Nepal faces the risk of being added to the Financial Action Task Force (FATF) grey list, which will jeopardize its financial credibility and global prestige. The international watchdog, FATF, monitors countries on whether they are honestly combating money laundering and terrorism financing. Key government officials, including the chief secretary and governor of Nepal Rastra Bank, have voiced concerns that failing to meet earlier commitments could damage the country's prestige and its financial future. At an interaction entitled 'Money Laundering Prevention National Day 2081' on Monday, Chief Secretary Ek Narayan Aryal expressed that though our authorities have moved quickly to enact necessary anti-money laundering laws, they have been weak in effectively implementing these laws. The chief secretary said that the nation’s inability to enforce the law and report in a timely manner has not gone down well with the international watchdog. NRB Governor Maha Prasad Adhikari, who attended a recent FATF conference in the Philippines with a Nepali delegation, stated that the meeting did not generate favorable results for Nepal's risk reduction efforts. He noted that while initial adjustments to legislation were made on schedule and early reviews were good, the findings of the third assessment did not match our expectations. Adhikari emphasized that additional work is required for Nepal to be risk-free.
Nepal's ineffective enforcement procedures, reporting delays, and lack of supervision in high-risk industries, including real estate, gold trading, cooperatives, and casinos, have given rise to FATF grey-listing risks. Being grey-listed will have serious ramifications for Nepal's economy, as it may cause a loss of international credibility and may lead to our inability to undertake financial transactions internationally. In July 2023, Nepal had narrowly avoided the grey-listing, and FATF extended its compliance deadline to October 2024. However, progress has been slow in meeting compliance targets while FATF continued its supervision. Although money laundering laws have been enacted, their poor enforcement is a worrying aspect. Non-financial sectors have not been sufficiently supervised, making them prone to illegal activities. The attention of the FATF inspection team, which has conducted several inspections of Nepal, has been drawn towards these insufficiencies.
Nepal narrowly escapes FATF ‘greylisting’
If Nepal gets added to the grey list, the consequences will be catastrophic. It may result in limited access to global commerce and finance, impeding international corporate operations, and foreign investors may be hesitant owing to perceived dangers connected with a grey listing. Moreover, overseas financial institutions may impose tougher conditions, further increasing pressure on Nepal's economy.
To avoid such a perilous situation, Nepal should actively enforce existing laws, equipping law enforcers with needful resources while ensuring timely reporting of its financial activities. To prevent any illegal activities from taking place, our authorities must supervise real estate, bullion trading, cooperatives, and casinos, as they must be brought under tighter control. Similarly, regular audits, cooperation among government, financial institutions, and law enforcement agencies should be done while assistance from foreign agencies for technical support should be sought. Our authorities should make swift moves to rectify all the shortcomings in Nepal's anti-money laundering efforts. Failure to act in time will not only harm the country's economy but also erode faith in our governance and institutions. Nepal's vulnerabilities look serious since high-ranking officials have raised concerns, which calls for our authorities to pull their acts together to remain in good offices with the international watchdog, which will keep its financial future safe and sound.
