Combating Finance-related Crimes

As stated by the French sociologist Emile Durkheim, laws, especially criminal laws, are considered a necessary evil. American Jurist Karl Llewellyn remarked, "Society changes faster than law." This statement proves to be more and more relevant in this era as society undergoes rapid modernisation, especially in the business and financial sectors. New ideas and tools are being developed in banking and the financial business regularly. Banking and financial institutions-related crimes and offences are growing in the modern era due to the availability of a variety of means, such as computers, mobile phones, and social media, among others. 

Financial and commercial frauds, such as misuse of loan and credit, abuse of electronic means and cyber-related frauds and crimes, misuse of authority, violation of banking laws, rules, norms and practices, wrong valuation, misuse and presentation of fake documents, forgery of bank accounts, property-related offences and others are being committed more frequently than ever before.  Banking crime can cause significant financial damage and loss to our society. The effect of such crimes has a chain reaction on society. 

Evolution of technology

Concerns and challenges in finance-related crimes and cases are rapidly growing these days due to the evolution of technology, sophisticated methods of fraud, and the difficulty of detection and enforcement. These financial offences and fraudulent activities cannot be effectively controlled solely through laws and regulatory bodies; they also require robust social awareness and proactive public engagement as essential mechanisms of prevention and control. This is crucial because banks and financial institutions are among the most sensitive and indispensable components of the state, providing a wide range of financial, monetary, banking, and commercial services to all citizens and the broader society.

In the realm of financial offences, a growing array of legal documents now governs the increasingly complex landscape of financial transactions and banking operations. These crimes and offences, ranging from fraud to unauthorised activities, continue to challenge contemporary business communities, giving rise to significant issues within modern society. Notably, the surge in cheating through online and mobile banking platforms has become a pressing concern in this era of artificial intelligence (AI), further complicating the fight against crimes.

The Nepal Rastra Bank (NRB) plays a pivotal role in this context by formulating and implementing financial crimes, monetary policy, issuing currency, overseeing foreign exchange policies, regulating and supervising financial institutions, managing foreign exchange reserves, and developing secure payment systems. The increasing prevalence of financial offences can be attributed to factors such as urbanisation, modernisation, and globalisation, all of which have transformed financial practices and introduced new vulnerabilities.

Given these realities, it is imperative to minimise financially related crimes and offences at all costs to ensure a fair, just, and lawful society. Achieving this goal requires not only strong legal frameworks and vigilant regulatory oversight but also widespread public education and the cultivation of a culture of integrity and accountability throughout the financial sector. Only through a comprehensive and collaborative approach can we safeguard the stability and trustworthiness of Nepal’s banking and financial system for the benefit of all. That's possible through the implementation of laws and order by the regulatory bodies of the country. 

Law serves as a formal mechanism for controlling individual and social behaviour in every modern society. Crimes and offences are inherently social phenomena. Numerous financial and banking-related offences have been committed within Nepali financial institutions and the commerce and business sector since the beginning of Nepal’s modern economic history. Consequently, laws, rules, regulations, and government directives have been established to mitigate those offences. An offence or crime is an act, or the commission of an act that is prohibited, or the omission of a duty that is mandated by public law, making the offender liable to punishment under that law. 

Although the term “banking offence” is relatively new in Nepal’s legal context, such offences have existed since the emergence of money and the banking system in society. Financial companies and co-operatives provide financial services to the citizens. However, this service sector is increasingly experiencing offences and crimes related to money, finance, credit, and loans. Collecting money from the public and investing or giving loans to business sectors are the primary objectives of banks and financial institutions. 

Public awareness

Such crimes must be controlled not only by law but also through social and public awareness from concerned bodies. The preamble of the Banking Offence and Punishment Act, 2064, states: “It is expedient to provide legal provisions on banking offences and punishments to promote trust towards the banking and financial system". This is done to mitigate the consequences and risks that the banking and financial system may suffer due to offences occurring during transactions of banks and financial institutions. 

There are numerous cases and examples related to financial fraud. Unity Life International Kashiram Gurung vs. Prime Minister and Office of the Ministerial Secretariat (NKP 2069, Issue 4, Decision no. 8814) was one of the most serious financial crimes which involved an organised way of teamwork. Co-operatives-related financial crimes are also growing in number. Politicians, social activists, ex-personnel of Nepal police and civil services and businessmen are also involved in these crimes. That's why financial crimes are the most challenging socio-economic problem, and must be controlled for the social and financial harmony in our country. 

(The author is an advocate.)