Country Report on Terrorism 2016 - Chapter 2 - Nepal

Overview: Throughout 2016, domestic political unrest continued to plague Nepal as members of Madhesi groups from the country’s southern Terai area agitated for amendments to the constitution promulgated in September 2015. While the protests were mainly peaceful, agitators sometimes employed violent tactics. Ten years after the 1996-2006 Maoist insurgency, most Maoist factions have joined the legitimate political process, and the Communist Party of Nepal‑Maoist Center leads the Nepali government as of late 2016. But some participants of the former Maoist insurgency remained outside of the political process and occasionally used violence or threats to meet their objectives. Neither the ethnic protestors in the Terai nor the Maoist splinter groups have any known links to international terrorist groups.

2016 Terrorist Incidents: In June, a splinter Maoist group led by Netra Bikram Chand, also known as the Biplav group, used crude incendiary devices to destroy cell phone towers in several districts and to attack offices of two international non-governmental organizations (NGOs) in Sindhupalchowk and Nuwakot districts. In September, another Maoist splinter group was suspected of planting crude improvised explosive devices at a number of schools in the Kathmandu Valley.

Legislation, Law Enforcement, and Border Security: Nepal lacks a law specifically criminalizing terrorism or the provision of material support to terrorist networks. If an act of terrorism were to take place, Nepali courts would likely prosecute the perpetrators on the basis of laws pertaining to its constituent crimes, e.g. murder, arson, etc. Most Nepali officials view Nepal as at low-risk for an international terrorist incident. Accordingly, there is little impetus to introduce new laws.

A serious international terrorist event inside Nepal targeting foreigners would pose new and serious challenges for the Nepal Police and the justice sector and would strain the country’s investigative and judicial capacities. Under the current legal regime, a terrorist attack would likely be charged under its constituent crimes, such as murder or arson, while Nepal’s anti‑money laundering statute would encompass financial support for the offense. Nepal has limited experience with countering and investigating transnational crime, performing formal mutual legal assistance, and handling extradition requests. The country’s ability to process modern forms of evidence (e.g., cyber, DNA, explosives) to international standards is also limited, but it is poised to expand with the Nepal Police Special Bureau’s establishment of a cybercrime investigation unit and the Nepal Police Criminal Investigation Division’s inauguration of a digital forensics lab in December 2015. Nepali law enforcement agencies have demonstrated interest in receiving outside technical assistance and training. Nepal cooperates with other South Asian countries when they request assistance in investigating suspected terrorists, mainly through identification and tracking.

While Nepal has specialized units to investigate and respond to terrorist incidents (Nepal Police Special Bureau), law enforcement units have limited capacity to effectively detect, deter, or identify terrorist suspects. An open border with India and relatively weak airport security present vulnerabilities.

Kathmandu’s Tribhuvan International Airport lacks state of the art baggage screening technology and relies on physical pat-downs and metal detectors for passenger screening. Weak controls restricting access of airport employees are present throughout the facility, and initial and recurrent background checks on employees may not be rigorous.

Nepali police officers participated in the Department of State’s Antiterrorism Assistance (ATA) program. In 2016, the ATA program funded five training courses to improve counterterrorism capabilities within Nepali law enforcement agencies. More than 100 Nepali officers attended the 2016 ATA courses, which included: terrorism public awareness training consultation; hospital based management of mass casualty incidents; management of terrorist investigations training; fraudulent document recognition-behavioral analysis train-the-trainer; and best counterterrorism practices-community policing training.

Countering the Financing of Terrorism: Nepal belongs to the Asia Pacific Group on Money Laundering, a Financial Action Task Force (FATF)-style regional body. While the Government of Nepal has made progress in constructing an anti-money laundering/countering the financing of terrorism (AML/CFT) regime, additional work is required to develop expertise in financial crimes investigations, case management, interagency and departmental coordination, and border control. In 2014, Nepal enacted implementing regulations to address key deficiencies in its AML/CFT regime, including the seizing, freezing, and confiscation of terrorist assets, to comply with UN Security Council resolution (UNSCR) 1373 and the UN Security Council ISIL (Da’esh) and al‑Qa’ida sanctions regime. Nepal is taking steps to bring its legislation into compliance with international standards, but corruption, a large and open border, limited financial sector regulations, a large informal economy, and a lack of resources and capacity continued to hamper efforts to counter illicit financial flows.

Nepal’s financial intelligence unit, the Financial Information Unit (FIU-Nepal) is a member of the Egmont Financial Group of Intelligence Units. In 2014 it adopted AML/CFT software that can store suspicious financial transactions data, but the software was not fully operational by the end of 2016 due to a lack of compatible software among reporting entities to electronically submit data. Instead, reporting entities continued to submit hard copy reports to the FIU-Nepal. Additionally, key parts of the Nepali government responsible for AML/CFT lacked the ability to share data electronically. Cooperation and information sharing among government agencies remained a key obstacle to more effective AML/CFT efforts.

Nepali law criminalizes terrorist financing for any purpose, including through money laundering and financial transactions related to terrorism. The FIU-Nepal and the Department of Money Laundering Investigations (DMLI) lacked expertise, access to data, and other resources, however. During 2016, the DMLI and the Department of Revenue Investigation did not have any open investigations for suspected terrorist financing. There were no instances in 2016 of the government freezing or seizing assets for counterterrorism reasons.

The Nepal Rastra Bank (NRB), the central bank of Nepal, licenses and monitors money services businesses (MSBs) that receive remittances. MSBs in Nepal may receive inbound remittances, but funds must be distributed to recipients through banks, which are required to collect data on the originator. The government has limited ability to determine whether the source of money sent as remittances from abroad is licit or illicit, and has difficulty investigating informal money transfer systems such as hundi and hawala because the normally small nature of their businesses makes them hard to detect.

The NRB’s FIU-Nepal directives do not cover non-profit organizations unless specific information indicates that they are involved in money laundering or terrorist financing. Only commercial banks are required to submit suspicious transaction reports (STRs). NGOs must register with the Social Welfare Council and obtain permission from the Ministry of Finance to receive donations. The government lacks information on how many NGOs comply with this regulation.

Officials have identified trade-based money laundering, specifically the use of under- and over‑invoicing by businesses as a major source of money laundering. Nepal’s open border with India and inadequate security screening at border entry points make it difficult to detect the smuggling of currency, gold, and counterfeit notes, all of which are potential sources of funding terrorism.

For further information on money laundering and financial crimes, we refer you to the 2017 International Narcotics Control Strategy Report (INCSR), Volume II, Money Laundering and Financial Crimes: http://www.state.gov/j/inl/rls/nrcrpt/index.htm.

Countering Violent Extremism: The Government of Nepal generally does not view violent extremism, specifically the violent extremist ideology originating from conflict and instability in the Middle East, as a significant threat to Nepal. There were no government strategic communications programs to counter violent extremist ideology, nor were there government or civil society programs in Nepal to counter terrorist recruitment or rehabilitate former violent extremists.

International and Regional Cooperation: Nepal is a signatory of the South Asian Association for Regional Cooperation Regional Convention on Suppression of Terrorism.