According to Cointelegraph, Nepal's Financial Intelligence Unit (FIU) has identified a significant rise in the use of cryptocurrencies for cyber-related fraud, despite an official ban on trading digital assets. The FIU, a specialized department within Nepal Rastra Bank, is tasked with monitoring and countering financial fraud, including money laundering and terrorist financing. In its "Strategic Analysis Report" released on November 18, the FIU highlighted the increasing trend of bad actors using cryptocurrencies to launder illicit funds. The report noted that fraudsters often convert illicit funds into cryptocurrencies, complicating efforts by authorities to trace and recover these funds. The ease with which cryptocurrencies can be transferred to offshore accounts further exacerbates the challenge of tracking down these fraudsters.
The legal status of cryptocurrencies in Nepal complicates the reporting of fraud. Many citizens have fallen victim to fraudulent crypto investment schemes, often initiated through social media or online advertisements that promise unrealistic returns. The illegality of crypto trading in Nepal discourages victims from reporting these frauds to authorities, leading to significant underreporting. Factors such as embarrassment or fear of repercussions contribute to this issue. As of May 2024, nearly 65% of all fraud reported to Nepalese authorities was cyber-enabled, underscoring the growing threat posed by digital fraud.
To combat the rising threat of crypto-related fraud, the FIU has proposed two key measures. These include enhancing the scrutiny of cryptocurrency transactions and training financial institutions to identify red flags and report suspicious activities promptly. The FIU also emphasized the importance of increasing public awareness to reduce vulnerability to fraud, strengthening inter-agency cooperation, and updating regulatory frameworks to address digital payment fraud effectively.
In a related development, South Korea is also taking steps to curb financial fraud involving cryptocurrencies. South Korea's Finance Minister, Choi Sang-Mok, announced at a G20 meeting in Washington, D.C., that the country will introduce reporting mandates on cross-border crypto transactions. Under the new regulations, businesses handling cross-border crypto transfers will be required to pre-register with relevant authorities and report all transaction details to the Bank of Korea on a monthly basis. These measures reflect a broader international effort to address the challenges posed by the misuse of cryptocurrencies in financial fraud.