Country Reports on Terrorism 2010 - Nepal

Overview: Nepal experienced no acts of terrorism during the past year, though the government's limited ability to control the open border with India was of concern, since terrorist groups have used Nepal as a transit point into India. The increased presence of Nepali security services in the southern Terai region led to a decrease in violence there, but the security situation remained problematic, particularly in central and eastern Terai. The United Communist Party of Nepal-Maoist (UCPN-Maoist), designated as a Specially Designated Global Terrorist by the U.S. government under Executive Order 13224, became a partner in the coalition government. The group has not forsworn violence nor has it taken several of the other steps required for delisting, that is it has not renounced violence and terrorism, its youth group has not abandoned violence and reformed, nor has it fully demonstrated a commitment to the peace process by complying with Nepali courts investigating emblematic human rights cases.

Legislation and Law Enforcement: Nepal improved its security monitoring capabilities at official border crossings along the southern border with India and at Kathmandu's Tribhuvan International Airport, while also increasing the Armed Police Force and Nepal Police presence at several crossings along the southern border. Violence in the southern Terai plains decreased due to increased deployment of both the Armed Police Force and the Nepal Police throughout the Terai along with a renewed working relationship with Indian security forces. The government's Special Security Plan, created in July 2009, sought to bridge a gap between the Nepal Police, Armed Police Force, and local communities through promotion of better working relationships, but has fallen short in building sustained public confidence.

Countering Terrorist Finance: Nepal was not a regional financial nexus, and there were no indications that the country was used as a major international money laundering center in 2010. However, government corruption, poorly regulated trade, weak financial sector regulation, and a large informal economy made the country vulnerable to money laundering and terrorist financing. The major sources of laundered proceeds stemmed from tax evasion, corruption, counterfeit currency, smuggling, and invoice manipulation. The Financial Information Unit within the Nepal Rastra Bank (Nepal's Central Bank) continued to investigate money laundering and terrorist financing; however, its efforts were limited by a lack of technical capabilities and government support. Terrorist financing legislation was drafted, and at year's end, the Cabinet was reviewing it before sending it to the legislature. Nepal is a member of the Asia/Pacific Group on Money Laundering, a Financial Action Task Force-style regional body. The Government of Nepal has the authority to freeze suspected terrorist assets and has implemented UNSCR 1373. There was one arrest and conviction for money laundering in 2010.

Regional and International Cooperation: Nepal hosted the U.S.-sponsored "South Asia Conference on the Use of Financial Sanctions in Countering Violent Extremism," which brought together government officials from every country in South Asia to discuss the issues involved with financial sanctions and the importance of maintaining and respecting those sanctions once imposed.