conducted with high frequency, transactions conducted by using several different individual names for the interest of a particular person, a series of transactions or bookkeeping tricks by a customer for concealing the source of funds (layering) fall under suspicious transactions, according to the guidelines.

Likewise, if a customer consistently makes cash transactions that are significantly below the reporting threshold amount of Rs 1million in an apparent attempt to avoid triggering identification and reporting requirements, it too comes under the category of suspicious transactions.
A reporting entity also needs to check if any customer shows unusual curiosity about internal systems, control and reporting, uses identification documents that are unreliable and refuses to provide information/documents requested by the officials.

Changes in employee’s characteristics such as lavish lifestyles or avoiding taking holidays, involvement in dealings where the identity of the ultimate beneficiary or counterpart is undisclosed, multiple deposits made to an account by non-account holders, unrelated parties transferring funds with no apparent relation to the recipient are some of the other indicators of suspicious transactions.

Other activities that can be classified as suspicious are: if a customer makes a large, unexpected loan payment with unknown source of funds and in the case where the commodity is shipped to (or from) a jurisdiction designated as “high risk” for money laundering activities.

Accountants and lawyers should consider the transactions of a client suspicious if the client has a history of changing bookkeepers or accountants on yearly basis and the loans of a company shareholder are not consistent with his business activity.

Transactions involving certain high-risk jurisdictions, such as locations in the midst of or in proximity to an armed conflict where terrorist groups operate or locations which are subject to weaker money laundering and terrorism financing controls, should also come under suspicious transactions.

The directive asks the banks and financial institutions to keep a tab on the transactions where unknown third parties frequently transfer funds into a customer's account and if there is repeated transfer of money to and from the name of a foreign individual or if the individual is living outside Nepal without any valid reason.

A stockbroker should identify a client’s behaviour to be suspicious if the deposits are funnelled into the broker’s account and then requests of repayment of funds are made within a short period of time, with no apparent reason. In the case of real estate, if a purchaser buys multiple properties in a short time period, and seems to have few concerns about the location, condition or with no interest in the characteristics of the property, it should also come under the category of suspicious transactions. A casino customer doing transactions of more than Rs2.5 million in one transaction or in a series of transactions in a day also comes under the purview of suspicious transactions.

While reporting, a reporting entity should report by incorporating the components such as a summary of suspicious activities, analysis or examination, possible linkage, suspected beneficiary (if any), mandatory details (as required by the regulators), correct identifications and other details.

According to the guidelines, the reporting entities should make reporting about both individuals and institutions, based on the indicators of suspicious transactions. As per the unit’s instruction, commercial banks have been reporting to the unit through goAML software that was developed by the United Nations Office of Drugs and Crime to specifically meet the Financial Information Unit’s data collection, management, analysis and statistical needs.

The unit plans to make it compulsory for all the reporting entities to make reporting through this software gradually.

“A suspicious transaction must be reported to the unit as soon as possible, but no later than three working days after detection of the initial suspicion or on receipt of information that’s being reported,” the guidelines say.