KATHMANDU, Feb 22: The Financial Action Task Force (FATF) has approved Nepal's action plan to exit the grey list after placing the country under intensified monitoring for money laundering. The intergovernmental body, which combats money laundering and terrorist financing, made the decision during its meeting in Paris, France, on Friday.
FATF had previously added Nepal and Laos to the grey list. Earlier, during the face-to-face meeting of FATF's Asia-Pacific Group (APG) in the Philippines, officials had deemed Nepal's inclusion in the grey list almost certain.
In response, Nepal submitted an action plan at the plenary meeting in Paris to exit the grey list. FATF stressed that Nepal's top political leadership has pledged strong and effective commitments to enhance anti-money laundering controls and counter-terrorism financing measures before FATF and APG.
Avoid FATF grey-listing
After the 2023 Mutual Evaluation Report, Nepal implemented some of FATF's recommendations. FATF stated that Nepal focused on streamlining mutual legal assistance requests and strengthening the capacity of the Financial Intelligence Unit (FIU).
FATF also noted that Nepal will continue collaborating with them to exit the grey list. To achieve this, Nepal has committed to making seven key improvements.
Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel stated that Nepal will exit the grey list ahead of the scheduled time. He explained, "This situation arose because we could not complete the tasks on time in the past. The Paris meeting approved Nepal's action plan. By working effectively according to the action plan, we will exit the grey list before the scheduled time."
Nepal has committed to a series of reforms aimed at improving its anti-money laundering and counter-terrorism financing efforts. The country plans to enhance its understanding of risks related to money laundering and terrorist financing. It will also strengthen risk-based regulation in commercial banks, high-risk cooperatives, casinos, precious metals and gemstone businesses, and the real estate sector. Nepal is committed to identifying and taking action against illegal payment service providers (MBTS) and hundi operators, ensuring this does not hinder financial inclusion.
Additionally, Nepal will work to bolster the capacity and coordination of agencies responsible for conducting money laundering investigations and increase the number of such investigations and prosecutions. The country will also implement measures to identify, trace, freeze, seize, and confiscate proceeds and instruments of crime based on risk profiles. Finally, Nepal will address technical weaknesses in the targeted financial sanctions regime to counter terrorist financing (TF) and the proliferation of weapons of mass destruction (PF).
While the Philippines have been removed from the grey list, FATF placed Laos and Nepal on the grey list. The FATF now includes 26 countries on its grey list, such as Algeria, Angola, Bulgaria, Burkina Faso, Cameroon, Ivory Coast, Croatia, Congo, Haiti, Kenya, Lebanon, Mali, Monaco, Mozambique, Namibia, Nigeria, South Africa, South Sudan, Syria, Tanzania, Venezuela, Vietnam, and Yemen, among others. However, North Korea, Iran, and Myanmar have been placed on the blacklist.
This is Nepal's second time on the grey list. Nepal spent time on the grey list from January 2008 to January 2014. During that period, it was removed after Nepal established legal and institutional frameworks. However, in 2024, FATF placed Nepal back on the grey list due to its failure to implement legal reforms according to international standards.
