The international anti-money laundering watchdog, the Financial Action Task Force (FATF), has confirmed that Nepal will remain on its monitoring or “grey list”, stating that although the country has initiated reforms, they are still insufficient and additional improvements are necessary.
According to FATF, the decision was made on June 19 (Asar 5). The organization noted that Nepal needs to continue implementing an action plan aimed at addressing existing weaknesses and provided recommendations for further reforms.
FATF emphasized the need for Nepal to strengthen its understanding of key risks related to money laundering and terrorist financing. It stated that while some progress has been made, Nepal must pursue strategic reforms and implement a clear action plan to effectively address these challenges.
The watchdog also stressed the importance of conducting risk-based supervision of sectors considered highly vulnerable to financial crimes, including:
- Commercial banks,
- High-risk cooperatives,
- Casinos,
- Dealers in precious metals and stones,
- Real estate businesses, and
- Other high-risk sectors.
FATF recommended stronger measures to identify and prevent illegal financial transactions such as hundi (informal money transfer systems). It also called for enhancing the capacity of institutions responsible for combating money laundering and improving the efficiency of investigations and prosecutions.
The organization urged Nepal to identify major providers involved in illegal currency and value transfer services and ensure they are subject to legal action and sanctions, while safeguarding financial inclusion.
In addition, FATF stressed the need to:
- Strengthen coordination and capacity among investigative agencies;
- Demonstrate increased effectiveness and numbers of money laundering investigations and prosecutions;
- Improve the identification, tracing, freezing, confiscation, and, where appropriate, state seizure of assets and instruments linked to criminal activities; and
- Eliminate strategic deficiencies in line with international standards.
Nepal was placed on the FATF grey list in February 2025 (Falgun 2081) after shortcomings were identified in its anti-money laundering and counter-terrorism financing framework. Subsequently, Nepal made a high-level political commitment to FATF and the Asia/Pacific Group on Money Laundering (APG) to strengthen the effectiveness of its anti-money laundering regime.
Previously, Nepal had successfully exited the grey list in 2014, after implementing a clear roadmap of regulatory reforms and meeting FATF requirements. However, with its return to the monitoring list, the country now faces renewed pressure to accelerate reforms and strengthen its financial governance system to meet international standards.
