Financial Crime: The Silent Killer of Economic Stability and Democracy

In the 21st century, financial crime has evolved into a massive global challenge, extending beyond economic issues to become one of the biggest threats to national security and democratic stability. Unlike traditional crimes that relied on physical weapons, modern “financial terrorism” weaponizes stock market manipulation, money laundering, and policy corruption, often using these tools to destabilize entire nations. These crimes not only illegally capture the hard-earned wealth of citizens but also turn entire governments into puppets controlled by criminal interests.

The Global Perspective on Financial Crime

To understand the gravity of financial crime, it is essential to examine how leading global organizations define it. The United Nations Office on Drugs and Crime (UNODC) refers to financial crime as the “cancer eating away at the foundations of economic systems.” According to the UN Convention Against Corruption (UNCAC), “financial crimes not only undermine the rule of law but also destroy the capacity of developing countries to achieve their Sustainable Development Goals (SDGs).”

Similarly, the International Monetary Fund (IMF) highlights the “macro-criticality” of financial crime, emphasizing how money laundering and financial terrorism jeopardize the stability of financial systems, ultimately reducing foreign investment and causing capital flight. The Financial Action Task Force (FATF), the global body monitoring money laundering, adds that financial crime is not just about hiding money; it involves “legitimizing illicit gains to fund criminal activities and terrorism.” FATF now considers the “strategic vulnerability” of stock markets and digital assets (such as cryptocurrency) to be one of the world’s greatest security risks.

Stock Market “Cornering” and Financial Terrorism

In emerging markets like Nepal, stock market “cornering” has become a major channel for money laundering. When a specific group, often in collusion with regulatory authorities, takes control of a company’s shares, they distort the natural rules of the market. This is where financial terrorism comes into play:

1. Economic Destruction: It leads to the illegal siphoning of billions of rupees from ordinary citizens' savings through artificial price inflation, an act no different from looting in times of war.

2. State Capture: As per an UNODC report, when illicit money is “cleaned” through the stock market, it is used to bribe politicians and policymakers. As a result, laws are no longer crafted for the people, but for the benefit of financial terrorists.

3. Attack on State Institutions: Following the IMF’s warning, when financial mafias gain control over state structures, they render the judiciary, police, and regulatory bodies their shields, effectively protecting their illegal activities.

Nepal's Risky Financial Landscape

In countries like Nepal, the density of financial crimes is alarmingly high. Taking advantage of the informal economy and weak regulatory frameworks, criminals have turned the stock market into a money laundering machine. While developed nations use algorithmic trading to manipulate markets, in Nepal, "setting" and "insider trading" are rampant, leading to the illegal extraction of money from citizens. The result in both cases is the same: poverty for citizens and unlimited power for criminals.

This scenario not only disrupts the economy but also undermines democracy and justice. When stock market manipulators grow more powerful than honest taxpayers, the value of hard work and integrity evaporates, leading to the migration of talented human capital and transforming the nation into a playground for “crony capitalism.”

Financial Terrorism and Political Movements

In recent years, financial terrorism has also infiltrated youth movements (Gen Z movements) and political uprisings. As young people take to the streets due to economic inequality, financial mafias often fund these movements to turn them in their favor. The goal of these actors is to weaken the existing legal framework to capitalize on the transitional period and further launder money. Much of the economic narratives spread through social media are sponsored by these groups, misleading youth to further their own interests.

The End of Governance and Justice

The consequences of financial terrorism extend far beyond economic instability; it also marks the end of social justice. When market manipulators become more powerful than the tax-paying citizens, society’s values of hard work and integrity are lost. This not only leads to a brain drain but also turns the country into a battleground for “crony capitalism,” where the state serves the interests of a few powerful entities instead of the public good.

Conclusion and Roadmap

The fight against financial crime is no longer just a technical issue; it has become a political and social struggle. To avoid falling further into the financial quagmire and to ensure financial stability as advised by the IMF and FATF, Nepal must take urgent action. The following steps should be prioritized:

1. Reorganization of Regulatory Bodies: Nepal’s Securities Board and the central bank should be completely freed from political interference and operated in accordance with FATF and UNODC standards.

2. Tougher Action on Money Laundering: There must be a thorough investigation into the sources of assets and stock market investments of high-profile individuals.

3. Digital and Financial Literacy: The youth must be educated about the realities and risks of financial markets to avoid being misled by false narratives.

If the country fails to break the grip of financial terrorists today, future generations will inherit a nation where the government exists in name only, with true power in the hands of invisible financial mafias. The fight against financial terrorism is essential for safeguarding democracy and justice. Both the state and civil society must unite in this battle for a fair and just society.