Nepal Rastra Bank Directs Casinos to Obtain License for Foreign Currency Transactions

12th September 2025, Kathmandu

In a significant move to fortify its regulatory framework, the Nepal Rastra Bank (NRB), the country’s central bank, has issued a decisive directive making it mandatory for all casinos and similar institutions to obtain a specialized license for conducting foreign currency transactions.

Casinos Required to Obtain License

This directive, publicly announced by the NRB’s Foreign Exchange Management Department on October 11, 2025 (Ashwin 24, 2082), marks the full enforcement of provisions already stipulated under the Foreign Exchange (Regulation) Act, 2019 (B.S.). The primary goal of this policy shift is to ensure greater transparency, compliance, and stronger oversight on the flow of foreign currency within Nepal’s booming entertainment and tourism sectors. This comprehensive enforcement targets the potential for unauthorized transactions, thereby safeguarding the nation’s financial stability and integrity.

The Legal Backbone: Enforcing the Foreign Exchange (Regulation) Act, 2019

The NRB’s recent directive is not a creation of new law but rather the stringent application of existing legislation. At its core, the mandate rests on Section 3 of the Foreign Exchange (Regulation) Act, 2019, which unequivocally states that any organization intending to engage in foreign exchange activities—which includes the buying, selling, lending, or borrowing of foreign currency—must first secure prior and formal approval from the central bank. Casinos, by the very nature of their operations, deal extensively with international clientele and, consequently, transact large volumes of foreign exchange, including the highly prevalent Indian Rupee. This makes them designated entities that fall squarely under the central bank’s regulatory purview.

The NRB further exercises its authority under Section 12 of the same Act, which empowers it to issue necessary orders and directives to regulate and manage foreign exchange transactions conducted by its licensees. By requiring a license, the NRB transforms the casino industry into a formal component of the national financial reporting structure, demanding accountability that aligns with the central bank’s overarching mission: maintaining macroeconomic and financial stability.

Why the New Focus on Casino Foreign Exchange?

The gambling and entertainment industry, particularly casinos, has historically been identified globally as a high-risk sector for financial malpractices. The NRB’s heightened focus is driven by multiple strategic imperatives:

Combating Money Laundering and Terrorist Financing (AML/CFT): This is perhaps the most critical reason. Casinos are classified as Designated Non-Financial Businesses and Professions (DNFBPs). Without stringent regulation, they can become vulnerable conduits for illicit financial flows. The NRB’s directive is an instrumental step in strengthening the country’s defense against money laundering and the financing of terrorism, aligning Nepal’s practices with international standards set by bodies like the Financial Action Task Force (FATF). Licensing allows the NRB to enforce Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) guidelines, including stringent Know Your Customer (KYC) requirements and mandatory Threshold Transaction Reports (TTRs) and Suspicious Transaction Reports (STRs).

Ensuring Financial Transparency and Compliance: A license mandates that casinos adhere to the reporting and inspection requirements set out in the Foreign Exchange Transaction License and Inspection Regulations, 2077. This allows the central bank to monitor, inspect, and audit all foreign currency transactions, effectively preventing unauthorized currency trading or the use of foreign currency outside the formal banking channel. The directive explicitly covers the transaction of Indian Rupees, a common currency in the border-adjacent tourism sector, ensuring its formal inclusion in the reporting mechanism.

Protecting Foreign Exchange Reserves: By bringing a significant segment of the tourism revenue directly under its control, the NRB can better track, manage, and ultimately safeguard the country’s foreign exchange reserves. Ensuring that foreign earnings are converted or used in an approved, traceable manner is crucial for national economic health and external sector stability.

The Mechanics of Compliance: Fees and Guarantees

The detailed compliance requirements are specified under the Foreign Exchange Transaction License and Inspection Regulations, 2077. For a casino or a similar institution to obtain a license to handle foreign currency transactions, specific financial obligations must be met, underscoring the seriousness of the regulatory environment.

For a standard casino operation, the requirements include:

Bank Guarantee: A significant security, often a bank guarantee, must be submitted to the NRB. For standard transaction locations, this can amount to Rs. 25 lakhs (NPR 2.5 million) per location, valid for a two-year period. An additional, equivalent guarantee is also required upon renewal.

License Fee: A non-refundable license fee is mandatory, typically set at Rs. 100,000 (NPR 1 lakh) for a license to operate foreign exchange services.

Separate Provisions for Electronic Gaming: Casinos that operate games solely through electronic equipment have a separate structure, which may require a lower bank guarantee (e.g., Rs. 10 lakhs) and a smaller license fee (e.g., Rs. 50,000).

These financial requirements serve as a tangible commitment from the operators to comply with the central bank’s directives and provide a financial cushion for any regulatory penalties or breaches. The license is granted for a specific, renewable two-year period, ensuring continuous regulatory review.

Strengthening Oversight and Monetary Management

The NRB’s move signifies a tightening of the regulatory net over a high-volume foreign currency sector. By mandating the license, the central bank moves from a policy-advisory role to a direct oversight function for foreign exchange in the casino business. This institutional alignment ensures that casinos, like banks and financial institutions, are integrated into the formal economic monitoring system.

The enforcement will inevitably lead to more rigorous inspection of the records of cash receipts, customer identification logs, and the overall flow of currency. This robust oversight is pivotal for the NRB to fulfill its mandate of maintaining a safe, stable, and efficient financial system, ultimately bolstering the credibility of Nepal’s financial sector on the international stage. Any casino found operating foreign currency transactions without this new, mandatory license will be in direct violation of the Foreign Exchange (Regulation) Act, 2019, making them subject to severe regulatory action and penalties as prescribed by the central bank. The directive is a clear signal that the era of unregulated foreign currency dealings in the tourism and entertainment industry is conclusively over, paving the way for a more transparent and financially sound future.

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