Stakeholders on Monday, January 27, expressed concerns about Nepal's potential inclusion on the Financial Action Task Force (FATF) ‘grey list’ due to weak implementation of anti-money laundering (AML) laws. The warnings were raised during an event in Kathmandu, organized by the Department of Money Laundering Investigation (DMLI) to mark the National Day for the Prevention of Money Laundering.
Admitting the shortcomings in Nepal’s efforts to enforce AML laws, Deputy Prime Minister and Finance Minister Bishnu Paudel said, “While we have made strides in legislation, regulations, structural reforms, investigations, and prosecutions, our implementation remains insufficient to present Nepal strongly on the global stage.”
We should have been better prepared for the third phase of evaluation, but we have fallen short, added Paudel, emphasizing the need for stronger coordination among agencies, timely action, and heightened awareness to prevent Nepal from being placed under international monitoring.
Read: Government Amends Laws to Avoid FATF 'Grey List' for Money Laundering
Concerns Raised in Mutual Evaluation
The Asia/Pacific Group on Money Laundering (APG) conducted a Mutual Evaluation of Nepal around two years ago and submitted its findings to the FATF. The report outlined 40 critical areas for improvement, including inadequate regulation of the non-financial sector, failure to track financial investments tied to terrorist activities, weak investigation and prosecution of high-risk money laundering cases and delayed implementation of necessary legal reforms.
The APG urged Nepal to focus on legal reforms, institutional capacity-building, resource mobilization, and enhanced inter-agency coordination to combat money laundering effectively.
Structural and Operational Challenges
Chief Secretary Ek Narayan Aryal highlighted delays in investigating and prosecuting money laundering cases as a key concern.
“Agencies must take responsibility and act promptly,” Aryal stated. “Although laws and structures are in place, enforcement and reporting remain inefficient and untimely, putting Nepal under international scrutiny.”
Emerging Risks in Digital Finance
Nepal Rastra Bank Governor Maha Prasad Adhikari warned about evolving risks in the digital era, including transactions involving cryptocurrency and illegal investments.
“Risks are constantly changing,” Adhikari said. “We must adapt our systems to address challenges posed by digital transactions and other emerging threats.”
Read: Politicians, Bureaucrats Discuss Measures to Avoid Nepal From Falling in AML Grey List
Attorney General Ramesh Badal called for improved investigation and prosecution processes, stressing the importance of creating preventive conditions to deter criminal activities. He also emphasized combating misconceptions about AML measures to ensure legitimate businesses are not negatively impacted.
Progress in Investigations
DMLI Director General Suman Dahal highlighted significant progress in recent investigations, with 15 cases, seeking to forfeit around Rs 55 billion, filed in the first half of the fiscal year—nearly double the annual average of previous years. He underscored the importance of coordination among the 13 investigative agencies to enhance effectiveness.
The DMLI has implemented a five-year strategic action plan, incorporating 77 recommendations from the FATF’s 2022 Mutual Evaluation. While acknowledging Nepal’s progress, Dahal stressed the need for further improvements to strengthen the country’s global standing and operational efficiency.
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