Money Laundering Law Misused for Personal Vendettas, Says Former SSP

Kathmandu. The Prevention of Money Laundering Act defines money laundering as the act of concealing the source of illegally earned property, changing its nature, or evading transactions to legitimize such property. Before investigating money laundering, it must be confirmed that the property is proceeds of crime. Crimes such as corruption, tax evasion, and human trafficking are considered predicate offenses in money laundering cases. The Department of Money Laundering Investigation, which investigates crimes of acquiring property through crime and entering it into the financial system to legitimize it, has recently been investigating former prime ministers and businessmen. The department is facing criticism for investigating businessmen and the opposition with the intention of intimidating them without confirming the predicate offense.

Has the investigation of money laundering become a tool to target individuals? We spoke with former SSP Dr. Ganesh Regmi about this. Regmi, who worked in criminal investigation and the police legal branch for a long time during his police career, holds a doctorate on 'Police and Rule of Law'. He is currently an advocate.

Here is the edited excerpt of the conversation between Ratopati correspondent Rajesh Bhandari and Dr. Regmi:

• Businessmen to high-level leaders are under investigation for money laundering offenses. Why has the tendency of state machinery to selectively file cases increased?

In Nepal, the money laundering law was introduced with good intentions, but it has not been followed with good intentions. I have seen problems in its implementation from the beginning. The structure is such that the Ministry of Finance is under the government, and the Department of Money Laundering Investigation is under it, with a joint secretary in charge. However, the department's authority extends to taking action against former judges and former military officers. Placing such a large investigative mechanism under the leadership of a joint secretary was a process of deception from the outset. The underlying intention appears to be its misuse by the ruling party for its own convenience. This has become even clearer in recent times.

• The Department of Money Laundering Investigation has recently been seen arresting businessmen and political figures without legal basis. A process for a red notice against a former prime minister is underway. Is this the model for money laundering investigation?

The model for money laundering is not as it is currently being practiced in Nepal. Money laundering is a very big and serious matter. It has not been given much importance in Nepal. The ruling party is misusing it by narrowing its great principles and objectives. Generally, for money laundering, there must be property accumulated beforehand. Money laundering is only possible when someone has accumulated funds through illegal means, primarily from crimes like arms dealing and drug trafficking.

Internationally, corruption has also been included. Money laundering investigation is a method of detecting crimes aimed at legitimizing property acquired through crime or showing it as legitimately earned income. The core principle of this is that all investigation processes must be kept secret.

• Should I not know that my property is being investigated?

Yes, no one should know about it. Except for the investigating officer and the person authorizing the investigation, the concerned individual should not receive any information. Even when collecting evidence from other sources, it should not be disclosed that it is for money laundering purposes. Therefore, there are talks of 'undercover operations' in this regard. The law calls it a special investigation method, but here it is like someone who should not reveal their job has publicly announced 'I am of this rank'. It is as if they are trying to intimidate by publicizing that money laundering is being done against you. It seems like they are trying to take credit for good work or are trying to make it impossible to investigate money laundering crimes by having malicious intentions.

• Under what circumstances is a money laundering case initiated?

First, a person who accumulates excessive wealth, which must be illegally collected. Money laundering is a crime committed by showing the accumulated property as if it were collected from other individuals or regular income sources. To do that, the first thing is to establish that property has been accumulated. Then, it is necessary to find out by what method the property was laundered and legitimized. Currently, there is a lot of noise about this.

I have investigated some cases myself. There is a practice of filing a complaint for money laundering to frame a partner after a dispute with a partner in a hydropower project. Although there is a provision that the source of property in hydropower is not investigated, actions are taken out of revenge. In reality, this case is not like that.

• As investigations are currently underway against Sulav Agrawal, Deepak Bhatta, and Sher Bahadur Deuba, and other former prime ministers are also under investigation. Previously, in the case of Ravi Lamichhane and Chhabilal Joshi, the transaction amount deposited in the bank was considered the basis for investigation. Can only the bank transaction amount be the basis for money laundering investigation?

From a practical standpoint, my understanding is that some individuals, regardless of which political party is in power, intended to use, misuse, or abuse the situation to accumulate wealth and then do whatever they pleased under the guise of bringing in the money laundering law. In their cases, their arrest has sent a good message. Many have praised it.

If an investigation is to be conducted in recent times, why bring it out into the public discussion? Let's investigate first, establish that the accused has this amount. Investigating the inflow and outflow of funds in the account is the first step.

The first step to establish the property-related crime is to determine the source of the funds. The process of finding the source of the property is done in the first stage. Then, after investigating the laundering process and the extent to which it has been followed or not, the case can be taken to court. I do not see attention being paid to that.

• When people in authority can file cases against anyone for their convenience, people will be further victimized, won't they?

Absolutely. There is a Latin principle related to law, 'Power is blind.' It means that people in government exercise power, believing they are exempt from any action. When the government has a majority or overwhelming majority, they tend to act with even greater audacity.

The Government of Nepal has recently introduced six laws in the form of ordinances. One of these is related to money laundering. The court will evaluate the authenticity of such ordinances. Similarly, the Trade Union Ordinance that came along has been issued an interim order by the court as prima facie flawed. A decision is yet to be made on that, but there are apparent flaws at first glance. The Ordinance related to money laundering has come in a similar fashion.

Through a decision of the Council of Ministers led by KP Oli, the responsibility of investigation was decentralized from the Department of Money Laundering Investigation to all bodies that conduct investigations. The law was amended in 2080 BS to the effect that if any person is found to have accumulated property during an investigation within their jurisdiction, the respective bodies will investigate it for laundering.

In the case of former Prime Minister Sher Bahadur Deuba, if a money laundering case is to be filed against him, the Commission for Investigation of Abuse of Authority should investigate it. What is the crime of receiving funds and laundering that property? In other words, a 'predicate offense' is required. If he acquired it through corruption, then the CIAA can investigate and prosecute corruption and then the property. This has not been done. The authenticity of the amendment to the Money Laundering Act through the current ordinance will be examined by the court. Laws that have a long-term impact should be made by the legislature with the mandate of the people. It is not good for laws with long-term implications to come through ordinances. The court has also established a principle regarding this.

It is not the intention of the money laundering law to file cases against political figures like ordinary criminals when there is a constitutional body like the CIAA. The police are treating individuals who have contributed to nation-building in the same way they would deal with thieves, robbers, thugs, or those who have accumulated property through criminal conspiracy.

• Has the Money Laundering Act been turned into a tool to target individuals?

It has been like this from the beginning. In Nepal, many people should be investigated by the Commission for Investigation of Abuse of Authority, not for money laundering. There is no disagreement on that. Corruption has become a national disease in our country. It is not the spirit of the law for the District Police Office and the CIB to investigate cases of money laundering after acquiring wealth through corruption.

• People are arrested based on ordinary complaints. Why is the principle of hearing first and then punishing not adopted?

Yes. This is why we can infer that the state is over-exercising its power, misusing it, or acting with unnecessary conspiracy with the intention of harassing someone. In some cases, we have seen the CIAA investigate and file cases directly. Public officials and leaders can be asked, according to the Prevention of Corruption Act, 'How much property do you have? Where did you get it from?'

In such cases, the defendant must submit their evidence, otherwise, they are guilty. However, the country cannot be brought out of the grey list by making a 'scarecrow' out of a money laundering department led by a joint secretary. Attention should be paid to meaningful investigation rather than arresting people. That is not the spirit of the law either.

• How can the investigation and prosecution of money laundering be made effective?

First, the investigator must look at their jurisdiction. 'Rule of Law' and 'Rule by Law' are two different things. 'Rule of Law' means the supremacy of law. 'Rule by Law' means governance through laws made according to one's needs.

The current attempt to do things through ordinances, including the one related to money laundering, is one such example.

I am not saying this is improper, but the court may interpret it as a sample of 'Rule by Law'. If this issue reaches the honorable court, it will be interpreted. It is wrong for the government to bring laws that should be issued by the sovereign legislature through the back door. This is wrong.

Second, the investigation process for money laundering has not been done properly. The investigation becomes effective when all investigation processes are completed without the concerned person or anyone else having prior information, and the case is submitted to the court at once. After the case is prosecuted in court, the matter should become known, but there is a commotion from the beginning. This is not a systematic investigation. Improvement is needed in this regard.