Nepal’s Financial Intelligence Unit (FIU) has found that cryptocurrencies are widely used to orchestrate cyber-related frauds despite an official ban on trading digital assets.
The FIU is a dedicated department of Nepal Rastra Bank, the central bank of Nepal, which monitors and counters financial fraud, including money laundering and terrorist financing.
In its “Strategic Analysis Report” issued on Nov. 18, the FIU noted an increase in the use of cryptocurrencies by bad actors to launder illicit funds. The report claimed fraudsters convert illicit funds to cryptocurrencies, making it challenging for authorities to trace and recover funds.
Source: Nepal Rastra Bank
The ease of transferring cryptocurrencies to off-shore accounts adds to the complexity of tracking down fraudsters.
Legal status of crypto hinders fraud reporting
Additionally, citizens of Nepal are increasingly falling victim to fraudulent crypto investment schemes. Fraudsters contact potential victims through social media or online advertisements, often promising unrealistic and lucrative returns.
In many cases, the illegality associated with crypto trading discourages victims of crypto fraud from informing authorities. As a result, underreporting remains a challenge due to factors like embarrassment or fear of repercussions.
Fraud-related complaints received in 2024. Nepal Rastra Bank
Nearly 65% of all fraud reported to Nepal authorities until May 2024 was cyber-enabled.
Preventing crypto fraud through education and transaction monitoring
In response to growing cyber threats, the FIU made two key recommendations to deter the use of crypto in financial fraud. These include enhancing scrutiny of cryptocurrency transactions and training financial institutions to identify red flags and conduct timely reporting.
Various avenues of financial fraud. Source Nepal Rastra Bank
The authority further recommended increased public awareness to reduce susceptibility to fraud, strengthening inter-agency cooperation and updating regulatory frameworks to address digital payment fraud.
In a similar effort to curb financial fraud using cryptocurrencies, South Korea’s Finance Minister, Choi Sang-Mok, said the country will introduce reporting mandates on cross-border crypto transactions at a G20 meeting in Washington, D.C. in the United States.
South Korean Finance Minister Choi Sang-Mok at a G20 meeting in Washington. Source: South Korea Ministry of Strategy and Finance
Under the new rules, any business handling cross-border crypto transfers must pre-register with the relevant authorities and report all details to the Bank of Korea monthly.
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