Thursday evening (November 28), two men, including one Indian national Gobardhan Sarabagi, were arrested with Rs. 3,812,000 cash from New Road ready to be sent abroad illegally through Hundi.

Metropolitan Police Crime Division (MPCD) detained Krishna Prasad Bhattarai, 23, a permanent resident of Sitaganga Municipality-4 of Arghakhanchi district, and Sarabagi, temporarily residing at Naradevi of Kathmandu Metropolitan City while they were preparing to dispatch the money through illegal channel to evade revenue to the government.

Senior Superintendent of Police (SSP) and in-charge at MPCD Shahakul Thapa said the police, suspecting revenue evasion for foreign exchange, handed over them to the Department of Revenue Investigation (DRI).

According to a preliminary police investigation, Sarabagi had given the money to Bhattarai for sending the cash through Hundi process. Sarabagi owns his own office under the name of Anjani Overseas in Kathmandu.

Police had recovered Rs. 3 million from Bhattarai in New Road and 812,000 cash possessed by Sarabagi himself.This was just one of the representative incidents and this trend has been thriving in Kathmandu and southern border points of Nepal especially involving well-off entrepreneurs who wish to do so to legalise their black money earned from illegal sources, police said.

According to police, major businessmen were very confidentially adopting Hundi as the best method to legalise their black money which they first send abroad in the name of buying or importing various goods.

Generally, in Hundi transfer money is paid in the destination country.
A month ago, the police, suspecting revenue evasion or misappropriation of foreign exchange, detained Ritesh Kumar Madhesia and Niraj Agrahari and handed them over to the DRI.
During the investigation, in which the case of Ritesh and Niraj was handled by DRI, the office found that the two individuals who came from India to Nepal’s border point had carried the Nepali currency in order to deposit it in the name of Nepalis in Nepali banks.

Looking at the case of Ritesh and Niraj, a new trend of Hundi method was uncovering, said information officer Rajib Pokhrel at the DRI.

“Generally while doing transaction in Hundi method, money is paid in the destination country but in this case, money was being physically moved to Nepal. The Hundi network is now being operated from Indian soil, unlike in the past when such networks were active in Nepal,” Pokhrel said.

Hundi is an informal system of remittance that is illegal as the money exchange takes place outside the banking channels. Anyone found involved in such transactions is liable to punishment.

According to the Foreign Exchange Regulation Act, anyone involved in such transaction will forfeit the money and could be fined up to thrice the amount illegally transferred, in addition to a jail term not exceeding three years.

Hundi is still widely practised in Nepal but in confidential way. But according to Pokhrel, traders are resorting to new techniques to transfer large amounts of remittance to Nepal.

In the Indian towns along the open border, Nepali currency is widely used and shopkeepers readily accept Nepali money as legal tender. This money, however, needs to return to Nepal. As Nepali currency is not exchangeable in India, it has to be brought back to Nepal physically.

“In this particular case, Hundi traders were collecting Nepali currency from the Indian shopkeepers who had sold goods to Nepali customers. They then tied up with Nepalis working and studying in India, Australia, Japan, the United Arab Emirates and Israel who need to send money back home on a regular basis,” said Nawaraj Adhikari, information officer at the Butwal-based branch office of the department.

Associates of the Hundi traders would collect foreign currency from the remitters in the foreign lands and the traders would then deposit equivalent Nepali currency into the bank accounts of the relatives of those remitters, bypassing the legal banking channel, according to Adhikari.

Other department officials, however, said they were not sure why Hundi traders were collecting Nepali currency from the Indian markets when it is available in Nepal in abundance.

Although Nepalis abroad are increasingly using formal channels to send money home in recent years, a significant amount of money still comes through Hundi, according to Nepal Rastra Bank.

Published on: 30 November 2019 | The Rising Nepal