The Financial Intelligence Unit of Nepal (FIU) has found that cryptocurrency is widely used to carry out cyber-related fraud, despite an official ban on trading digital assets.
FIU is a dedicated unit of the Central Bank of Nepal, Nepal Rastra Bank, tasked with overseeing and combating financial fraud, including money laundering and terrorist financing.
In the report 'Strategic Analysis' published on November 18, FIU confirmed the increase in the use of cryptocurrency by bad actors for money laundering. The report states that fraudsters convert illegal money into cryptocurrency, making it challenging for authorities to trace and recover funds.
Source: Central Bank of Nepal
The ability to transfer cryptocurrency to foreign accounts increases the complexity of tracking down scammers.
The legal status of cryptocurrency hinders fraud reporting
Additionally, Nepalese citizens are increasingly falling victim to fraudulent cryptocurrency investment schemes. Scammers approach potential victims through social media or online ads, often promising attractive and unrealistic returns.
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In many cases, the illegality associated with cryptocurrency transactions makes victims hesitant to report fraud to authorities. This leads to underreporting due to factors such as embarrassment or fear of consequences.
Complaints related to fraud received in 2024. Central Bank of Nepal
Nearly 65% of all fraud cases reported to Nepalese authorities by May 2024 are caused by networks.
Preventing cryptocurrency fraud through education and transaction monitoring
In response to the increasing cyber threats, FIU has made two important recommendations to prevent the use of cryptocurrency in financial fraud. These are to enhance the scrutiny of cryptocurrency transactions and to train financial institutions to identify red flags and report them in a timely manner.
Various financial fraud pathways. Source: Central Bank of Nepal
This agency also proposes to enhance public awareness to reduce the likelihood of falling victim to scams, strengthen inter-agency cooperation, and update the legal framework to address digital payment fraud.
In a similar effort to curb financial fraud using cryptocurrency, Korean Finance Minister Choi Sang-Mok stated that the country will implement mandatory reporting regulations for cross-border cryptocurrency transactions at the G20 meeting in Washington, D.C., USA.
Korean Finance Minister Choi Sang-Mok at a G20 meeting in Washington. Source: Ministry of Strategy and Finance of Korea
According to new regulations, any business processing cross-border cryptocurrency transfers must register in advance with relevant authorities and report all details to the Bank of Korea on a monthly basis.
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