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declined between 2010 and 2012. (The police do not
have – or are not willing to release – any actual concrete
data, and thus those assessments by both army and police
officers and citizens in the Terai are mostly atmospheric.) 103
These reductions in certain types of political violence and
criminal rates in the Terai do not, however, imply that a
climate of fear in the Terai, particularly among vulnerable
segments of the population, has been eliminated. Many
urban and rural residents still believe that in order to
assure their safety and secure their everyday transactions,
they need to provide payoffs to and engage in complex
negotiations with powerful local actors, whether local
strongmen or armed criminal gangs. Such a climate of fear,
in part the result of the escalating bandhs, is increasing in
other parts of Nepal, including in the Pahari (Nepal’s midhill)
areas.
Crime linked to political actors also includes various
financial scams, shell companies, and fake loans that
politicians and government officials never intend to
repay. 104 Nepal lacks even elementary oversight of its
banking sector, with due-diligence, know-your-customer,
and disclosure rules nonexistent either on paper or in
practice. A law criminalizing money laundering has yet
to be adopted. 105 The risk of Ponzi and similar schemes
to defraud the population or launder illicit proceeds via
the former banking sector remains high. In fact, even the
well-known microcredit Grameen Bank judged that it was
not able to create a successful program in Nepal due to
corruption and pressure from high-level officials to receive
kickbacks. 106
External Organized Crime Groups and Terrorist
Organizations Impacting Governance in Nepal
The porous border between India and Nepal, the fact that
Indian and Nepali nationals do not need a passport to cross
the border, and the difficulties in physically distinguishing
who is Indian or Nepali not only facilitate smuggling, but
103. Author’s interviews with Nepal Army and police officers, businessmen, NGO representatives,
political party representatives, and rural residents in Bardia, Banke, Kavrepalanchok, and Chitwan
districts, May 17-20 and 24-28, 2012.
104. For details, see: Jason Miklian (2009a). “Illicit Trading in Nepal: Fueling South Asian Terrorism,”
PRIO South Asia Briefing Paper #3. (pp. 8 and 13)
105. Author’s interviews with former Nepal Supreme Court justice and former police
superintendent, Kathmandu, May 10 and 12, 2012. See also: Asia-Pacific Group on
Moneylaundering (2005). Nepal Mutual Evaluation: Executive Summary. Available at: http://www.
apgml.org/documents/docs/8/Nepal%20MER%20Executive%20Summary.pdf (pp. 1-6)
106. Miklian (2009a) (pp. 16)
also enable the existence of safe-havens for terrorist and
other armed groups on both sides of the demarcation line.
The Indian government has long complained that terrorist
groups such as Lashkar-e-Taiba, Harakat-ul-Mujahideen
and Harakat-ul-Jihad-ul-Islami use the cities of Nepalganj
and Birgunj for planning, financing, and recruitment
to conduct terrorist operations in India. 107 Interviews
among the Muslim community in Nepalganj suggested
that radicalization of the Muslim population was taking
place to some extent and that at least some mullahs
were preaching violent jihad and possibly facilitating
recruitment for terrorist groups. 108 Although anti-Indian
terrorist activities originating in Nepal do not necessarily
directly affect Nepalis, the broader atmosp<strong>here</strong> of fear and
communal tensions that criminal- terrorist networks stir
up in border areas have a dramatically negative effect on
the human security of the Terai population.
Radicalization in turn increases stigmatization of the
Muslim community and intensifies ethnic tensions with
the Hindu community. Nepal expert Jason Miklian, for
example, argues that a major Terai businessman and
smuggler, Hamid Ansari, 109 would regularly play up Hindu-
Muslim communal tensions, with major negative impact
on local governance and ethnic equality, to cultivate
political cover for his criminal enterprises, secure impunity
for himself, and mask his turf war against Hindu criminal
groups as Hindu-Muslim communal violence. 110
Having long defined counterfeit currency rackets with
Indian rupees as a national security threat, India regularly
accuses Pakistan of being behind or exploiting the
extensive counterfeiting networks that span the India-
Nepal border. New Delhi alleges that Pakistan’s intelligence
services use the Indian currency counterfeit networks to
fund terrorist groups like Lashkar-e-Taiba and conduct
107. See, for example: Farzand Ahmed (2000). “Wake-Up Call,” India Today, June 19, 2000; and
“Nepal Refuses India Plea to Intercept Calls to Track Pakistan-based Militants,” BBC, January 12,
2012. After the 2008 Mumbai attacks, two men implicated in the attacks – Aslam Ansari and
Nasim Ansari -- were arrested in Birguanj by Nepali police under pressure from Interpol and
Indian intelligence services for their role in funding the Mumbai attacks. See: “Terror-Funding Pak
Kingpin in Nepal Police Net,” Times of India, December 21, 2008; and: “Nepal Nabs Fake Money
Kingpin,” Telegraph India, December 21, 2008. According to author’s interviews with police officials
in Kathmandu and Nepalganj on May 12 and 28, 2012, Dawood Ibrahim, another Indian criminal
don implicated in the Mumbai attacks, is also widely believed to have used Nepal for his criminal
and possibly terrorist activities.
108. Author’s interviews with Muslim NGO representatives and Muslim community members,
Nepalganj, May 25, 2012.
109. Hamid Ansari avoided arrest as a result of his political connections and network of corrupt
police officials.
110. Miklian (2009a).(pp. 5)
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Responding to the Impact of Organized Crime on Developing Countries
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