The Financial Action Task Force (FATF), an international organization that monitors money laundering and terrorist activities, has pointed out that Nepal's efforts to exit the 'Grey List' are insufficient.

After Nepal was placed on the 'Grey List' on February 25, 2025, the FATF has prepared an action plan. If Nepal can do the specified work within the specified time, it can easily get out of the list.  Nepal has been given two years to get out of the 'Grey List'. The FATF has stated that although an action plan has been prepared for that, the implementation has not been effective. The fourth plenary meeting of the FATF was held in Paris, France from October 20 to 24. The Nepali team also participated in the meeting.

In a statement issued by the FATF after the meeting, it is mentioned that although Nepal has continued its reform efforts, they are still insufficient and it is necessary to increase the pace further. The FATF action plan must be implemented to get it out of the 'Grey List' and progress based on evidence or results must be shown, said Phanindra Gautam, Secretary of the Prime Minister's Office, Coordinator of the National Coordination Committee for the Prevention of Money Laundering, who participated in the FATF meeting.

'In the meeting, the FATF has asked Nepal to increase the pace of reforms, although the path taken by the country is correct, as the pace is very slow. "If the pace we have been working at since the beginning had been maintained, we could have come out of the 'Grey List' within the stipulated time. But in the meantime, the pace has slowed down," he said, "Now, studies, research and prosecution will have to be made more effective."

Nepal had made a high-level political commitment to the FATF and the Asia Pacific Group (APG) in February 2025 to strengthen the effectiveness of its anti-money laundering system. Although the path taken by Nepal to come out of the 'Grey List' is correct, the efforts are not sufficient, so the FATF has pointed out that it needs to be accelerated. The FATF says that although the action plan set by Nepal to come out of the 'Grey List' within the stipulated time is correct, the implementation has not been fast enough. For this, the FATF has made seven-point suggestions.

The FATF recommends improving and broadening the understanding of money laundering/terrorist financing risks, implementing effective risk-based monitoring of banks and financial institutions, high-risk cooperatives, casinos, dealers in precious metals and stones (DPMS), and the real estate sector, and identifying, regulating, and taking action against illegal money-laundering service providers, including hundi, without hindering financial inclusion. The FATF also recommends establishing a strong authority to investigate money laundering, building capacity, and coordinating it, and increasing the number of money laundering investigations and prosecutions.

‘In accordance with the risk profile, the procedures for identifying, monitoring, freezing, confiscating and, if necessary, confiscating/seizing the proceeds of crime and assets used in criminal transactions should be effectively implemented,’ the FATF has said. ‘Directives issued by regulatory bodies should be effectively followed to prevent financial investment in terrorist activities and the manufacture and transportation of weapons of mass destruction.’

Nepali experts had already pointed out that effective investigation, prosecution and supervision are challenging to bring Nepal out of the ‘grey list’ quickly. They argue that the political leadership has neglected the investigation and implementation of laws related to the prevention of money laundering and if the same mistakes are repeated now, it will be difficult to get out of the ‘grey list’ within the stipulated time, i.e. two years. In last week’s meeting, the FATF said that although Nepal’s efforts to get out of the ‘grey list’ were good, they were not enough, which confirmed the correctness of the Nepali officials’ assumptions.

In the initial situation, all state bodies were excited. Policies and regulations were also made accordingly. Now is the time to implement those policies and guidelines. The process has not progressed at the pace that it should have. After being placed on the ‘Grey List’, money laundering guidelines for the real estate, casino, gold and silver and cooperative sectors were to be issued in the first quarter. In which the guidelines for three sectors have been issued only a day before the deadline. This confirms that the government is still not sensitive to this issue.

The second general assembly meeting of the FATF held in Paris, France in the second week of last March placed Nepal on the ‘Grey List’. At a press conference organized after the general assembly, FATF President Elisa de Anda Madrazo announced that Nepal would remain on the ‘Grey List’ for the next two years. It has been seven months since it was placed on the ‘Grey List’.

After being placed on the ‘Grey List’, the FATF has given Nepal a two-year action plan to get out of it. In which Nepal has to submit its progress to the FATF every four months. In this way, if Nepal's performance is satisfactory in each assessment, it will be removed from the 'Grey List' within the specified time. If the performance is not satisfactory, the FATF is likely to blacklist Nepal.

The two-year period has been divided into five quarters. Since the FATF meets every quarter, the concerned country has been given time accordingly. Accordingly, Nepal did not have to do anything more than normal reporting in the first four months after being placed on the 'Grey List' (from Falgun 2081 to Jestha 2082). The FATF has not asked it to do anything more than normal inquiries during this period so that it can focus on internal preparations. However, the reporting for the first quarter has started from Ashad to Asoj last year.

Instructions were to be issued regarding individuals and entities included in the UN sanctions list. In accordance with the same provision, the Nepal Rastra Bank, Securities and Exchange Board of Nepal and the Insurance Authority have already issued guidelines regarding the financial transactions of individuals and entities included in the sanctions list. Accordingly, the directive states that such individuals, institutions, groups, organizations, etc. should not be transacted with, if they have been doing so before, and that information should be provided to the relevant bodies regularly. Sources claim that all work has been done on these issues.

In the second quarter (from Kartik 2082 to Magh), the production and expansion of weapons of mass destruction, the enhancement of the supervisory capacity of regulatory bodies, financial crimes, and financial crimes under money laundering should be made effective in the investigation and prosecution. This work is also very challenging.

In the third quarter (from Falgun 2082 to Jestha 2083), there is effective supervision, investigation and prosecution of the cooperative sector along with financial crimes and national risk assessment in all sectors of the economy, enhancement of the supervisory capacity of banks and the financial sector. There is investigation and prosecution of Hundi. Sources claim that this work is very challenging.