Nepal shifts toward heavy fines over jail for financial crimes, Drawing global parallels and investor debate

KATHMANDU: Nepal is moving toward a significant policy shift in handling financial crimes, with the government signaling a preference for large monetary penalties over custodial arrests, aligning more closely with practices seen in advanced economies. The proposed approach has sparked intense debate among policymakers, regulators, and the private sector, particularly amid recent high-profile arrests of leading industrialists.

The evolving stance comes as global precedents show that even the world’s largest corporations often resolve financial and regulatory violations through hefty fines rather than imprisonment of top executives.

Global Practice: Fines Over Imprisonment

In 2025, the European Commission fined Apple and Meta a combined 700 million euros (approximately Rs 1.01 trillion at the time) for violating digital competition rules under the Digital Markets Act. Apple faced a 500 million euro penalty, while Meta was fined 200 million euros. Despite the scale of the violation, no senior executives were arrested.

Similarly, in October 2024, the Consumer Financial Protection Bureau ordered Apple and Goldman Sachs to pay over 89 million US dollars in penalties related to issues with the Apple Card and misleading customers. The case was settled through fines, with no criminal prosecution of executives.

Other examples reinforce the trend:

• In 2022, NVIDIA paid 5.5 million US dollars for failing to disclose the impact of crypto mining on its gaming business.
• In 2019, Microsoft paid over 25 million US dollars to settle bribery-related allegations in multiple countries.

According to the US Department of Justice, establishing personal liability of executives in large corporations is often complex. Companies typically enter into settlement agreements, pay substantial fines, and commit to compliance reforms. Critics describe this phenomenon as “too big to jail.”

Nepal’s Context: Growing Calls for Reform

Nepal has also seen instances of regulatory penalties without imprisonment. The Nepal Rastra Bank previously fined former leadership of NIC Asia Bank, including then-chairman Tulsi Ram Agrawal and former CEO Roshan Kumar Neupane, Rs 200,000 each for regulatory violations—without custodial action.

However, recent developments have intensified the debate. The arrest of key figures linked to Shanker Group—including chairman Shankar Agrawal and vice-chairman Sulabh Agrawal—along with businessman Deepak Bhatt, has triggered concerns within the business community.

These individuals are associated with a group reportedly managing loans approaching Rs 100 billion, raising fears that aggressive enforcement actions could destabilize investor sentiment and financial markets.

Private Sector Pushback

Business leaders argue that criminalizing financial errors through arrests could discourage entrepreneurship and investment, particularly in a fragile economic environment.

Industry voices emphasize that:

• Business operations often involve complex regulatory gray areas
• Immediate arrests before thorough investigation create uncertainty and fear
• Financial penalties, regulatory tightening, and monitoring would be more effective and less disruptive

A senior banker warned of potential systemic risks, noting that actions against large borrowers could create a “chain effect” across the banking sector, especially when exposure per institution runs into billions of rupees.

“Even if a promoter is arrested, the company does not collapse immediately, as operations continue under management teams. But in the long term, leadership vacuum can create instability,” the banker said.

Entrepreneurs and Economic Contribution

Experts caution against undermining Nepal’s limited pool of large-scale entrepreneurs, highlighting contributions from figures such as Chandra Prasad Dhakal, Min Bahadur Gurung, Binod Chaudhary, and Shankar Agrawal.

They argue that while accountability is essential, enforcement must be balanced and proportionate, ensuring that regulatory action does not inadvertently weaken the private sector.

Government Signals Policy Shift

Finance Minister Swarnim Wagle has indicated that the government is not pursuing a blanket policy of arrests in financial crime cases. Instead, authorities are increasingly considering penalties and fines as primary enforcement tools.

“We have not instructed anyone to target individuals for arrest, nor will we do so,” Wagle said, emphasizing that cases will proceed through normal legal processes.

He further noted that authorities aim to avoid unnecessary public displays during investigations, such as handcuffing or high-profile detentions, particularly in financial cases.

“Financial crimes can be addressed through fines or penalties. There is no policy to imprison everyone, as that would discourage the private sector,” he stated.

Wagle also highlighted reputational risks, noting that premature arrests could damage individuals’ credibility even before judicial conclusions are reached.

Balancing Enforcement and Investment Climate

The government maintains that many ongoing cases are legacy investigations now reaching conclusion, rather than new targeted crackdowns. Authorities claim they are strengthening institutions to allow cases to proceed on merit, without interference or suppression.

Policy experts suggest that Nepal’s shift toward fine-based enforcement, regulatory reform, and enhanced supervision could:

• Improve compliance without disrupting business continuity
• Align Nepal with global regulatory practices
• Preserve investor confidence during a critical economic phase

However, they also warn that weak enforcement or excessive leniency could undermine accountability if not paired with robust oversight and transparent legal processes.

Strategic Implications

As Nepal navigates a delicate economic environment marked by low investment and cautious private sector sentiment, the approach to financial crime enforcement is emerging as a critical policy lever.

The transition from arrest-led enforcement to penalty-based mechanisms reflects a broader attempt to strike a balance between rule of law and economic pragmatism—a balance that will shape Nepal’s investment climate and institutional credibility in the years ahead.