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Over 50 Nepalis have invested in offshore companies, exploiting secretive tax regimes and breaking Nepal’s law, which bars investment in foreign countries, an investigation by the Centre for Investigative Journalism (CIJ) has found.

The report “Nepal Leaks 2019: Illegal Wealth Watch,” based on an analysis of over 3,000 financial and court documents and interviews with over 70 individuals, was published Wednesday night.

Those involved in offshore investment include politicians to high-flying businessmen — some of whom are non-resident Nepalis — to doctors and hoteliers, as well as at least half a dozen individuals whose names were previously unheard of in the public sphere.

Former lawmaker Birendra Mahato and his brother Upendra Mahato, Nepali Congress member Rajendra Bajgain, controversial businessman Ajeya Raj Sumargi, Mercantile CEO Sanjib Raj Bhandari, Chaudhary Group MD Arun Kumar Chaudhary and Hotel Malla Chair Rama Malla are among those named in the report.

Birendra Mahato, currently a central member of the Federal Socialist Forum party, invested in the Belarus-based OJSC Amkodor Holding Ltd Company, the CIJ report found. Other investors in the company include his brother Upendra Mahato, the former chairman of the Non-Resident Nepali (NRN) Association, another NRN Niraj Govinda Shrestha, and Lebanese national Romeo Abdo who was previously associated with TeliaSonera, the Swedish telecommunications company, which sold its stake in Ncell to Asian company Axiata amidst uproars over its tax evasion tactics.

The report by the Centre for Investigative Journalism reveals how a lot of these investors used their offshore companies to funnel money back into the country under the guise of foreign direct investment

Sumargi, who has made headlines in recent weeks following his withdrawal of nearly $7 million from Nepal Investment Bank after an apex court order quashed an earlier order allowing him access to his assets, invested in the Cyprus-based Airbell Service Ltd Company. His employee Arjun Sharma was named as a co-investor in the company. The company, the report found, is still actively operating.

The CIJ said most of the documents were provided by the Washington-based International Consortium of Investigative Journalists (ICIJ), the organisation responsible for publishing the Panama Papers, a 2016 investigation that exposed how the world’s rich and famous hide their wealth offshore.

The investigation revealed offshore links of 140 politicians and public officials, including former Pakistani Prime Minister Nawaz Sharif, Ukrainian President Petro Poroshenko, Iceland Prime Minister Sigmundur Davíð Gunnlaughsson and the current king of Saudi Arabia, Salman bin Abdulaziz bin Abdulrahman Al Saud.

Following the revelations, Iceland Prime Minister Gunnlaughsson was forced to step down from his position.

Among other Nepalis mentioned in the report are Arun Kumar Chaudhary, managing director of Chaudhary Group, and his family, who registered a company in the British Virgin Islands named the Ursine Ltd Company. The company lists Chaudhary, his wife Shila and sons, Karan and Suryansh, as co-owners.

A majority of investments were made in businesses registered in the British Virgin Islands, one of the most notorious tax havens in the Caribbean.

The report also revealed how a lot of these investors used their offshore companies to funnel money back into the country under the guise of foreign direct investment.

Sumargi and Sharma repatriated over $63m to Nepal from their Cyprus-based company through multiple transactions between 2008 and 2013, a report prepared by the Department of Money Laundering Investigation, which the CIJ report cites, concluded.

Nepal Congress member and tourism entrepreneur Rajendra Bajgain was also found to have made investments abroad. Bajgain set up the Gurkha Encounters Ltd and the FNB Publishing Ltd in London. He also opened three different companies in Hong Kong, British Virgin Islands and the United Kingdom, and then used these companies to funnel 3.78 billion rupees into Nepal as an investment for operating hotels and casino.

Another company that brought in funding through an offshore company is Saurabh Group of Companies. The group, led by Bishnu Prasad Neupane, received permission to bring in FDI worth 1.94bn rupees from the British Virgin Islands-based Global Technology and Trademark Ltd for the construction of a building in Bhaktapur’s Thimi area.

However, the construction was halted after the municipality found the company had defied its approval to construct a five-storey building and was planning on building a 17-storey complex.

The CIJ investigation also carried a separate report detailing a rise in the trend of Nepalis depositing money into Swiss banks, long considered to be the safest place to store illegally amassed wealth due to its secrecy laws. The amount of money being deposited by Nepalis in Swiss banks has seen a steady rise ever since the trend of hiding one’s ill-gotten wealth in the Alpine nation started in 1996. The report says the current savings of Nepalis in Swiss banks have crossed over 52 billion rupees.

Between 1996 when the Maoist insurgency started and 2006 when the peace agreement was signed, the amount of money deposited by Nepalis in Swiss banks more than doubled from 1.2bn rupees to 2.7bn rupees.

The report doesn’t mention the number of Nepalis with accounts in Swiss banks, but identified Lalitpur-based Minu Shah as the individual with the highest savings among Nepali accountholders.

Shah, who was married to an Indian national, made deposits of $23m in the bank between 2006 and 2007, according to the report. Shah also sought the service of the controversial Panamanian law firm Mossack Fonseca to register a company Rooney Holdings in the British Virgin Islands. The company was incorporated in 2007.

Shah’s two sons — Mahesh and Pravesh, both of whom hold Nepali passports — have also invested in foreign companies. The two brothers along with American national John Morrison Atwater invested in Dubai-based Pearl Global Finance Ltd.

Atwater also made a mutual investment with another Nepali national, Rama Malla, chairperson of Hotel Malla, in a London-based company called the Sixteen Upper Brook Street. —The Kathmandu Post/ANN

Published in Dawn, The Business and Finance Weekly, January 21st, 2019