US bank debits Nepal $1m sans NRB nod

KATHMANDU, March 23: In a surprising event, US-based Chase Bank has deducted one million dollars from a bank account held by Nepal´s central bank at the US bank without its approval after a New York court issued a verdict in favor of Asim Khatri Chhetri, whose swift-transferred payment had been frozen by Nepali authorities on the charge of money laundering.

Nepal Rastra Bank (NRB) had frozen the payment made by KC -- proprietor of Colorado-based Tarala International -- in July 2008, after the Department of Revenue Investigations (DRI) overseeing money-laundering cases traced a dubious transfer payments.

KC had made the payment to a Chinese national named Wu Lixian, a logistics supplier to the Nepal Army and Nepal Police, for supply of non-lethal logistics to Nepal Police peacekeepers in Sudan and also for construction of a prefab house in Kathmandu.


DRI froze the amount after Wu failed to produce customs clearance of the supply and official documents of transactions for which the payment was made. Wu later even refused to cooperate with the investigation, following which DRI on February 28 filed a case against him at the Special Court, Kathmandu, on money laundering charge.

The case sub judice in Nepal took a dramatic turn last week when Chase Bank deducted the frozen amount from NRB´s account at Chase. "It was pretty nasty development. Neither had the bank issued any prior notice of intended action, nor we knew anything about the court´s verdict," said an NRB official.

Why did the Chase Bank decide to debit the amount from NRB´s account is puzzling as well, for NRB was neither involved in the transaction nor overseeing the case. NRB had just frozen Wu´s account at NB Bank as per the instruction from the DRI.

According to information gathered by Republica, KC filed a case at a New York court in 2010 seeking retrieval of the money as the recipient bank in Nepal -- NB Bank -- did not pay the money to its client -- Wu. KC had made DRI and NRB defendants in the case.

The New York court approached both the DRI and NRB seeking clarification over the case, but NRB did not respond as the approach was informal, said an NRB official.

When the court approached the DRI in December 2010, we said the payment was frozen because the recipient was under investigated for a possible case of money laundering, said Mahesh Dahal, director general of DRI.

As an authority handling the case, Dahal said the department had forwarded the letter to MoFA before December 31, the deadline set by the New York court for response, for further proceeding.

However, what followed after that took everyone by surprise. "Apparently, DRI´s response did not reach the court and it issued the verdict in favor of KC ordering Chase Bank to repay the transferred money," said the source.

Chase Bank did approach NB Bank for backward transfer of the money. However, as the bank refused to transfer the money citing NRB´s instruction, Chase Bank went on to debit the money from the account of NRB.

Officials concerned, meanwhile, suspect that Wu´s payment could be related to an unscrupulous deal linked with the supply of logistics to Nepal Police peacekeepers in Sudan.

"The link exists because Wu, under the subcontract of Tarala International, was engaged in supplying logistics to Nepal Police in Sudan and also built a prefab house in Kathmandu," said a source.

Wu´s representative in Nepal -- Shambhu Bharati of Bhagabati Traders -- has given statement to DRI that some Rs 73 million (US$ 1million) was transferred to Nepal because Wu was required to pay about Rs 50 million to local agents who supplied goods to Nepal Police peacekeepers in Sudan.

"An additional some Rs 20 million is needed for paying one Shiva Mandal - a carpenter from Mahottari - who assembled the prefab house," the source quoted Bharati as saying in his statement.

Govt takes diplomatic route

KATHMANDU: The government on Tuesday decided to promptly take up the "one million dollar" case with the US government informing that the money is ´not clean´.

"We will mobilize diplomatic channel to inform the US government that the money transferred by KC to Wu is meant for serving ´unknown´ purpose and a money laundering case is presently sub judice in Nepal," said a senior official at the Ministry of Finance.

MoF is likely to forward a letter in this connection to the Ministry of Foreign Affairs on Wednesday.

Likewise, Anti-Money Laundering National Steering Committee that met on the day also instructed NRB to engage in dialogue with Chase Bank to reclaim the one million dollar.

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