Nepal Remains on FATF Grey List Amidst Insufficient Reforms

Nepal continues to be monitored under the FATF's "grey list" after failing to implement necessary policy and structural changes, according to the task force's latest review report. The country has been on this list since February 2025, when it committed to strengthening its Anti-Money Laundering and Countering the Financing of Terrorism (CFT) regime.

Despite efforts to address technical compliance deficiencies, a recent visit by a two-member delegation from the APG found limited progress. The delegation, led by APG Deputy Executive Secretary David Shannon, met with Nepalese officials, including the Finance Minister and the Nepal Rastra Bank governor, to discuss areas needing improvement. They warned that failure to address these shortcomings could lead to Nepal being blacklisted.

The FATF's statement urged Nepal to continue working on its action plan. Key areas for improvement include enhancing the understanding of money laundering and terrorist financing risks, and strengthening risk-based supervision of commercial banks, cooperatives, casinos, designated non-financial businesses and professions, and the real estate sector. The APG delegation expressed dissatisfaction with progress in regulation, investigation, and prosecution related to various sectors, including banking, real estate, precious metals trading, corruption, tax evasion, human trafficking, environmental crimes, and money laundering through shell companies.

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Nepal should continue to work on implementing its FATF action plan to address its strategic deficiencies, including improving its understanding of key money laundering and terrorist financing; improving risk-based supervision of commercial banks, higher-risk cooperatives, casinos, Designated Non-Financial Businesses and Professions [DPMS] and the real estate sector.