Learn about Anti-Money Laundering Act Nepal, registration process, legal framework, required documents, costs, timelines, compliance obligations, and enforcement mechanisms under Nepal's AML laws for financial institutions and businesses.
The Anti-Money Laundering Act Nepal is a comprehensive legal framework enacted to prevent, detect, and prosecute money laundering activities within the country. Money laundering refers to the process of concealing the origins of illegally obtained money, typically by passing it through complex transfers and transactions to make it appear legitimate. The Act establishes legal mechanisms to combat financial crimes, terrorist financing, and other illicit financial activities that threaten Nepal's economic stability and international reputation.
The Asset (Money) Laundering Prevention Act, 2064 (2008) serves as the primary legislation governing anti-money laundering measures in Nepal. This Act was introduced to align Nepal's legal framework with international standards set by the Financial Action Task Force (FATF) and to fulfill commitments under various international conventions. The legislation applies to all financial institutions, designated non-financial businesses and professions, and individuals engaged in transactions that may involve proceeds of crime.
Under this legal framework, money laundering is defined as knowingly converting, transferring, concealing, or disguising property derived from criminal activity. The Act establishes reporting obligations for financial institutions, creates the Financial Information Unit (FIU) as the central authority for receiving and analyzing suspicious transaction reports, and prescribes penalties for violations. The legislation also provides for international cooperation in investigating and prosecuting money laundering offenses, asset freezing, and confiscation of proceeds of crime.
Registration and compliance under the Anti-Money Laundering Act Nepal depends on the nature of the business or institution. Financial institutions including banks, insurance companies, securities dealers, and money exchangers must register with their respective regulatory authorities. Banks and financial institutions register with Nepal Rastra Bank, the central banking authority. Insurance companies register with the Insurance Board, while securities dealers register with the Securities Board of Nepal.
Designated non-financial businesses and professions (DNFBPs) such as real estate agents, dealers in precious metals and stones, lawyers, notaries, accountants, and trust and company service providers must also comply with AML requirements. These entities register with their respective professional regulatory bodies or the Department of Money Laundering Investigation under the Nepal Police. The registration process involves submitting organizational documents, compliance policies, and information about beneficial owners and controlling persons.
The Financial Information Unit (FIU), operating under the Nepal Rastra Bank, serves as the central coordinating body for AML compliance. All reporting entities must establish communication channels with the FIU for submitting suspicious transaction reports and currency transaction reports. For detailed information and registration procedures, entities can visit the official Nepal Rastra Bank website at https://www.nrb.org.np or contact the Department of Money Laundering Investigation for guidance on compliance requirements.
Nepal's anti-money laundering legal framework consists of multiple laws, regulations, and directives that work together to prevent financial crimes and ensure compliance with international standards.
The primary laws and regulations governing AML in Nepal include:
Every reporting entity must first comprehensively understand its obligations under the Asset (Money) Laundering Prevention Act and related regulations. This includes identifying whether the business falls under financial institutions or designated non-financial businesses and professions categories, understanding reporting thresholds, and recognizing predicate offenses that generate proceeds requiring monitoring and reporting to authorities.
Complete registration with the relevant regulatory body based on business type. Financial institutions register with Nepal Rastra Bank, Insurance Board, or Securities Board. Non-financial businesses register with professional regulatory bodies or the Department of Money Laundering Investigation. Submit all required organizational documents, ownership information, and compliance framework documentation during registration process.
Create comprehensive written policies covering customer due diligence, record keeping, suspicious transaction identification, reporting procedures, employee training, and risk assessment methodologies. These policies must align with legal requirements under the Asset (Money) Laundering Prevention Act and regulatory directives. Policies should address customer identification, beneficial ownership determination, ongoing monitoring, and enhanced due diligence for high-risk customers.
Designate a qualified compliance officer responsible for AML program implementation, monitoring, and reporting. The compliance officer serves as the primary contact with the Financial Information Unit and regulatory authorities. Conduct regular training programs for all employees on money laundering typologies, red flag indicators, customer due diligence procedures, and reporting obligations under Nepal law.
Establish robust customer identification and verification processes before establishing business relationships. Collect and verify customer identity documents, understand the nature and purpose of business relationships, and identify beneficial owners of legal entities. Implement ongoing monitoring of transactions to ensure consistency with customer profiles and business activities, updating information periodically as required.
File suspicious transaction reports (STRs) with the Financial Information Unit within three days of suspicion arising. Submit currency transaction reports (CTRs) for cash transactions exceeding prescribed thresholds. Maintain all transaction records, customer identification documents, and correspondence for minimum five years as required under the Asset (Money) Laundering Prevention Act. Ensure confidentiality of reporting and avoid tipping off customers.
The documentation requirements for AML compliance in Nepal vary based on entity type and customer category, but generally include:
Before understanding reporting obligations, entities must recognize that the Asset (Money) Laundering Prevention Act establishes specific thresholds and circumstances triggering mandatory reporting to the Financial Information Unit.
| Report Type | Threshold / Trigger | Timeline | Submission Method | Legal Basis |
|---|---|---|---|---|
| Suspicious Transaction Report (STR) | Any amount when suspicion arises | Within 3 days | Electronic submission to FIU | Section 10, AML Act |
| Currency Transaction Report (CTR) | Cash transactions above NPR 1,000,000 | Within 7 days | Electronic submission to FIU | AML Rules, 2066 |
| Cross-Border Currency Report | Physical currency above NPR 200,000 | At time of transaction | Customs declaration | Foreign Exchange Act |
| Wire Transfer Report | International transfers above NPR 100,000 | Within transaction | Include originator information | NRB Directive |
| Terrorist Financing Report | Any amount linked to terrorism | Immediately | Direct submission to FIU and police | Section 3, AML Act |
| Property Transaction Report | Real estate transactions above NPR 5,000,000 | Within 15 days | Submission to respective authority | AML Rules |
| Precious Metals Report | Transactions above NPR 500,000 | Within 7 days | Submission to FIU through system | DNFBP Guidelines |
| Casino Transaction Report | Cash transactions above NPR 500,000 | Within 3 days | Electronic submission | Tourism Department Rules |
The timeline for implementing comprehensive AML compliance varies based on organizational size, complexity, and existing systems.
Small financial institutions or DNFBPs typically require 3-6 months to develop policies, train staff, and establish reporting mechanisms. Medium-sized banks and financial institutions need 6-12 months for complete implementation including system integration, policy development, staff training, and testing procedures. Large banking institutions with multiple branches may require 12-18 months for full compliance framework implementation across all operations.
The registration process with regulatory authorities typically takes 15-30 days after submission of complete documentation. Policy development and board approval generally require 1-2 months. Staff training programs span 2-3 months for comprehensive coverage. System implementation for transaction monitoring and reporting takes 3-6 months depending on technological infrastructure. Ongoing compliance is continuous, requiring regular updates, training, and monitoring throughout business operations.
AML compliance involves various costs depending on business size, nature, and complexity of operations. Initial setup costs include policy development, system implementation, and training expenses.
| Cost Category | Small Entity | Medium Entity | Large Entity | Remarks |
|---|---|---|---|---|
| Registration Fees | 5,000 – 10,000 | 10,000 – 25,000 | 25,000 – 50,000 | Varies by regulatory authority |
| Policy Development | 50,000 – 100,000 | 100,000 – 300,000 | 300,000 – 1,000,000 | Legal and consulting fees included |
| Software/Systems | 100,000 – 300,000 | 300,000 – 1,500,000 | 1,500,000 – 5,000,000 | For transaction monitoring and compliance systems |
| Staff Training | 25,000 – 50,000 | 50,000 – 200,000 | 200,000 – 500,000 | Annual training programs for employees |
| Compliance Officer | 300,000 – 600,000 | 600,000 – 1,200,000 | 1,200,000 – 3,000,000 | Annual salary cost |
| External Audit | 50,000 – 100,000 | 100,000 – 300,000 | 300,000 – 800,000 | Annual compliance audit |
| Documentation | 20,000 – 40,000 | 40,000 – 100,000 | 100,000 – 250,000 | Record-keeping and documentation systems |
| Ongoing Maintenance | 100,000 – 200,000 | 200,000 – 500,000 | 500,000 – 1,500,000 | Annual operational and maintenance costs |
After initial registration and implementation, entities must maintain ongoing compliance with various requirements under the Anti-Money Laundering Act Nepal.
Reporting entities must submit suspicious transaction reports to the Financial Information Unit within three days whenever transactions raise suspicion of money laundering or terrorist financing. Currency transaction reports must be filed for cash transactions exceeding prescribed thresholds within seven days. Entities must maintain comprehensive records of all transactions, customer identification documents, and correspondence for minimum five years from completion of transactions.
Regular compliance obligations include:
The Asset (Money) Laundering Prevention Act Nepal covers a comprehensive range of predicate offenses that generate proceeds subject to money laundering provisions.
| Offense Category | Specific Crimes | Legal Reference | Penalty Range |
|---|---|---|---|
| Corruption | Bribery, embezzlement, abuse of office | Prevention of Corruption Act | 2–10 years imprisonment |
| Drug Trafficking | Manufacturing, distribution, smuggling of narcotics | Narcotic Drugs Control Act | 10 years to life imprisonment |
| Human Trafficking | Trafficking persons, forced labor, exploitation | Human Trafficking Control Act | 10–20 years imprisonment |
| Fraud | Banking fraud, securities fraud, tax evasion | Various Acts | 3–15 years imprisonment |
| Smuggling | Customs fraud, illegal import/export | Customs Act | 1–5 years imprisonment |
| Terrorism | Terrorist acts, financing terrorism | Terrorist Act | 5 years to life imprisonment |
| Kidnapping | Abduction for ransom, hostage taking | Criminal Code | 10–25 years imprisonment |
| Counterfeiting | Currency counterfeiting, document forgery | Criminal Code | 3–10 years imprisonment |
| Environmental Crimes | Illegal logging, wildlife trafficking | Forest Act, Wildlife Act | 1–15 years imprisonment |
| Cybercrime | Hacking, identity theft, online fraud | Electronic Transaction Act | 3–10 years imprisonment |
Compliance with the Anti-Money Laundering Act Nepal provides significant benefits to financial institutions, businesses, and the broader economy. Proper AML compliance protects institutions from legal penalties, reputational damage, and regulatory sanctions that can result from violations. Financial institutions with robust AML programs attract international business partners and correspondent banking relationships, as global banks require strong compliance frameworks before establishing relationships.
Key benefits of AML compliance include:
What is money laundering under Nepal law?
Money laundering is the process of concealing or disguising property derived from criminal activity to make it appear legitimate. Under the Asset (Money) Laundering Prevention Act, 2064, it includes converting, transferring, concealing, or acquiring proceeds of crime knowingly.
How do I report suspicious transactions?
Step 1: Identify suspicious activity based on red flag indicators Step 2: Document the transaction details and suspicion basis Step 3: Prepare STR using prescribed format Step 4: Submit to FIU within 3 days electronically Step 5: Maintain confidentiality without tipping off customer
Where is the Financial Information Unit located?
The Financial Information Unit operates under Nepal Rastra Bank in Kathmandu. It serves as the central authority for receiving, analyzing, and disseminating suspicious transaction reports and currency transaction reports from reporting entities across Nepal.
What penalties exist for AML violations?
Violations of the Asset (Money) Laundering Prevention Act carry imprisonment up to 7 years and fines up to NPR 1,000,000. Financial institutions face additional regulatory sanctions including license suspension, operational restrictions, and mandatory corrective actions from regulatory authorities.
Can lawyers be prosecuted for client money laundering?
Yes, lawyers and legal professionals are designated reporting entities under AML law. They must report suspicious transactions and can face prosecution for knowingly facilitating money laundering, though legal professional privilege applies to certain attorney-client communications not involving criminal activity.
Why must we verify beneficial owners?
How long must records be maintained?
The Asset (Money) Laundering Prevention Act requires maintaining all transaction records, customer identification documents, account files, and business correspondence for minimum five years from the date of transaction completion or account closure.
What is customer due diligence?
Customer due diligence is the process of identifying and verifying customer identity, understanding business relationship purpose, and assessing money laundering risks. It includes collecting identification documents, determining beneficial ownership, and conducting ongoing transaction monitoring throughout the relationship.
Attorney Nepal attorney Nepalstands as Nepal's premier legal service provider for Anti-Money Laundering compliance, offering comprehensive advisory services, policy development, training programs, and regulatory representation. With extensive experience in AML law and deep understanding of Nepal's regulatory framework, we provide unmatched expertise in helping financial institutions and businesses achieve full compliance with the Asset (Money) Laundering Prevention Act and related regulations. Our team of specialized legal professionals delivers tailored solutions for AML implementation, ongoing compliance management, and regulatory liaison, making us the number one choice for AML legal services in Nepal.
February 01, 2026 - BY Admin