FATF says Nepal still on 'grey list'; further reforms required for its removal

KATHMANDU: Financial Action Task Force (FATF) has decided to keep Nepal on its monitoring list, the 'grey list', saying further improvements are needed despite ongoing reform efforts.

The intergovernmental anti‑money‑laundering and counter‑terrorist financing watchdog made the decision on June 19 and said that, while Nepal has taken steps to strengthen its legal and regulatory framework, progress remains insufficient to meet international standards.

The FATF urged Nepal to continue implementing its action plan to address strategic deficiencies and to deepen its understanding of the major risks related to money‑laundering and terrorist financing. It called for strategic reforms and stronger implementation mechanisms across the financial sector.

The watchdog recommended risk‑based supervision and corrective measures for commercial banks, high‑risk cooperatives, casinos, dealers in precious metals and stones and the real estate sector. It also urged authorities to step up efforts to identify and prevent illegal financial transactions, including hundi operations.

The FATF highlighted the need to enhance the capacity of agencies responsible for investigating money‑laundering cases and to improve the effectiveness of prosecutions.

Nepal was placed on the grey list in February 2025 for two years because of shortcomings in compliance with anti‑money‑laundering laws. The country had previously exited the list in 2014 after implementing regulatory reforms. Since its 2025 inclusion, Nepal has been working on a 15‑point reform plan aimed at strengthening its anti‑money‑laundering system and improving financial transparency.