Nepal Authorities Investigate Billion-Rupee Illegal Money Transfer scheme,Highlighting Risks of ‘Hundi‘ System
Kathmandu,Nepal – Nepali police are investigating a complex financial scheme involving approximately 9.68 billion rupees (roughly US$6.9 million) transferred through an informal money exchange network known as “hundi,” revealing the challenges Nepal faces in regulating remittances and combating illicit financial flows. The inquiry centers around alita Money Transfer, a business registered to Alita Devi Mahato, 45, who claims to be unaware of the illegal transactions.
The case underscores the widespread use of hundi – a conventional,unregulated system of money transfer – notably among Nepal’s large migrant worker population. While offering convenience, hundi operates outside formal banking channels, posing risks of fraud, money laundering, and circumvention of government regulations. nearly 6 million Nepalis, about 20% of the population, hold foreign employment labor permits, according to a 2024 report from the International Fund for Agricultural Development, sending vital remittances home.
According to police, Alita Devi Mahato’s company facilitated the illegal transactions, ultimately sending funds to the families of over 700 migrant workers. however, Mahato, who is illiterate, maintains she had no knowledge of the scheme. Her son,Bimal Mahato,has also been detained,with his bank accounts frozen and travel restricted,though he asserts his innocence,stating he was working in Kuwait during the period in question. Authorities have not yet disclosed the identities of those who initially funded the scheme.
“There is no blame on the person who works and sends money to Nepal,” stated police spokesman Khadka,emphasizing the focus remains on those orchestrating the illegal transfers.
The crackdown comes as banks,police,and government officials attempt to dismantle the hundi system. Nepal Rastra Bank has launched a financial literacy campaign via social media, aiming to educate overseas workers about legal remittance options. Though, experts argue systemic changes are needed.
Economist Adhikari suggests a comprehensive overhaul of remittance programs, citing high fees that erode the value of funds sent home. ”Workers need their money to earn more interest when it’s deposited into legitimate banks,” Adhikari said.
Despite efforts to promote formal channels, some argue the banking system remains inaccessible to manny. Shah, a gold chain smuggler from Qatar, contends, “The banking system…is not for the illiterate and the poor,” highlighting the continued reliance on hundi for those lacking financial literacy or access to traditional banking services. The government faces the challenge of balancing enforcement against hundi with providing accessible and affordable remittance options for its vast diaspora workforce.
