Himal Press 
KATHMANDU: Nepal will need to demonstrate significant improvements in investigating money laundering, supervising high-risk sectors and recovering criminal proceeds if it is to exit the Financial Action Task Force (FATF)’s grey list.
In its June update, FATF acknowledged that Nepal has made progress since making a high-level political commitment in February last year to work with FATF and the Asia/Pacific Group on Money Laundering (APG) to strengthen its anti-money laundering and countering the financing of terrorism (AML/CFT) regime. “Nepal has taken steps to address remaining technical deficiencies, particularly in its targeted financial sanctions regime related to terrorism financing (TF) and proliferation financing (PF),” FATF said in the update.
However, it said that the country must continue implementing its action plan to address strategic deficiencies identified in its AML/CFT framework.
FATF has outlined six deficiencies that the government must address. First, there is a need to improve Nepal’s understanding of money laundering and terrorism financing risks. This means authorities must develop a clearer assessment of how illicit funds move through the economy
Second, Nepal should improve risk-based supervision of sectors considered vulnerable to financial crimes. These include commercial banks, higher-risk cooperatives, casinos, dealers in precious metals and stones (DPMS), and the real estate sector.
Third, Nepal needs to demonstrate that it can identify and penalize major illegal money transfer operators, including informal hundi networks, while ensuring that these efforts do not undermine financial inclusion.
Fourth, FATF has called for greater capacity and coordination among law enforcement and regulatory agencies responsible for money laundering investigations.
Fifth, the government must also increase the number of investigations and prosecutions of money laundering cases.
Sixth, Nepal must demonstrate it can identify, trace, freeze, seize and, where appropriate, confiscate proceeds and tools of crime in line with the country’s risk profile.
The FATF put Nepal on its grey list in February 2025 after the watchdog found strategic weaknesses in its AML/CFT system. A FATF grey listing means a country is subject to increased monitoring and must work with FATF to address identified shortcomings within an agreed timeframe.
