International Financial Transaction Act, 2054 (1998)


Published: 1998

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INTERNATIONAL FINANCIAL TRANSACTIONS ACT, 2054 (1998)1

INTERNATIONAL FINANCIAL TRANSACTIONS
ACT, 2054 (1998)
Date of Authentication and publication
15 Magh 2054 (January 28, 1998)
An Act made to provide for International Financial Transactions
Preamble : Whereas, it is expedient to develop Nepal as a centre for international
financial transactions to foster the economic development of the nation in the context
of open, liberal and market oriented economic policies pursued by the country, and the
globalization of international financial markets; and
Whereas, it is expedient to regulate and manage the financial activities of international
financial entities in Nepal,
Be it enacted by Parliament in the Year-sixth year of the reign of His Majesty’s King
Birendra Bir Bikram Shah Dev .
1. Short Title and Commencement: (1) This Act may be called "International
Financial Transactions Act, 1998".
(2) It shall come into force on such date as Government of Nepal
may, by notification published in the Nepal Gazette, appoint.
2. Definitions: In this Act, unless the subject or context otherwise requires,-
(a) "International Financial Transaction" means any financial transaction
carried out by any license holder entity under thisAct.
(b) "International Financial Entity" means any financial entity as referred to
in Section 4.
(c) "Promotion Board" means the International Financi l Transactions
Promotion Board constituted under Section 9.
(d) "License" means a license granted under Section 14 to carry out
international financial transactions in accordance with this Act.
(e) "License holder Entity" means an international financial entity
authorized to carryout international financial trans ctions under this Act.
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(f) "Accreditation Committee" means the International Financial
Transactions Accreditation Committee constituted un er Section 11.
(g) "Person Resident of Nepal" means any of the following persons:-
(1) Nepalese Citizens other than those residing outside the Nepal for
more than the prescribed period for the purpose of being engaged
in any employment, doing any business or carrying out any other
occupation, or for any other purpose,
(2) Non-Nepalese citizens residing in the Nepal for more than the
prescribed period for the purpose of being engaged in any
employment, doing any business or carrying out any other
occupation,
(3) Any entity which has been registered in Nepal under the existing
laws.
(h) "Prescribed" or "as prescribed" means prescribed or as prescribed in
Rules made under this Act.
3. License to be obtained: An international financial entity interested to
carryout international financial transactions shall be required to obtain a license
therefore from the Accreditation Committee in pursuant to Section 14.
4. Financial Entities that may be authorized to obtain License : (1) Only
the following financial entities may be authorized to obtain licenses to carry out
international financial transactions under this Act:
(a) Foreign bank and trust companies,
(b) International insurance and reinsurance companies,
(c) Companies serving as the registered offices foreign
companies,
(d) International holding and investment companies,
(e) Administrative or regional offices established by foreign
companies,
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(f) International trading companies,
(g) International finance companies,
(h) Foreign real estate holding companies,
(i) Foreign Patent and royalty companies,
(j) Foreign mutual funds,
(k) International leasing companies,
(l) International merchant banks,
(m) Entities such as foreign partnership and trusts e tablished as body
corporate,
(n) International sales transaction companies,
(o) Foreign entities to allow nonresident pensions r deferred bonus
plans,
(p) International financial companies providing services like stock
broker, underwriter, investment advisor, pension fund advisor.
(2) Notwithstanding anything contained in Sub-section (1), in order to
obtain a license under this Act, a financial entity should have been registered
duly in any country outside the Nepal and engaged in international financial
transactions at least for a period of three years.
(3) Government of Nepal may, on the recommendation of the
Promotion Board, and by notification published in the Nepal Gazette, make
alterations, additions or deletion to the list of financial entities as referred to in
Sub-section (1).
5. Acts not to be done by International Financial Entities: International
financial entities shall not be allowed to do the following acts:
(a) To purchase any kind of immovable property within t e Nepal or to keep
in their name otherwise,
(b) To carry out any type of international financial transaction with any
person resident of Nepal,
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(c) To purchase shares or debentures of any company incorporated in the
Nepal under the existing laws,
(d) To open an account in any commercial bank of Nepal:
Provided that an account may be opened in any commercial bank with
the permission of the Accreditation Committee for the purpose of
running the day-to-day administrative business of the office up to such
amount as may be fixed by the Accreditation Committee.
6. No restrictions on brining in Foreign Currencies : (1) No restriction of
any kind shall be imposed on a license holder entity to bring in foreign
currencies as may be required for international financial transactions.
(2) No restriction of any kind imposed by the existing laws relating to
foreign exchange shall apply in relation to a licens holder entity.
7. Fund to be allowed repatriation : A license holder entity may repatriate
outside the Nepal the foreign currencies earned by it by carrying out
international financial transactions and the foreign currencies brought in by
such entity for the purpose of carrying out international financial transactions :
Provided that no property or capital accrued from any illicit or illegal act shall
be allowed to be repatriated.
8. Nationalization not to be done: The capital or the property of any entity
shall not be subjected to nationalization.
9. Foemation of Promotion Board: (1) An International Financial
Transactions Promotion Board consisting of the following members shall be
formed to promote international financial activities and develop Nepal as a
centre for international financial transaction:
(a) Minister or State Ministery of Finance -Chairpe son
(b) Chairperson, Finance Committee, the House of
Representatives - Member
(c) Vice-Chairperson, National Planning
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Commission - Member
(d) Governor, Nepal Rastra Bank - Member
(e) Secretary, Ministry of Finance - Member
(f) Secretary, Ministry of Law and Justice - Member
(g) A person nominated by Government of Nepal
from among persons having experience in
financial transactions - Member
(2) The Promotion Board may invite national or foreign experts or
advisors involved in international financial transactions to participate at its
meeting as observers.
(3) The tenure of office of the member nominated uner Clause (g) of
Sub-section (1) shall be two years.
(4) An officer-level employee of Nepal Rastra Bank designated by
the Promotion Board with the consent of the Nepal Rastra Bank shall act as the
Secretary of the Promotion Board.
(5) The working procedures of the meetings of the Promotion Board
shall be as prescribed.
(6) The members of the Promotion Board shall be entitl d to receive
such allowances and benefits as may be prescribed.
10. Functions, Duties and Powers of Promotion Board : The Promotion
Board shall have the following functions, duties and powers :
(a) To frame necessary policies for the promotion of international financial
transactions,
(b) To cooperate with Government of Nepal in the formulation of necessary
laws so as to promote international financial transactions,
(c) To maintain or cause to be maintained coordinatio among the
concerned governmental, non-governmental and interna io al entities in
matters of international financial transactions,
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(d) To make necessary recommendations to Government of Nepal in
respect of exemptions, facilities and concessions to be accorded to
international financial entities for the purpose of establishing Nepal as an
attractive centre for international financial transctions,
(e) To hear appeals filed by any international financi l entity against the
suspension or revocation of its license by the Accreditation Committee,
(f) To perform such other functions as may be deemed n cessary for
promoting international financial transactions.
11. Formation of Accreditation Committee : (1) An International Financial
Transactions Accreditation Committee consisting of the following members
shall be formed for the purpose of granting licenses to international financial
entities to carry out international financial transctions, and for the purpose of
regulating financial transactions to be carried out by such entities :
(a) Governor, Nepal Rastra Bank -Chairperson
(b) Secretary, Ministry of Finance - Member
(c) Secretary, Ministry of Law and Justice - Member
(d) One person nominated by Government of Nepal from
among Chartered Accountants - Member
(e) One person nominated by Government of Nepal from
among Economists - Member
(2) The Accreditation committee may invite national or foreign
experts or advisors involved in international financi l transactions to participate
at its meetings as observers.
(3) The tenure of office of the members nominated un er Clauses (d)
and (e) of Sub-section (1) shall be two years.
(4) An officer-level employee of Nepal Rastra Bank as designated by
the Accreditation Committee with the consent of theN pal Rastra Bank shall
act as Secretary of the Accreditation Committee.
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(5) The office of the Accreditation Committee shall be located at the
Nepal Rastra Bank.
(6) The working procedures of the meetings of the Accreditation
Committee shall be as prescribed.
(7) The members of the Accreditation Committee shall be entitled to
receive such allowances and benefits as may be prescrib d.
12. Functions, Duties and Powers of the Accreditation Committee: The
Accreditation Committee shall, apart from the functions, duties and powers set
forth elsewhere in this Act, have the following functions, duties and powers:-
(a) To monitor and supervise the financial activities of license holder entities
as to whether or not their international financial tr nsaction activities are
in line with the provisions of this Act or Rules made thereunder, or other
prevailing laws relating to international financial transactions,
(b) To make recommendations to the Promotion Board in respect of
facilitates to be accorded to international financil entities for the
purpose of making Nepal as an attractive centre for international
financial transactions,
(c) To make recommendations to the Promotion Board in respect of
improvements to be made in the existing laws related with international
financial transactions for the purpose of carrying out international
financial transactions in an effective and well-managed manner,
(d) To inquire as to whether or not a license holder entity is fulfilling the
conditions required to be fulfilled under the provisions of this Act and to
require it to fulfill them if they are found not tohave been fulfilled,
(e) To give necessary instructions to license holder entities in respect of
international financial transactions.
(f) To avail itself of the service of national or foreign experts or specialized
agencies for the promotion and development of international financial
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transactions,
(g) To comply with the instructions given from time to time by the
Promotion Board,
(h) To suspend or revoke, as may be required, the license obtained by any
license holder entity in cases where it is in violati n of the provisions of
this Act or Rules made thereunder, or the existing laws relating to
international financial transactions:
Provided that, such an entity shall be given an opportunity to submit its
explanation before such revocation.
(i) To perform such other acts, as may be prescribed, for making
international financial transactions effective.
13. Application for License: An international financial entity interested to carry
out international financial transaction shall, for the purpose of obtaining license
to carry out such financial transaction, submit an pplication to the
Accreditation Committee in the format as prescribed along with the prescribed
application fee, details and documentations.
14. Granting of License: If the Accreditation Committee, after the necessary
inquiry made into an application submitted under Section 13 for obtaining
license to carryout international financial transactions, deems it appropriate to
grant a license to carryout international financial tr nsactions, it shall, upon
taking the prescribed amount of license fee, issue a license in the prescribed
format setting out therein the necessary terms and co itions. If a license may
not be issued, the applicant shall be informed thereof.
15. Information, Details and Documentations may be Demanded : The
Accreditation Committee may, before issuing a license to any international
financial entity under this Act, demand from such entity such information,
details and documentations as it may deem necessary in connection with issuing
a license for carrying out international financial tr nsactions. It shall be the duty
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of the concerned international financial entity to furnish forthwith the
information, details and documentations so requisted by the Accreditation
Committee.
16. Renewal of License: A license issued under section 14 for carrying out
international financial transaction shall be renewed every year. The license
renewal fee and other provisions regarding renewal sh ll be as prescribed.
17. Secrecy to be maintained : (1) The Accreditation Committee shall maintain
secrecy of all documents and information which are related with license holder
entities and are in possession or control of the Accreditation Committee.
(2) The Accreditation Committee shall not be compelled to produce
any documents or information referred to in Sub-section (1) before any court,
commission of inquiry, Commission for the Investigaon of Abuse of Authority
or committee of inquiry, nor shall it be compelled to leak otherwise the secrecy
of such documents or information.
(3) Notwithstanding anything contained in Sub-section (2), if there
are sufficient grounds to prove that the documents or information related to the
international financial transaction carried out by a licenseholder entity are
connected with illicit narcotic drugs or illegal arms and ammunition, the court
may, on the request of the prosecuting authority acing on behalf of Government
of Nepal, give an order to have such documents and information produced
before it.
18. Proceeds to be credited to the formed Fund: The charges and other
proceeds received by the Accreditation Committee under this Act shall be
credited to the Consolidated Fund.
19. Sub-Committees may be constituted: (1) The Promotion Board and the
Accreditation Committee may formed sub-committees as may be required to
conduct their business.
(2) The functions, duties, powers, jurisdiction and procedures of the
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subcommittees formed under subsection (1) shall be as fixed by the Promotion
Board or the Accreditation Committee constituting such subcommittees.
20. Cooperation to be Extended : All governmental agencies shall extend
necessary cooperation to the Promotion Board or the Accreditation Committee
in matters of conducting their business.
21. Delegation of Power : (1) The Promotion Board may delegate any or all of
its powers under this Act, Rules or Bye-laws made th reunder to any of its
member or the Accreditation Committee, as may be requi d.
(2) The Accreditation Committee may delegate any or all of its
powers under this Act, Rules or Bye-laws made thereund r to any of its
member, a subcommittee or an employee of officer rank, s may be required:
Provided that, the Accreditation Committee shall not be entitled delegate
its power of issuing license for carrying out interational financial transactions
or of revoking or suspending it.
22. Contact with Government of Nepal : While maintaining contact with
Government of Nepal, the Promotion Board shall proceed through the Ministry
of Finance.
23. Power to make Rules and Bye-laws: (1) In order to carry out the objectives
of this Act, Government of Nepal may make necessary Rules.
(2) The Promotion Board may, subject to this Act and Rules made
thereunder, make necessary Bye-laws, and such Bye-laws shall come into force
upon approval by Government of Nepal.
24. Existing laws to Prevail: Matters governed by this Act shall be dealt with in
accordance with this Act and matters not dealt with by this Act shall be
governed by other international financial transactions-related existing laws.