The offences are alleged to have taken place between April 15 2005 and May 1 2005, and April 15 2005 and October 31 2005 at the Gorusinghe Army Barracks, Kapilvastu, Nepal.
These time periods fall within the Himalayan's nation's decade-long Maoist insurgency.
The government of Nepal summoned the British ambassador in Kathmandu to protest over the officer's arrest.
Nepal officials said Col Lama is serving as a military observer under the UN Mission in Southern Sudan and was on a holiday in London.
Scotland Yard said the arrest did not take place at the request of Nepali authorities
More top news
Simon's Blog - Things That Look Like Other Things
Tuesday Evening's Pollen Forecast
Tuesday night's forecast for the west of the region