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KATHMANDU, June 12: The European Union (EU) has placed Nepal on its updated list of high-risk third-country jurisdictions for money laundering and terrorist financing, following a similar move earlier this year by the global watchdog Financial Action Task Force (FATF).
In a statement released on Tuesday, the European Commission said that ten countries, including Nepal, had been added to the list, while eight others, including the United Arab Emirates (UAE), were removed. Other new additions include Algeria, Angola, Ivory Coast, Kenya, Laos, Lebanon, Monaco, Namibia, and Venezuela.
The decision means financial transactions involving Nepal will now face enhanced due diligence and closer monitoring by EU-based institutions. These steps are aimed at safeguarding the EU financial system and enforcing international standards to combat illicit financial flows, EU said in the statement.
The EU’s updated list aligns with the FATF's "grey list", officially called the list of "Jurisdictions under Increased Monitoring." In February 2024, FATF had added Nepal and Laos to this list while removing the Philippines, citing progress in its anti-money laundering and counter-terrorism financing frameworks.
Combating money laundering in Nepal
“Following a thorough technical assessment and after listening carefully to the concerns expressed around its last proposal, the Commission has now presented an update to the EU list which reiterates our strong commitment to aligning with international standards, particularly those set by the FATF,” said Maria Luís Albuquerque, EU Commissioner for Financial Services.
According to AFP, the revised list is now subject to scrutiny by the European Parliament and Council, and will become effective in one month if no objections are raised.
Nepal’s inclusion on the list highlights international concerns over deficiencies in the country's financial governance systems, particularly in monitoring and preventing financial crimes. While it does not lead to sanctions, it signals increased risk perception among international banks and investors, potentially complicating cross-border financial transactions and correspondent banking relationships.
The FATF, a Paris-based intergovernmental body, monitors how more than 200 countries combat money laundering and terrorism financing. It coordinates with regional bodies like the Asia/Pacific Group on Money Laundering (APG), of which Nepal is a member.
Nepal has made some legislative and institutional strides in recent years, including the Anti-Money Laundering Act and the establishment of the Financial Information Unit (FIU) under the Nepal Rastra Bank. However, enforcement remains weak, and delays in implementing FATF-recommended reforms have drawn criticism.
The Government of Nepal has yet to issue an official response following the EU's latest decision.
