Nepal has again been included in the 'grey list' of the Financial Action Task Force (FATF). In the past too, when Nepal was included in such a list, complications were seen in international financial transactions.

However, since the government failed to make the necessary reforms, Nepal has again been included in the risky list. This will seriously affect Nepal's banking system, international trade, foreign investment and remittance flow. If the government and regulatory bodies do not improve in time, Nepal may fall into a bigger economic crisis.

Nepal has been put on the 'grey list' due to its failure to implement the recommendations given in the assessment report of FATF's Asia Pacific Group (APG) in 2023. Nepal has failed to control money laundering and financial investment in terrorist activities. In none of the 11 effectiveness indicators, Nepal received a high or adequate rating. Regulation in the non-banking sector (cooperatives, casinos, precious metals dealers, real estate transactions) was judged to be weak. In addition, the reporting system from banks and financial institutions to the Financial Intelligence Unit needs to be improved. Even though the government claims to have made efforts for reform, due to weak implementation, Nepal has come under the supervision of FATF again.

After Nepal falls in the 'grey list', big economic risks will be seen. Banks may lose confidence in letters of credit (LC), which will make the import-export process more expensive and complicated. Foreign investors will see Nepal as a high-risk country, which means that there is a high possibility that foreign investment will decrease. Nepalis abroad will incur additional fees when sending money, as international banks may see Nepal as risky. Also, there is likely to be difficulty in getting concessional loans and grants from organizations like IMF, World Bank, ADB. Nepal was included in the 'grey list' before. If corrective measures are not taken even now, Nepal may fall into the 'black list', which will put the economy in a deeper crisis.

Nepal now needs to take timely corrective measures. Laws should be implemented effectively to prevent money laundering. The non-banking sector (cooperatives, real estate, casinos) should be strictly regulated. It is necessary to increase the capacity of the Financial Intelligence Unit by strengthening the investigation of financial crimes. If the government does not delay and make effective reforms, international confidence in Nepal's financial system will decrease, which will seriously affect the overall economy. Now, if Nepal does not adopt the right policies, the economy is sure to face more crisis.

- Santosh Simkhada , Tokyo, Japan