Government Amends AML Rules, Expands Disclosure and Asset-Freezing Powers

The government has tightened anti-money laundering regulations by mandating detailed disclosure of beneficial ownership by reporting entities and expanding its authority to freeze assets linked to terrorism.

The new provision has come into force following a recent amendment to the Asset (Money) Laundering Rules.

Reporting entities including banks and financial institutions, insurance companies, casinos, real estate businesses, gold and silver traders, and other entities are mandated to report suspicious transactions and large-value dealings related to money laundering.

According to the amended rules, reporting entities must disclose information on individuals who directly or indirectly own, control or participate in the establishment, operation, management or activities of the institution, including its ultimate beneficial owners. The requirement applies during registration, licensing or issuance of permits, in line with provisions of the Asset (Money) Laundering Act.

As per the revised rules published in the Nepal Gazette, entities must also provide details of any ongoing or past court cases, investigations, alternative dispute resolution processes, or judicial or administrative actions of which they have written knowledge. They are also required to disclose whether any taxes, government dues or other liabilities remain unpaid under court orders or decisions of authorised authorities.

Similarly, details must be submitted on whether the concerned individuals have been blacklisted for loan defaults in Nepal or abroad, whether there is a potential conflict of interest, and—if the individual is a Nepali citizen—whether they own assets outside Nepal or act as a beneficial owner of any such property.

The rules further require disclosure of professional background, including previous roles, institutional affiliations, responsibilities held, awards received, penalties imposed, examples of professional achievements, and matters related to financial conduct. These details must be submitted to regulators while carrying out various company-related processes.

Under the amended provisions, such disclosures are mandatory when applying for a business licence or permit, acquiring or purchasing shares or capital amounting to 5 percent or more of paid-up capital or exceeding Rs 5 million, and during the appointment or nomination of directors or senior management officials of reporting entities.

The rules also require submission of these details where a person remains the beneficial owner of 5 percent or more of shares or capital exceeding Rs 2.5 million.

The regulation authorises the Financial Information Unit, relevant government agencies or other appropriate bodies to obtain information through various means to assess the integrity, ethics and reputation of the individuals concerned.

Terrorism financing provisions tightened

The amended rules also strengthen provisions related to terrorism financing. Once the United Nations publicly lists an individual or group as terrorists, the Ministry of Home Affairs may now order the immediate freezing of assets and funds without prior notice to the concerned parties.

Previously, such freezing orders had to be issued within 24 hours. The revised rules also allow innocent third parties to seek compensation if they suffer losses due to the freezing of assets or funds.