FIU-Nepal Flags Rise in Crypto-Based Money Laundering; Plans to Increase Tracking, Awareness

The Financial Intelligence Unit (FIU) of Nepal has highlighted a rise in the misuse of crypto assets in the country. The agency, which closely monitors the crypto sphere, has said that the laundering of illicit funding through cryptocurrencies has spiked in the country. The Nepal Rastra Bank has released its ‘Strategic Analysis Report' that claims that notorious actors have been converting their illegally obtained funds into cryptocurrencies because these assets provide private transactions. Nepal is working on a roadmap to combat these existing issues related to crypto exploitation.

Cryptocurrencies like Bitcoin and Ether bring an element of anonymity to financial transactions that are also facilitated in real time, making them difficult to trace. This makes it challenging for law enforcement agencies to follow transaction trails that could lead to the identification of initiators.

In its report, the FIU-Nepal (Nepal Rastra Bank) noted, “conversion of proceeds of fraud to cryptocurrency or for online betting purpose too is observed frequently. The purpose is to increase the time necessary for FIUs and LEAs to access and analyse the necessary financial data across sectors, and institutions making it difficult for tracing the funds, freezing the proceeds and recovering it.”

Nepal is also witnessing a rise in fraud cases that involve luring potential investors into finally risky crypto schemes.

“The advertisements direct the potential prey to deposit amount in certain bank accounts or wallet accounts. The amount thus deposited is later not returned as promised. In countries like Nepal where investment in virtual assets like cryptocurrency is illegal, the victims rarely come up with complaints against such scams for potential repercussions,” the report noted elaborating into its matter of concerns.

FIU-Nepal is currently conducting an analysis of the kind of actions that other countries have taken to tackle cyber-enabled frauds. The country is planning to launch educational campaigns to increase awareness around the financial risks involved with volatile crypto assets.

In addition, Nepal is exploring the development of a technologically advanced platform capable of tracing information across different financial institutions to intercept illicit proceeds.

In 2023, Nepal instructed all internet service providers (ISPs) in the country to block access to crypto trading platforms. At the time, there were growing concerns around the misuse of crypto assets for moving illicit funds. In Nepal, it is prohibited to utilise cryptocurrencies as any kind of a monetary instrument.