Nepal to Combat Crypto Fraud with Transaction Monitoring and Public Awareness

Highlights:

• Nepal’s FIU raises concerns over the growing use of cryptocurrencies in cyber-related fraud in the country.
• Crypto misuse complicates investigations, with fraudsters moving illicit funds across borders easily.
• FIU recommends enhanced crypto monitoring, financial institution training, and public awareness to fight fraud.

Nepal’s Financial Intelligence Unit (FIU) has raised alarms over the increasing use of cryptocurrencies in cyber-related frauds. This rise comes despite the country’s strict ban on digital asset trading. The FIU, a special department of the Nepal Rastra Bank (the country’s central bank), oversees financial fraud prevention, including terrorist financing and money laundering. 

'Strategic Analysis Report, 2024' प्रतिवेदन सार्वजनिकhttps://t.co/GPwuNaW6wQ pic.twitter.com/d3f3XlyS7D

— Nepal Rastra Bank (@NepalRastraBank) November 17, 2024

FIU Highlights Surge in Crypto Misuse and Cyber-Related Fraud in Nepal

In its most recent “Strategic Analysis Report” released on November 18, the FIU disclosed that fraudsters are increasingly using cryptocurrencies to move illicit funds across borders. This trend makes it more challenging to trace and recover stolen money.

The ease of transferring cryptocurrencies to offshore accounts adds complexity to investigations. The FIU reported a rise in fraudulent crypto investment schemes targeting Nepali citizens via social media and online ads. These schemes attract victims by promising high returns.

In many cases, the illegal nature of crypto trading discourages victims of fraud from reporting to authorities. Consequently, underreporting remains a challenge due to factors like fear of consequences or embarrassment. This lack of reporting poses a significant challenge for Govt. authorities. By May 2024, around 64% of all reported fraud cases in Nepal were cyber-related. This statistic highlights the significant scale of the issue.

FIU Proposes Key Measures to Combat Rising Cyber Threats

In response to rising cyber threats, Nepal’s FIU suggested two significant recommendations. The first is to enhance the monitoring of cryptocurrency transactions for better oversight. The second recommendation involves training financial institutions to identify warning signs and ensure timely reporting of suspicious activities.

The authority also suggested raising public awareness to lower vulnerability to fraud. Additionally, it emphasized improving inter-agency collaboration and updating regulatory frameworks to combat digital payment fraud effectively. 

FIU-Nepal noted:

“Conversion of proceeds of fraud to cryptocurrency or for online betting purpose too is observed frequently. The purpose is to increase the time necessary for FIUs and LEAs to access and analyze the necessary financial data across sectors, and institutions making it difficult for tracing the funds, freezing the proceeds and recovering it.” 

South Korea to Regulate Cross-Border Crypto Transactions to Combat Crypto Crimes

Other countries around the world are also taking action to combat crypto-related financial crimes. The South Korean government plans to regulate cross-border transactions involving virtual assets like cryptocurrencies. The aim is to prevent their misuse for tax evasion and illegal foreign exchange activities, as announced by the country’s Minister of Economy and Finance, Choi Sang-mok, at a G20 meeting in Washington on October 24.

South Korea to Regulate Cross-Border Crypto in 2025

South Korea is set to implement #regulations on cross-border #Cryptocurrency transactions starting in the latter half of 2025. These forthcoming rules will require businesses engaged in international virtual asset trades to… pic.twitter.com/M1VC5XxwoM

— VOY (@voyfinance) October 26, 2024

Choi announced that South Korea will require businesses handling international crypto transfers to register. They must report all transactions to the Bank of Korea monthly. Tax, customs, financial, and international regulators will monitor these reports. This will help detect illegal activities and support research efforts. The finance minister expects legal revisions by mid-next year.