Deadline Approaches for Nepal to Exit Money Laundering Grey List Amid Ongoing Pressures and Risks
Image source, Nepal Police
As the deadline for Nepal to exit the money laundering related ‘grey list’ approaches, international monitoring bodies have pointed out the country’s shortcomings and urged relevant authorities to address them.
Representatives from the Asia Pacific Group (APG) of the Financial Action Task Force (FATF), the international organization that monitors money laundering, have been in Kathmandu for three days, meeting with ministers and secretaries including the Finance Minister.
“Alongside monitoring, the organization also assists us in how to get off that list. They have come to suggest improvements in areas like investigation, prosecution, and asset recovery,” said Pushkar Sapkota, Law Secretary at the Prime Minister’s Office.
Sapkota also mentioned that he coordinates the National Coordination Committee formed to ensure cooperation among agencies working on the grey list-related matters.
FATF places countries on the grey list if they demonstrate low vigilance and fail to comply with necessary regulations related to money laundering. Nepal has been on this list for nearly one and a half to two years.
Experts note that countries like Nepal under close monitoring face significant challenges in international trade such as financial costs, difficulties in securing bank guarantees, and limitations on financial relationships, all of which affect the nation’s reputation.
If current plans prove ineffective, Nepal risks not exiting the grey list and could face further complications that might place it on a blacklist.
Nepal is aiming to be removed from the list by January 2027 and is working accordingly.
According to economist Posharaj Pande, while Nepal has made progress in drafting laws, implementation remains significantly delayed.
“Though laws have been prepared timely, their enforcement and monitoring have not been adequate,” he commented.
Pressure on Nepal
Image source, Ministry of Finance
Law Secretary Pushkar Sapkota asserts that work is ongoing in line with the plan set for exiting the grey list.
“Necessary legal amendments are underway, and progress reports are being presented at FATF meetings,” he said.
However, an official revealed that the APG team remains dissatisfied with the initiatives Nepal has undertaken so far.
“The team expressed concerns on two main issues—the frequent transfer of trained staff and the overall need to enhance system capacity,” the official said.
Because Nepal has demonstrated strong political commitment, further efforts are reportedly planned.
Former Secretary Phanindra Gautam stated that Nepal follows a 16-point action plan to exit the grey list.
“If the plan isn’t completed, a deadline extension may be granted. I don’t see a situation where Nepal would be placed on the blacklist,” he said.
Media reports about the risk of blacklisting raised further concern.
The plan includes enhancing the central bank’s capacity and improving investigations and monitoring among other priorities.
Challenges Highlighted by Experts
Image source, Nepal Photo Library
Economist Posharaj Pande highlights the considerable gap between legislation and enforcement.
“FATF points to implementation as the main problem. For example, although gold trade is supposed to be conducted through banking or digital means, it is still often done in cash,” Pande explained.
Former Secretary Gautam identified two additional challenges.
“Money laundering is a predicate offense—without an underlying crime, it is not treated as an offense. This legal framework complicates taking action against individuals,” he stated.
According to Gautam, regulators assess how well different financial sectors are regulated, including the central bank, insurance, securities, gold and silver businesses, and land transactions.
Investigations, prosecutions, verdicts on violations, and asset recovery are then scrutinized.
“Many regulatory bodies currently have vacancies; the Securities Board and Insurance Board have unfilled positions. If these commissions do not function properly, how can they be held accountable?” he questioned.
Law Secretary Sapkota remains steadfast about the goal of exiting the grey list in the future.
“However, FATF’s agreement with our work is also essential,” he added.
How FATF Operates
In response to the global crisis of economic crime, the major industrial nations collectively established FATF, as domestic efforts alone are insufficient.
FATF has also set up regional mechanisms worldwide to control money laundering and terrorist financing.
It comprises 40 member countries and nine regional bodies, with Nepal joining the Asia Pacific Group (APG) in 2002.
“We submit regular progress reports. While we were previously on the grey list and used to receive leniency due to being a poor country in crisis, times have changed,” the official explained.
Currently, 25 countries including Nepal remain on the grey list.
“Such monitoring is part of FATF’s routine operations and should be continuous. Even countries that lift themselves off the list remain under surveillance. For example, although Pakistan was removed, questions persist,” the official said.
“The grey list concerns technical compliance and not everything. The key factor is how sustainably and honestly the work is carried out.”
