Now, cooperatives will have to carefully collect all details related to members' transactions, savings, share purchases, and loans to identify the real beneficiaries.
What you should know
The Department of Cooperatives has directed cooperative organizations to tighten their arrangements for preventing money laundering. The department has issued instructions and guidelines on preventing money laundering, directing cooperative organizations to identify real owners, make member identification effective, regularly report suspicious/border transactions to the Financial Intelligence Unit, and effectively regulate financial criminal transactions.
The department has directed to identify the real owner if an account is operated in the name of an individual or organization but its operation and transactions are carried out by another person and the benefits are received. Similarly, while determining high-risk and suspicious persons, if it is found that a person has established a business relationship or transacted on behalf of another person, it is directed to see whether measures have been taken according to the law regarding the identity of such a person and its confirmation.
The directive states that the organization should monitor and investigate the transactions of members to identify the real owner and make necessary arrangements to make it effective. Similarly, the directive clarifies that a member with high financial transactions should have saved more than 3 million rupees annually or purchased shares or taken a loan.
‘A comprehensive identification should be collected about members and high-ranking persons and members of such families and persons or members associated with them who engage in complex, large or unusual transactions where the financial or legal purpose is not clear,’ the directive states.
The department has also asked cooperatives to make the member identification (Know Your Member-KYM) effective for their member identification. The department has also issued instructions not to provide documents, details and information for member identification and verification, and not to make transactions with people who cannot be identified and verified based on the documents, details and information provided.
The department has issued the instructions in accordance with the action plan put forward by the government to exit the negative list 'Grey List' after the Financial Action Task Force (FATF), an international organization that monitors money laundering and terrorist activities, placed Nepal on the 'Grey List'. After Nepal was included in the list, it has made a two-year action plan to exit the negative list as per the FATF's suggestion.
The action plan states that the conditions set by FATF will be followed within two years. As per the action plan, the Rastra Bank, Insurance Committee, Nepal Securities Board, Department of Cooperatives and other organizations that regulate the financial sector and financial transactions are issuing instructions on money laundering. The agencies have revised the existing guidelines and issued new ones based on the conclusion that the previous guidelines were insufficient. The Financial Sector High-Level Coordination Committee had decided in February that all regulators should issue guidelines in this regard.
