Kathmandu, June 20 (IANS) Nepal has remained on the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring, commonly known as the “grey list”, although the Nepali government has been taking several measures to address concerns raised by the global anti-money laundering watchdog.
Nepal was placed on the FATF grey list in February 2025 after the watchdog identified shortcomings in the country’s anti-money laundering and counter-terrorist financing framework.
Since then, the government, regulators, and financial institutions have been working to implement reforms required under the FATF action plan.
Being on the grey list can increase scrutiny of cross-border financial transactions and may raise compliance costs for banks and businesses, although it does not trigger economic sanctions.
The FATF conducts regular reviews of jurisdictions worldwide and updates its list of countries under increased monitoring three times a year.
In its latest update, the FATF said that since February 2025, when Nepal made a high-level political commitment to work with the FATF and the Asia/Pacific Group on Money Laundering (APG) to strengthen the effectiveness of its anti-money laundering and counter-terrorist financing (AML/CFT) regime, the country has taken steps to improve its framework by addressing the remaining technical compliance deficiencies in its targeted financial sanctions regime for terrorist financing and proliferation financing.
“Nepal should continue to work on implementing its FATF action plan to address its strategic deficiencies, including improving its understanding of key money laundering and terrorist financing risks; enhancing risk-based supervision of commercial banks, higher-risk cooperatives, casinos, dealers in precious metals and stones, and the real estate sector; and demonstrating the identification and sanctioning of materially significant illegal money or value transfer services (MVTS), commonly known as hundi operators, without hindering financial inclusion,” the global anti-money laundering watchdog added.
The FATF also highlighted the need to enhance the capacity and coordination of law enforcement and regulatory agencies responsible for investigating money laundering cases. Nepal has also been asked to demonstrate a measurable increase in money laundering investigations and prosecutions.
In addition, the FATF expects Nepal to strengthen its ability to identify, trace, freeze, seize, and, where appropriate, confiscate the proceeds and instrumentalities of crime in line with the country’s risk profile.
Besides Nepal, the FATF reviewed the progress of several countries since February 2026, including Algeria, Angola, Bolivia, Bulgaria, Cameroon, Cote d’Ivoire, Congo, Haiti, Kenya, Lao PDR, Lebanon, Monaco, Namibia, South Sudan, Syria, Venezuela, Vietnam, the Virgin Islands (UK), and Yemen.
The Paris-based watchdog emphasised that inclusion on the grey list does not call for enhanced due diligence measures or financial sanctions against the listed jurisdictions.
“Instead, it encourages countries and financial institutions to apply a risk-based approach when assessing transactions and business relationships,” it said.
The organisation also cautioned against “de-risking” practices that could disrupt legitimate financial flows, including humanitarian assistance and remittances.
Following Nepal’s placement on the grey list, an APG delegation visited Kathmandu and met Finance Minister Swarnim Wagle, senior Ministry officials, Nepal Rastra Bank Governor Bishwo Nath Poudel, senior Central bank officials, the police Chief, and other stakeholders, reminding them of Nepal’s shortcomings in addressing AML/CFT issues.
The APG has said that during those meetings, Nepal’s leaders clearly expressed their political commitment to fast-track the necessary AML/CFT reforms to meet the FATF action plans.
“A clear outcome from the visit is that Nepal’s leaders and technical staff demonstrate refreshed commitment and targeted strategies to drive forward urgent actions to meet the FATF’s International Co-operation Review Group (ICRG) action plan,” the APG said on its website.
‘The prioritisation of AML/CFT complements the government’s wide-ranging agenda of good governance and wider reforms to underpin economic growth and financial integrity,” it added.
The International Monetary Fund (IMF) said in its latest Article IV report that Nepal’s AML/CFT framework faces significant challenges, including capacity constraints and fragmented coordination among multiple agencies, which limit effective implementation.
Under the IMF assistance programme, and with support from the IMF’s Legal Department, the Asset (Money) Laundering Prevention Act was amended, establishing a stronger foundation for ongoing reforms ahead of FATF intensive monitoring.
“Furthermore, to support authorities’ efforts to remove Nepal from the FATF grey list, the IMF legal team has been assisting authorities with legal drafting and providing updated language for money laundering prevention rules focused on implementing United Nations Security Council Resolutions (UNSCRs),” the IMF said.
–IANS
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