Nepal Aims to Fight Rising Crypto Use in Money Laundering by Transaction Monitoring

Nepal’s Financial Intelligence Unit (FIU) has raised concerns about the increasing misuse of cryptocurrencies for money laundering and cyber-related fraud, despite the country’s ban on digital asset trading.

In its latest “Strategic Analysis Report,” issued on November 18, the FIU revealed that fraudsters frequently exploit cryptocurrencies to transfer illicit funds across borders, complicating efforts to trace and recover stolen money.

Operating under the Nepal Rastra Bank, the FIU monitors and combats financial crimes, including money laundering and terrorist financing.

Bad Actors Convert Illicit Funds to Crypto

The FIU’s report claimed that bad actors often convert illicit funds into cryptocurrencies, which are then transferred offshore, making them harder to track.

This trend has coincided with a rise in fraudulent crypto investment schemes targeting Nepalese citizens through social media and online advertisements.

Many victims are lured by promises of unrealistic profits, only to lose their money.

A significant challenge in addressing crypto-related fraud is the lack of reporting.

Many victims, deterred by the illegality of cryptocurrency trading in Nepal or fear of social stigma, avoid informing authorities.

'Strategic Analysis Report, 2024' प्रतिवेदन सार्वजनिकhttps://t.co/GPwuNaW6wQ pic.twitter.com/d3f3XlyS7D

— Nepal Rastra Bank (@NepalRastraBank) November 17, 2024

The underreporting exacerbates the difficulty of quantifying and combating such fraud.

The FIU notes that nearly 65% of fraud cases reported to Nepalese authorities by mid-2024 were cyber-enabled, underscoring the urgency of the issue.

In response, the FIU has recommended stricter monitoring of cryptocurrency transactions and enhanced training for financial institutions to detect and report suspicious activities.

The agency also called for increased public awareness campaigns to educate citizens about potential risks and updated regulations to address digital payment fraud effectively.

Globally, other nations are also taking steps to address crypto-related financial crimes.

South Korea, for instance, is introducing stricter reporting rules for cross-border crypto transactions, requiring pre-registration and detailed monthly reports to its central bank.

Gold Smugglers in Nepal Turn to Tether

As reported, an international, organized criminal network has been busted for gold smuggling and using the Tether (USDT) stablecoin in its $16 million-worth illegal operations.

According to the local media report by The Rising Nepal, the group managed to smuggle 33 kg of gold.

Notably, the group earned money through other illegal activities.

District Police Office Dolakha said in a press conference the gold smugglers had transacted Rs. 2.19 billion ($16.43 million) via cryptocurrency in less than a year.

The police said in the press conference that they identified 27 people involved in gold smuggling.

Between November 2022 and October 2023, the groups within the network (some of which allegedly didn’t know each other) moved gold to Nepal’s capital Kathmandu via the Phalaak crossing of Lamabagar in Dolakha, a region bordering Tibet.