Zero tolerance for corruption and rhetoric of good governance is not enough. Instead, reforms in the structural sector, investigations and prosecutions in money laundering should be made effective and accelerated.
Due to the political and administrative leadership that expresses oral and written commitment to control money laundering and terrorist activities, but remains indifferent to implementation, Nepal has been included in the "grey list" (negative list) of money laundering.
Such a decision by the Financial Action Task Force (FATF), an international organization that oversees money laundering and terrorism, is not unexpected. Because, since Nepal's claim could not disprove the FATF's assessment, it was certain that Nepal would be placed on the 'grey list'.
FATF President Elisa de Anda Madrazo has announced that Nepal will remain on the "grey list" for the next two years. Now the only option left for Nepal is to implement the money laundering laws and practical implementation of international commitments. For this, the political leadership itself needs to understand the situation and be sensitive to the possible future effects.
Nepal was also included in the 'Grey List' in 2011 and was removed in 2014. At that time, it came out after saying, "We will make laws". But in the meantime, even though the law was made, it could not be implemented. The last time Nepal was under the close supervision of FATF since July 2080.
FATF's Asia Pacific Group (APG) public mutual assessment report in August 2080 had already pointed out the risk of Nepal being on the "grey list". In the report, the standards that Nepal has to follow were divided into two parts, law making and institutional aspect (technical compliance rating) and law enforcement and research aspect (effective rating).
The evaluation of Nepal was satisfactory in the criteria under 'Technical Compliance Rating'. But in most of the parameters under 'Effective Rating', he could get only low marks. Because of this, it was decided that Nepal would be on the 'Grey List'. It has been formalized by the FATF General Assembly which is being held in Paris, France from Friday.
Nepal's economy is not transparent and disciplined. There is no strict supervision of the state against financial crimes like corruption and illegal acquisition, questionable investment, revenue evasion. The assets of high-ranking, influential and powerful people who are involved in economic crimes have not been monitored, and it is difficult to prosecute them for the crimes they are involved in. Investigation and prosecution are not enough.
Responsible agencies such as the Abuse of Authority Investigation Commission, the Revenue Investigation Department and the Money Laundering Investigation Department have not been able to play an adequate role. It has been done to influence the investigation process by spreading responsibility in the law, creating political and administrative pressure. This is the reason for being in the 'grey list'. International financial transactions will be affected as
falls on the 'grey list'. Millions of Nepalese are sending remittances from abroad, but now the fees may increase. Interest rates on imports and exports and foreign loans may become expensive and additional surveillance may be required.
Foreign direct investment may decline. Organizations such as the World Bank, International Monetary Fund and Asian Development Bank may reduce the amount of loans and grants they provide or increase interest rates. Conditions may be added to financial assistance. Ultimately, Nepali aspirations of economic development may be delayed. If there is a delay in returning from the 'Grey List' or if it moves towards the 'Black List', then the financial blockade may have to be faced.
should be honest about the creation of laws with strict provisions and their implementation in order not to be in the 'black list', not to extend the period of the 'grey list' or to get out of this list as soon as possible. Banks fill KYC forms with the aim of reducing suspicious transactions. But rather than monitoring dubious traders, it has become a means of harassing ordinary customers. In practice, there are many aspects that the government should pay attention to.
Therefore, the next two years should be taken as an opportunity for improvement. At least Nepal should complete the two-year action plan made according to FATF's recommendations. And, regular progress reporting is required. For positive reporting there is no substitute for proper reform in the country. Also, use your diplomatic skills.
For all these tasks, political leadership and implementing institutions are expected to be more active. Zero tolerance for corruption and rhetoric of good governance is not enough. Rather, reforms in the structural sector, investigations and prosecutions in asset laundering should be made effective and accelerated.
