Nepal’s ministry of finance says it is preparing to clamp down on trade-based money laundering, particularly in respect of under-invoicing of imports.

The ministry says that under-invoicing is one of the primary reasons for the country’s current US dollar crunch.

Minister’s view

“We believe that under-invoicing in imports is rampant and importers might be sending money through other channels such as hundi to pay for the goods that are under-invoiced,” according to finance secretary, Shanta Raj Subedi.

Traders using letter of credit transactions are under-invoicing, with the amount paid in those transactions amounting to less than the actual cost of imported goods in order to evade customs payments according to Subedi.

The difference between the real cost of imports and the amount paid under an L/C transaction is settled under the hundi system, in which an unconditional order in writing is made by a person directing another to pay a certain sum of money to a person named in the order.

Departmental action

Subedi says the ministry has directed the Inland Revenue Department and the ministry’s own Department of Revenue Investigation to crack down on under-invoicing and other trade-based financial crimes.

The departments will increase their monitoring efforts, particularly by crosschecking prices quoted on documents shown at customs posts with market prices.