Border casinos in Nepal pose a high money-laundering and terrorism financing risk, the Asia/Pacific Group on Money Laundering (APG) said in a statement. According to the group, the country’s authorities should make sure they greatly enhance risk-based supervision of non-financial professions and businesses in Nepal, including casinos, in terms of anti-money laundering (AML) and counter-terrorism financing (CTF) measures.
Officials from the Asia/Pacific Group on Money Laundering warned that Nepal is currently exposed to threats associated with money laundering from neighboring jurisdictions mostly because of its easily penetrable border and the close trade and economic links that the country has to other places. In its report on the jurisdiction, the APG explained that Nepalese casinos, especially the ones situated in the border region of the country, represent a major vulnerability to money laundering of foreign proceeds.
The aforementioned report, titled “Anti-money laundering and counter-terrorism financing measures – Nepal” was officially published by the Group, on September 8th. The APG is an intergovernmental organization consisting of 42 Asian-Pacific region-based members, which also has links to various international organizations and foreign region observers.
A Total of 28 Licensed Physical Casinos Operate in Nepal Nowadays
As stated in the organization’s report, currently, there are 28 licensed brick-and-mortar casinos in Nepal, with the figure also including 15 so-called mini-casinos. Ten of these venues are situated in the capital, Kathmandu, and the remaining 18 entities are scattered across the country, mostly in regions adjacent to Nepal’s border with India.
According to estimates, the licensed physical casino venues in the country account for annual turnover amounting to a total of NPR9 billion.
Following a National Risk Assessment that was held by the local authorities in 2020, the APG categorized the country’s casino industry as “medium-high vulnerability” in terms of risks associated with money laundering. The Group further noted that the gambling and casino regulatory framework of Nepal is unclear, hence insufficient to prevent criminal management or ownership within the country’s borders. The “fit and proper” person requirements for local casinos are also vague.
For the time being, supervision of anti-money laundering and counter-terrorism financing issues for Nepal’s casino industry is granted to the Ministry of Culture, Tourism and Civil Aviation. Unfortunately, the latest APG report states that the implementation of AML, CTF, and risk-based supervision by the ministry has not started. The organization found the vulnerability assessment reasonable, with some sectors, such as casinos and banking considered the most vulnerable.
The Asia/Pacific Group noted that the country only partially complied with recommendations from the Financial Action Task Force (FATF) in terms of its casino sector regulation and monitoring.
No Mitigating Measures Taken by Nepalese Casino Operators
According to the latest APG report, operating permits for 19 new casinos have been approved over the last few years by the Nepalese authorities, with no license application being rejected. Apart from that, the competent authorities in the country provided only limited information in regard to the steps taken when the casino applications were taken into consideration.
Furthermore, the Group’s report also claims that casinos that are being engaged in foreign exchange must also hold operating permits from Nepal Rastra Bank, which is the central bank of the nation. However, only six casino companies that currently operate 10 casinos in Nepal, had managed to obtain the necessary NRB license. Of these, only two casinos have been found to have ever filed a monthly return to the country’s central bank regarding their foreign exchange transactions, as required by their license conditions.
It also seems that casino operators in Nepal were not implementing mitigating measures that correspond to the country’s money laundering and terrorism financing risks because they were found to have neglected their understanding of such risks. Lack of adequate guidance and supervision contributed to the issue.
According to the anti-money laundering regulator, Nepal was not actively preventing criminals from controlling or holding some non-financial businesses, such as the higher-risk casino industry.