by Prithvi Man Shrestha in The Kathmandu Post, March 16, 2023
The Asia Pacific Group on Money Laundering has pointed out Nepal’s failure to criminalise corruption involving the private sector as one of the country’s deficiencies in complying with the standards on anti-money laundering and terrorist financing, a senior government official said.
Nepal’s existing anti-corruption laws—the Prevention of Corruption Act-2002 and the Commission for Investigation of Abuse of Authority Act 1991—criminalise corruption involving the public sector. Bills to amend these laws registered at the National Assembly three years ago will also fail to criminalise corruption involving the private sector. Nepal’s constitution authorises the CIAA, the anti-corruption authority, to investigate and prosecute only the malpractices involving public officials.
However, Nepal in 2011 ratified the United Nations Convention Against Corruption that calls for preventive measures and criminalisation of the most prevalent forms of corruption in both public and private sectors.
“The Asia Pacific Group on Money Laundering [APG], in its initial report submitted a month ago to Nepal for its opinion, has pointed at the non-criminalisation of corruption involving the private sector as problematic,” a government official with access to the report told the Post on condition of anonymity because he was not authorised to speak to the media.
The private sector has long been opposed to any agency investigating its matters claiming that such measures could discourage investments in the country.
The government, which often promises a sound investment climate in the country, has thus far heeded the private sector.
“Current and proposed laws to control corruption don’t have a provision to criminalise corruption involving the private sector,” said the government official. “Standards of criminalising corruption involving the private sector should be different to similar standards for the public sector, if any such standards are to be set.”
The official argued that business enterprises in the country cannot operate with the same standards that govern public entities and officials.
According to the UN Convention Against Corruption, to which Nepal is a signatory, member countries should take measures to prevent corruption involving the private sector, enhance accounting and auditing standards in the private sector and, where appropriate, provide effective, proportionate and dissuasive civil, administrative or criminal penalties for failure to comply with such measures.
In order to achieve these ends, the convention has called for measures to deepen cooperation between law enforcement agencies and relevant private entities and promote development of standards and procedures to safeguard the integrity of relevant private entities, including codes of conduct.
Prevention of conflicts of interest, promotion of the use of good commercial practices among businesses and in the contractual relations of businesses with the state, and prevention of the misuse of procedures regulating private entities are other measures included in the convention.
It calls for preventing conflicts of interest by imposing restrictions, as appropriate and for a reasonable period of time, on the professional activities of former public officials or on the employment of public officials by the private sector after their resignation or retirement.
The Nepal’s Civil Service Act-1993 does not bar civil servants from joining the private sector after their retirement or resignation. Civil servants are often accused of working in favour of the international agencies that they plan to join after their retirement.
The law governing the central bank, the Nepal Rastra Bank Act-2002, however, bars its senior officials from working at any banks or financial institutions (BFIs) for a specified number of years after retirement.
A person who has served as the governor of the central bank can never work in any commercial bank or financial institution, according to the Act. Similarly, deputy governors and executive directors cannot work in any BFI in any capacity for three years after retirement.
Likewise, an officer-level employee of the central bank is barred from working in any BFI for two years after retirement.
“We need to introduce a law to prevent conflict of interest in order to comply with anti-money laundering standards,” Rajan Khanal, former finance secretary, told the Post in an interview a few months back.
As a party to the UN convention, Nepal has an obligation to address the issue in whatever way possible.
The CIAA has long been calling for its expanded jurisdiction to probe the private sector in line with the UN convention.
Speaking at an event organised by the CIAA to mark its 32nd anniversary on February 11, Prem Kumar Rai, the chief commissioner, called for an expanded jurisdiction to enable the commission to investigate even improper conduct, issues related to conflict of interest, and private and non-governmental sectors as well.
However, former CIAA chief commissioner Surya Nath Upadhyay said the state should not penalise the private sector for corruption so long as there is no involvement of government money, government officials or government institutions.
“Otherwise, the private sector will feel hassled and discouraged,” he said.
He pointed to the several laws and regulatory agencies with the authority to take action against private sector entities involved in malpractice.
“For example, the Nepal Rastra Bank can penalise banks and financial institutions and their promoters and employees for illegal and criminal practices and there are also ways to penalise private sector people under the anti-money laundering law, among others,” he said.
Even the CIAA has been prosecuting private sector actors found to be working in collusion with government officials and bleeding state coffers.
For example, the CIAA, in December 2018, filed a corruption case against former minister Bikram Pandey along with 20 other government individuals after several sections of the main canal of the multi-billion-rupee Sikta Irrigation Project collapsed apparently owing to substandard construction.
On June 20, this year, the Special Court cleared all 21 including Pandey of the charges.
He was charged not as a minister, but as the owner of the contractor firm, Kalika Construction, which was involved in building the main canal.
The CIAA, in October 2018, had filed a corruption case against Pappu Construction owner Hari Narayan Rauniyar and his son Sumit Rauniyar for building a substandard bridge across the Babai river at Jabdighat in Bardiya district.
Private sector representatives say any move to penalise them under the pretext of controlling corruption would have a negative impact on the economy.
“Nepal’s economy is already overregulated,” said Hari Bhakta Sharma, former president of the Confederation of Nepalese Industries (CNI). “Business climate will be severely affected if further control measures are brought against the private sector.”
As Nepal faces the risk of being greylisted by the Financial Action Task Force (FATF), a global anti-corruption body, for its deficiencies in controlling money laundering and terrorist financing, the government is required to address the deficiencies the Asia Pacific Group has pointed out.
After a field visit to Nepal in December last year as a part of mutual evaluation of Nepal’s compliance, the Asia Pacific Group prepared a report and shared it with Nepal.
In fact, the government itself has identified 15 laws that need amendments. The government recently rushed a bill to Parliament to amend several such laws.
“When the new bill is passed, around 70-80 percent of the legal deficiencies pointed out by the Asia Pacific Group will be addressed,” the government official said. “It, however, does not address the issue of criminalising corruption involving the private sector.”
https://kathmandupost.com/national/2023/03/16/anti-money-laundering-grouping-asks-nepal-to-curb-private-sector-corruption
