Nepal Rastra Bank (NRB) has introduced a comprehensive strategy to strengthen surveillance, investigation, and enforcement of suspicious financial activities to help remove Nepal from the Financial Action Task Force’s (FATF) grey list.
In the recently announced Monetary Policy for FY 2082/83, NRB Governor Dr. Bishwanath Paudel emphasized that all tasks outlined in FATF’s Action Plan will be implemented with effective inter-agency coordination. The policy highlights Nepal’s commitment to meet the criteria set by FATF and its regional body, the Asia/Pacific Group on Money Laundering (APG).
“To be removed from FATF’s grey list, Nepal will enhance monitoring, investigation, and prosecution capacities in line with the national strategy and action plan,” states the policy.
The APG’s third mutual evaluation report for Nepal pointed out several priority areas and regulatory weaknesses. The monetary policy affirms these will be addressed with urgency.
Additionally, the Financial Intelligence Unit (FIU) under NRB will automate data transmission to relevant agencies to improve efficiency in investigations.
Nepal was grey-listed due to its inability to fully implement anti-money laundering (AML) laws and to control illicit financial activities such as corruption, tax evasion, hundi transactions, illegal arms trading, and human trafficking.
While Nepal made some efforts to strengthen its legal and institutional frameworks, progress was deemed insufficient by FATF, leading to its placement on the grey list. The APG identified over three dozen weaknesses and issued improvement recommendations.
Grey listing has economic consequences, including:
- Increased cost and difficulty in international banking transactions
- Higher remittance transfer fees
- Growth of illegal cross-border trade
- Customs revenue loss
- Proliferation of informal money transfer channels (hundi)
FATF has set out 40 recommendations on AML and counter-terrorism financing. Nepal’s Anti-Money Laundering Act mandates legal action against individuals who hide the sources of illicit income, including proceeds from terrorist activities and other unlawful acts.
Despite efforts to revise several laws in an integrated manner, the government’s attempts have not been fully successful, and Nepal has yet to fully align with international standards. The monetary policy now reflects a renewed push to correct these gaps and exit the grey list.
