It has been proposed that the NRB can regulate, inspect and supervise the cooperatives by using the existing laws related to cooperatives. The central bank should issue guidelines and standards regarding the regulation, inspection, and supervision of savings and credit cooperatives.
As there is no powerful authority to regulate cooperatives till now, it is suspected that people keep the money earned from undisclosed sources at such financial institutions. This is the reason the government is bringing the cooperatives under the regulation of the NRB. The proposed bill has also recommended amendments to the Cooperatives Act 2017. It has been proposed in the bill that the cooperatives that deal mainly with savings and credit should follow the guidelines and standards set by the central bank. Such institutions will be inspected and supervised by the NRB on the basis of corporate governance and risk. Bringing large cooperatives under the NRB is one of the amendments that the government is planning in the amendment of the 19 Acts. With the risk of Nepal finding a place on the 'grey list' of the Financial Action Task Force (FATF), the government has already decided to expedite the endorsement of amendment bills related to anti-money laundering (AML). The government sought to amend those laws through Some Nepal Acts Amendment processes. The Ministry of Law, Justice, and Parliamentary Affairs has recently registered the Bill for the purpose. A majority of the 19 laws in the group are meant to address deficiencies in compliance with the FATF’s anti-money laundering and terrorist financing standards. Some of the major laws that need amendment are the Money Laundering Prevention Act 2008, Land Revenue Act 1978, Tourism Act 1978, Securities Act 2007, Human Trafficking and Transportation (Control) Act 2008, Confiscation of Criminal Proceeds Act 2014, Mutual Legal Assistance Act 2014, Organized Crimes Prevention Act 2014, Criminal (Code) Act 2017 and Cooperatives Act 2017. Nepal is currently under pressure from FAFT and international lenders like the International Monetary Fund (IMF) to enact a number of laws to address the deficiencies to comply with the standards on AML and counter-terrorism financing (CFT). Though the amendment bill was presented at the erstwhile parliament, it was dissolved before it was endorsed. Later, the government sent an ordinance the President Bidya Devi Bhandari in November last year. But the President didn’t authenticate the ordinance on time, and following the elections of the House of Representatives, the ordinance could not be introduced. The Asia Pacific Group (APG) on Money Laundering has been conducting a mutual evaluation of Nepal’s compliance with the global standards on anti-money laundering and terrorist financing (AML/CFT). Though the APG team concluded the field visit to Nepal in December last year based on which its report will be prepared, Nepali officials believe Nepal could accommodate the progress made after their visits to Nepal before the APG plenary meeting scheduled to be held in April. The report will then go to the APG plenary, which will determine whether Nepal will be under the International Cooperation Review Group (ICRG) monitoring of the FATF. The ‘grey list’ is used to denote a group of countries/jurisdictions with “strategic deficiencies” in their regime to counter money laundering and terror financing. Once listed as ‘jurisdiction under increased monitoring’ by the FATF, they must develop an action plan within a specific period. A country on the grey list is not subject to sanctions. However, the grey list signals to the international banking system that there could be enhanced transactional risks from doing business with the said country. Nepal was on the FAFT's 'grey list' from 2008-2014. After a series of progress made on the AML/CFT regime that includes an amendment to the Anti-Money Laundering Act 2008, and the enactment of other laws, the FATF finally removed Nepal from the list in 2014. Ceiling on deposits After the Cooperatives Act 2017 is amended, savings and credit cooperatives will be allowed to collect individual deposits up to Rs 2.5 million only. As per the proposal, the limit of individual deposits should not exceed Rs 2.5 million. The institutions having deposits above Rs 2.5 million will be given a five-year period to bring the deposits within the prescribed limit.
