The legal framework in Nepal regarding money laundering is stringent to comply with international standards set by the Financial Action Task Force (FATF).
Primary Legislation: The Asset (Money) Laundering Prevention Act, 2017 (2074 BS) is the prevailing law, replacing the 2008 Act. It defines predicate offenses, confiscation procedures, and penalties.
Regulatory Body: The Department of Money Laundering Investigation (DMLI) operates under the Ministry of Finance. It is the sole authority responsible for investigating money laundering offenses.
Financial Intelligence Unit (FIU): Located within the Nepal Rastra Bank (NRB), the FIU receives Suspicious Transaction Reports (STRs) and Cash Transaction Reports (CTRs) from reporting entities (banks, financial institutions, and designated non-financial businesses and professions).
Who Can Initiate a Case? (Eligibility)
Unlike civil cases where an individual files a plaint, money laundering cases are criminal in nature. However, specific parties can trigger the legal mechanism:
The Department of Money Laundering Investigation (DMLI): The DMLI can initiate an investigation suo motu (on its own motion) based on intelligence or suspicious patterns.
Financial Institutions (Banks & Financial Institutions): Banks must report suspicious activities to the FIU, which then forwards the case to the DMLI.
Law Enforcement Agencies: The Nepal Police can forward cases involving predicate offenses (e.g., drug trafficking, corruption) that involve financial proceeds to the DMLI.
Individuals/Whistleblowers: While private citizens cannot file a direct "money laundering case" in court, they can file a First Information Report (FIR) or a complaint with the DMLI or police regarding financial crimes.
The Step-by-Step Legal Process
The money laundering case process in Nepal follows a specific criminal procedure distinct from standard civil trials.
FIU Analysis: The Financial Intelligence Unit analyzes the STR and determines if there is grounds for suspicion.
Forwarding to DMLI: If the FIU suspects laundering, the information is sent to the DMLI for formal investigation.
Phase 2: Investigation (DMLI)
Registration of Case: The DMLI registers an inquiry based on the FIU report or a complaint.
Asset Freezing: The DMLI has the authority to freeze bank accounts, properties, or assets temporarily for up to 90 days (extendable) to prevent dissipation.
Evidence Collection: Investigators summon suspects, witnesses, and collect financial records.
Phase 3: Charge Sheet Filing
Decision to Prosecute: If the DMLI finds sufficient evidence, it files a Charge Sheet at the Special Court.
Framing of Charges: The Special Court reviews the charge sheet and frames charges against the accused.
Phase 4: Trial & Adjudication
Presentation of Evidence: The public prosecutor (representing the DMLI) presents witnesses and digital forensic evidence.
Defense Argument: The accused, via legal counsel, presents their defense.
Verdict: The Special Court delivers a judgment. If guilty, the court orders confiscation of property and imprisonment.
Comparison: Investigation vs. Adjudication
The following table outlines the different stages of the legal process regarding time and complexity.
Type/Method
Estimated Time
Complexity/Cost
Inquiry & Investigation (DMLI)
3 to 6 Months (Extendable)
High Complexity: Requires forensic accounting and tracing of assets. Low direct court cost, but high administrative resource cost.
Special Court Trial
6 Months to 2 Years
Very High Complexity: Involves strict legal procedures, expert witnesses, and extensive documentation. Legal fees for defense counsel can be significant.
Appeal (High Court)
1 to 3 Years
High Complexity: Focuses on legal errors in the lower court's judgment. High cost for legal representation and case preparation.
Required Documents Checklist
For the DMLI to build a case, or for a defendant to prepare a defense, the following documents are critical:
Identity Documents: Citizenship or Passport of the accused and related parties.
Financial Records: Bank statements (usually 5-10 years), cheque copies, and passbooks.
Transaction ledgers: Details of credit/debit entries, SWIFT messages for international transfers.
Property Documents: Land ownership certificates (Lalpurja), vehicle registration bluebooks, and share certificates.
Company Incorporation Docs: If a business is used for layering, memos of association and board minutes.
Tax Reports: Income tax filings and VAT/PAN details.
Source of Income Proof: Salary certificates, invoices, or inheritance documents to prove legitimate funds.
Key Factors, Penalties, and Costs
Penalties
Under the Asset (Money) Laundering Prevention Act, 2017, penalties are severe:
Imprisonment: Ranging from 3 months to 4 years for individuals, depending on the severity.
Fines: Up to the value of the property involved in the offense.
Confiscation: The court orders the confiscation of proceeds of crime and property derived from them.
Costs
Government Cost: The state bears the cost of investigation and prosecution.
Defense Cost: The accused must bear their own legal fees, which vary based on the seniority of the money laundering lawyer in Nepal.
Forfeiture: The primary "cost" to the convicted party is the total loss of assets identified as laundered funds.
Key Legal Factor: Burden of Proof
Unlike standard criminal cases where the prosecution must prove guilt "beyond a reasonable doubt," in money laundering cases, the burden of proof often shifts. If the prosecution proves the assets are disproportionate to known income, the accused must prove the legitimate source of those funds.
Timeline and Time Required
The duration of a money laundering case in Nepal varies significantly based on the complexity of the financial web.
Investigation Phase: Typically takes 3 to 6 months, though the DMLI can take longer if international cooperation (e.g., INTERPOL, foreign banks) is required.
Special Court Verdict: The Special Court is generally faster than District Courts, aiming to conclude cases within 6 months to 1 year, though complex cases often extend beyond this.
Final Disposition: Including appeals at the High Court and Supreme Court, a complete money laundering case can take 3 to 5 years to reach a final conclusion.
Conclusion
Navigating the money laundering law in Nepal requires a deep understanding of both financial forensics and criminal procedure. The laws are designed to be aggressive, with the DMLI possessing wide powers to freeze assets before a conviction is secured.
Given the severity of penalties—including asset confiscation and imprisonment—professional legal representation is not just recommended; it is essential. If you are under investigation or need to report financial misconduct, consult with a qualified money laundering lawyer in Nepalimmediately to ensure your rights are protected and to navigate the complexities of the Special Court system.
Disclaimer: The content provided in this guide is for informational purposes only and does not constitute legal advice. Laws and regulations are subject to change. For specific legal advice regarding money laundering cases, please consult a qualified advocate in Nepal.
February 08, 2026 - BY Admin