When selling precious metals worth one million rupees or more at a time, payment will have to be taken from the customer's or their family's bank or financial institution account.
What you should know
The Department of Internal Revenue has instructed businessmen dealing in precious metals or commodities, including gold and silver, not to conduct business transactions under anonymous or fictitious names and personal accounts.
The department has issued additional directives on the prevention of money laundering while the trade in precious metals including gold and silver is not being effectively regulated.
The directive 2082 issued by the Internal Revenue Department for businessmen (indicator institutions) dealing in precious metals or commodities regarding money laundering and financial investment in terrorist activities mentions that anonymous transactions are not allowed, commercial transactions cannot be carried out from personal accounts, and the identity of high-ranking persons must be sought. The directive issued by the department states that while conducting their transactions, the indicator institution (businessmen dealing in precious metals including gold and silver) should only use the accounts of commercial institutions in banks and financial institutions.
The directive clarifies that an indicator institution means any form of natural or refined gold, silver, platinum, osmium, palladium, rhodium, ruthenium, diamond, sapphire, or jewelry made from such metals.
‘The reference institution is not allowed to use personal accounts or accounts of its employees’ family members or any other person in banks and financial institutions,’ the directive states. ‘When a reference institution sells precious metals or commodities worth Rs 1 million or more at a time, it will have to take payment from the account of the customer or his family in banks and financial institutions.’ If there is any limit on payments made through electronic means, the department will request Nepal Rastra Bank to make arrangements to add it by mentioning the reference of the reference institution that buys and sells precious metals or commodities.
The directive states that if the aforementioned directive is not followed, legal action will be taken and a fine of up to Rs 10 million will be imposed. Entrepreneurs will have to identify high-ranking individuals on the basis of risk and collect, update and keep their details safe. The department has also asked entrepreneurs to determine whether the person they are dealing with is a family member or close relative of a high-ranking individual.
The reporting institution shall formulate policies and procedures in accordance with the provisions of the Act and establish a basis and method for identifying customers, transaction details, and unusual and suspicious transactions. ‘The reporting institution shall also apply the provisions mentioned in this directive to financial investments in the manufacture and expansion of weapons of mass destruction,’ the directive states. ‘The reporting institution shall make institutional arrangements to freeze the assets or funds within a maximum of 24 hours of their appearance on the website of the United Nations or in the case of others, the reporting institution shall make such arrangements and shall then carry out regular monitoring and take action.’
The department has also said that it shall also collect details of customers who appear to be high-risk, customers who engage in complex, large or unusual transactions with unclear financial or legal objectives, customers from countries that are internationally recognized as not complying with international standards on the prevention of money laundering and terrorist financing or only partially complying with them.
It has also been asked to collect details of high-ranking individuals and family members of such individuals and related individuals or customers, customers using high-risk new equipment or services, customers suspected of committing crimes related to money laundering and terrorist financing or any other offense.
The directive states that entrepreneurs should adopt reasonable measures to identify and verify the real owner while conducting transactions. ‘The reporting institution shall ascertain whether a person has established a business relationship or conducted business-related activities on behalf of any other person,’ the directive states. ‘If it is found that a person has established a business relationship or conducted business on behalf of any other person, the reporting institution shall adopt measures to identify such person and verify it.’
The department has also asked entrepreneurs to pay special attention to all transactions of complex, large or unusual nature where the economic or legal purpose is not clear. The department has issued the directive in accordance with the action plan put forward by the government to exit the negative list after the Financial Action Task Force (FATF), an international organization that monitors money laundering and terrorist activities, placed it on the 'Grey List'. The department had also issued such a directive on 30 Asho 2082. Now it has been further strengthened through amendments.
After Nepal was placed on the list, it has formulated 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 the FATF will be complied with within two years. As per the action plan, the financial sector and financial transaction regulatory organizations including the National Bank, Insurance Committee, Nepal Securities Board, Department of Cooperatives, etc. are issuing directives related to money laundering.
Based on the conclusion that the previous directives were insufficient, those bodies have been revising the existing directives and issuing new ones. The Financial Sector High-Level Coordination Committee had decided last Falgun that all regulators should issue guidelines in this regard.
