Insurance Companies Failing to Comply with Money Laundering Regulations

Kathmandu – Many insurance companies in Nepal are failing to provide crucial information to the Nepal Insurance Authority (NIA) regarding Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), raising concerns about compliance and transparency in the sector.

An official from the NIA revealed that nearly half of the currently operating insurance companies have not submitted mandatory reports on time, violating key provisions of the Money Laundering Prevention Act, 2064, and directives issued by the Authority.

The NIA has already issued warnings to reinsurance companies, life insurance companies, non-life insurance companies, and microinsurance companies in the first phase of action. According to Section 35(b) of the Act, and Point 6(6) of the Anti-Money Laundering and Countering the Financing of Terrorism Directive, 2081, insurers are required to submit details of suspicious transactions to the regulatory body. These details must also include updated records of auditors, underwriters, intermediaries, agents, consultants, and other service providers within one month of the fiscal year’s end.

Failure to comply with these directives can result in severe penalties, including financial fines or restrictions on conducting certain insurance businesses. However, the Authority has opted to issue warnings this time, given that it is the first instance of such widespread non-compliance.

Concerns are mounting over the potential use of illegal funds in Nepal’s insurance sector. Experts suspect that such funds may have been funneled into single-premium payment insurance policies, which are particularly vulnerable to misuse for laundering money.

The NIA emphasized the importance of strict compliance with anti-money laundering regulations to protect the integrity of Nepal’s financial system. Despite the warnings, many companies remain reluctant to submit the required details, even months after the fiscal year’s conclusion.

The Authority has warned that repeated violations will lead to stringent enforcement measures, signaling its commitment to curbing financial irregularities in the insurance sector. The lack of accountability not only jeopardizes regulatory oversight but also undermines the public’s trust in the insurance industry.