NepaLeaks: On the trail of money flowing from Nepal to tax havens, then back to Nepal

In case you missed the first investigation by journalists into how money moves from Nepal offshore, published in January, we are summing up some of its top findings… and the best cartoons describing the financial game of hide-and-seek.

The investigation, dubbed NepaLeaks, was led by the Kathmandu-based Center for  Investigative Journalism and based largely on the International Consortium of Investigative Journalists’ archive of leaked financial records, including the Panama Papers, Paradise Papers, and Swiss Leaks.

For about a year, journalists sifted through thousands of financial records to analyze money flows from Nepal – a landlocked South Asian nation and one of the world’s poorest economies – to some of the world’s most secretive jurisdictions, including Switzerland, the British Virgin Islands, Seychelles, and the United Arab Emirates.

The offshore cycle.

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Center for Investigative Journalism

What did the journalists find?

Wealthy Nepalis have stashed more than $450 million in Swiss banks since they began saving money in foreign institutions when the Maoist insurgency broke out in 1996. The amount of money brought to Switzerland has reportedly decreased in recent years. But Binod Lamichhane, a spokesman with Nepal’s anti-money laundering agency, told CIJ that gathering information on account holders is not an easy task, because Nepal doesn’t have information exchange agreements with some countries.

Next stop: Swiss Banks.

Fifty-five Nepalis have invested in offshore businesses, in violation of a national law that forbids Nepali citizens and residents from investing overseas without government permission. The law was passed in 1964 to protect the country’s weak economy and encourage investment at home.

Hammocks and sunshine.

In the last two decades, around 45 percent of funds flowing into Nepal as foreign direct investments came from the British Virgin Islands. In response to NepaLeaks, the country’s Finance Minister Yubaraj Khatiwada told the Kathmandu Post that the ministry has appointed a committee to look into the issue.

From the British Virgin Islands.

Part of the money brought back as FDI from tax havens belonged to companies that had previously been charged with tax evasion, according to CIJ. At least one of those firms, which invested in Nepal’s cement, betel nut and tobacco industries, then received tax credits for the FDI, the CIJ reported.

Foreign investment.

After the stories were published by more than two dozens local outlets, the Prime Minister’s office ordered the national bank’s financial information unit to probe all the names listed in the report, according to the Kathmandu Post.

Finance Minister Yubaraj Khatiwada also said the government will have to fix the legal loopholes that allow misuse of funds.

The NepaLeaks reporting team included Krishna Acharya, Shiva Gaunle and Arun Karki.

https://www.icij.org/blog/2019/03/nepaleaks-on-the-trail-of-money-flowing-from-nepal-to-tax-havens-then-back-to-nepal/