KATHMANDU: Nepal has witnessed a concerning trend in recent years as black money, once stashed abroad, is making its way back into the country under the guise of Foreign Direct Investment (FDI).
This unscrupulous influx is posing significant challenges to Nepal’s efforts to combat money laundering, particularly in light of the stringent oversight by the Financial Action Task Force (FATF).
Notably, substantial funds have flowed into Nepal from countries that lack diplomatic relations with the nation or have fragile economic conditions.
A staggering Rs 29.6 billion in FDI has found its way into Nepal from the Caribbean island nation of St. Kitts and Nevis, known for its asset concealment advantages and minimal tax obligations.
Data from the Nepal Rastra Bank reveals that within a single year, by the end of mid-July 2023, Rs 15.051 billion in direct foreign investments had come into Nepal via St. Kitts and Nevis-affiliated companies.
Subsequently, over the following year until July 2022, an additional Rs. 15.9 billion poured in from the same country in the name of FDI.
Likewise, during this period, Nepal has seen 16.48 billion rupees from the island nation, with an additional 20.90 billion rupees in FDI influx over the past year.
In parallel, a concerning trend emerged with 15.48 billion rupees and 16.7 billion rupees respectively entering Nepal as FDI from Singapore, another jurisdiction notorious for facilitating tax evasion.
During the fiscal year 2078/79 BS, Nepal received FDI equivalent to 3.84 billion rupees from Mauritius, 4.19 billion rupees from the British Virgin Islands, and 2.777 billion rupees from Bermuda, all of which are known for their role in harboring foreign black money.
Further contributing to the issue, 330 million rupees arrived from the Cayman Islands and 10.9 million rupees in FDI from Samoa. All of these countries have a history of suspicious activities related to money laundering.
Notably, the Central Bank has not disclosed the specific companies from these countries that have invested in Nepal or the businesses they have invested in.
However, the survey report indicates that FDI has come to Nepal from as many as 57 countries, amounting to a total of 2.064 trillion rupees.
These countries have earned notoriety for attracting illegal and questionable assets from abroad and channeling them back to their countries through fictitious companies, earning them the label of “tax havens.”
The research reports underscore that the ease with which undisclosed illegal funds can be hidden, combined with the lack of tax obligations, motivates individuals to repatriate their money to their home country by establishing shell companies in these tax haven nations.
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