KATHMANDU: Nepal Rastra Bank (NRB), the regulatory authority for banks and financial institutions (BFIs), has implemented new directives regarding the appointment of compliance officers and the reporting of suspicious transactions. The central bank issued a circular mandating BFIs to establish a dedicated AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) department or unit, headed by a compliance officer at the managerial level.
Key Provisions for Compliance Officers
BFIs must ensure that compliance officers appointed to lead the AML/CFT units are not closely related to regulatory officials or senior management employees within the organization. If a compliance officer’s close relatives or family members are involved in submitting transaction reports, an alternative officer must handle the reporting process.
Mandatory Use of National Identity Cards
Effective January 15, 2025 (Magh 1, 2081 BS), BFIs are required to verify customers’ national identity card details or numbers through electronic records while opening accounts. This measure is aimed at ensuring accurate customer identification.
In cases where the government provides payments, such as social security benefits, BFIs must open accounts based on the details provided by the relevant government authorities. However, before allowing any withdrawals, BFIs must verify and confirm the customer’s identity as per the directive.
Enhanced Customer Identification Measures
When identifying customers, BFIs must ensure transparency in ownership and management structures for legal entities. If a legal entity’s management or controlling authority is different from the registered owner, BFIs must identify the natural persons involved, following the provisions outlined in Rule 6, Sub-rule 2, Clause (a) of the applicable guidelines.
Additionally, BFIs are required to validate the mobile number provided by a customer to ensure it genuinely belongs to them. This process must be based on risk assessment and appropriate identification mechanisms.
Classification of Politically Exposed Persons (PEPs)
NRB has also directed BFIs to categorize PEPs into specific groups, including:
– High-ranking officials currently holding positions,
– Former high-ranking officials,
– Foreign PEPs from neighboring or nearby countries,
– Other foreign PEPs, and
– High-ranking officials in international organizations.
These classifications aim to ensure better monitoring and management of accounts held by such individuals.
NRB’s new measures are part of broader efforts to enhance transparency, improve customer identification protocols, and strengthen the integrity of Nepal’s banking system. These regulations will help mitigate financial risks and align BFIs with global anti-money laundering and compliance standards.