Nepal’s financial intelligence unit unveil crypto-related scams
Nepal’s Financial Intelligence Unit (FIU), a crucial arm of the Nepal Rastra Bank, has flagged an unsettling trend: cryptocurrencies are increasingly being used for cyber-related frauds. In its Strategic Analysis Report issued on November 18, the FIU highlighted a surge in crypto-driven fraud cases, underscoring the challenges in tracing illicit activities.
Details of fraud
A staggering 64 percent of fraud cases reported to Nepalese authorities until May 2024 were cyber-enabled, with cryptocurrencies playing a significant role. As a subsidiary of the central bank, the FIU collaborates with various agencies, ensuring that financial institutions comply with anti-fraud and anti-money laundering regulations.
Fraudsters leverage crypto’s global accessibility, transferring illicit funds to offshore accounts to obscure their trail. Criminals convert stolen or illegal funds into cryptocurrencies, exploiting the lack of regulation and transparency. Scammers lure victims with promises of high returns, often targeting individuals through flashy advertisements or testimonials. Platforms like Facebook and Instagram are rife with fraudulent accounts promoting fake crypto opportunities.
Nepal’s ban on cryptocurrency trading inadvertently hinders the reporting of fraud cases, as victims fear legal repercussions. Victims often hesitate to report incidents, fearing ridicule or backlash. Nepal’s limited resources make it difficult to monitor and trace sophisticated crypto transactions effectively.
The FIU advocates for advanced monitoring tools to track suspicious transactions in real-time. Institutions must be equipped to recognize unusual patterns or large transactions involving crypto. Timely reporting can prevent further damage and help authorities act swiftly. Empowering citizens with knowledge about crypto risks can significantly reduce susceptibility to scams. Encouraging open communication between victims and law enforcement is vital for improving fraud detection.
South Korea’s reporting mandates
South Korea’s policy of pre-registering businesses handling cross-border crypto transactions offers a valuable model for Nepal. Global cooperation is essential to address the borderless nature of cryptocurrency fraud. South Korea’s Finance Minister, Choi Sang-Mok, said the country would introduce reporting mandates on cross-border crypto transactions at a recent G20 meeting in the United States.
Nepal must update its policies to tackle the complexities of crypto-related fraud effectively. Enhanced collaboration between financial institutions, law enforcement, and international bodies is crucial for success.
