The Department of Cooperatives has issued a directive to cooperative organizations not to conduct business transactions from personal accounts. The department has issued the directive based on the increasing trend of depositing the funds for the organization's transactions into personal accounts. The department has stated that the directive has been issued based on the Income Tax Act 2058 BS and previous directives on money laundering.

The department has also asked that if any member of the cooperative is found to have deposited the amount received for commercial transactions in a personal account, such transactions should be sent to the Financial Information Unit.

The directive has been issued to cooperative organizations not to deposit the amount received for commercial transactions in personal accounts mainly to implement the provisions of the Money Laundering Prevention Regulations and the Income Tax Act, said Umesh Dhungana, Registrar of the Cooperative Department. “The directive has been issued mainly to implement the provisions of the Act and Regulations rather than on the basis of complaints and grievances,” he said.

Section 81A of the Income Tax Act, 2058 BS, provides that no amount received for commercial transactions can be deposited in a personal account. The act provides that no person can deposit any amount received for commercial transactions in cash, checks, QR codes, or any other electronic means into a personal bank account. However, the department has issued new directives after the cooperative organization was found not to comply with the provisions of the act. 

Rule 10 of the Money Laundering Prevention Regulations, 2081 (AMLA) contains provisions related to commercial transactions and accounts. There is a provision that a legal person or legal arrangement cannot pay or receive money related to commercial transactions into the personal account of anyone other than the account of such legal person or legal arrangement. The directive stipulates that if a personal savings account is found to be used as a means of commercial transactions, except in accordance with the prevailing law, the concerned financial institution must provide information to the Financial Intelligence Unit and the Inland Revenue Department. The department has issued the directive based on the same directive.

‘Section 81 ‘A’ of the Income Tax Act, 2058 (2001) prohibits the deposit of money for commercial transactions into a personal account. In which, no person can deposit any money received for commercial transactions through cash, checks, QR codes and any other electronic means into a personal bank account,’ the directive states.

The Prevention of Money Laundering Act, 2064 defines cooperatives as financial institutions, and as per Rule 10 of the Prevention of Money Laundering Regulations, 2081 and Section 81 'A' of the Income Tax Act, 2058, business transactions should not be carried out from personal accounts. The department has instructed that if a member is found to have made such a transaction, a report should be filed with the Financial Information Unit. 

The Department of Cooperatives has started collecting data on cooperatives regarding the prevention of money laundering, but in about five months, only more than four thousand organizations have been registered. Similarly, the Department of Cooperatives had started the registration process of all types of cooperatives from last Shrawan 1 with the aim of collecting information from the cooperative sector regarding the prevention of money laundering.

For that, it had directed cooperatives to create a separate Google form and fill it online. So far, only about 4 thousand cooperatives have been registered in the same process, said Umesh Dhungana, Registrar of the Department of Cooperatives. The department has been extending the deadline several times as very few cooperatives have been registered within the stipulated time. In the same vein, the department has issued a notice to register by mid-Mansir.

No body has accurate data on how many cooperatives there are in Nepal. The Economic Survey states that about 31,000 cooperatives are registered, of which about 15,000 are savings and credit cooperatives. However, experts say that the very low number of registrations initiated by the department to update the data confirms how the organizations are run and what kind of good governance they have. The Department of Cooperatives has been issuing notices repeatedly after very few organizations have been registered. However, very few organizations have been registered.