Nepal nears inclusion in FATF’s ‘grey list’ as money laundering case looms

KATHMANDU: Nepal is teetering on the precipice of inclusion in the notorious ‘grey list,’ a register of nations failing to meet essential benchmarks in curbing money laundering and financial crimes.

The Asia Pacific Group (APG), operating under the umbrella of the Financial Action Task Force (FATF), an esteemed international organization dedicated to monitoring illicit money flows, recently submitted a report advocating Nepal’s placement on this list.

The lack of expeditious lawmaking and the subsequent absence of enforcement agencies responsible for implementing anti-money laundering measures have firmly cemented Nepal’s trajectory towards the ‘grey list.’

Sources assert that due to the untimely legislation and the ineffective execution thereof, Nepal’s fate is all but sealed, compelling its inclusion on this list of financial transgressors.

The FATF Annual General Meeting, scheduled for July 9-14, will serve as the backdrop for Nepal’s attempt to alter its impending classification. Under the stewardship of Nepal Rastra Bank Governor Maha Prasad Adhikari, a delegation comprising approximately 30 individuals will journey to Canada. Notably, Nepal will be addressed in dedicated sessions during the General Assembly.

Based on the findings from these discussions, a conclusive determination regarding Nepal’s placement on the list will be made and subsequently unveiled in October. An official participating in the delegation asserts, “We will vigorously defend our position and strive to extricate ourselves from the grey list.” However, the ultimate outcome remains uncertain at this juncture.

The repercussions of landing on the FATF’s ‘grey list’ may extend to institutions such as the World Bank, International Monetary Fund, and Asian Development Bank, which could tighten control over loans and financial aid while withholding grants and assistance to any listed country.

In the absence of substantial improvements, a country risks blacklisting, which would have severe ramifications for its economic and financial transactions. International banking activities become increasingly arduous to regulate, engendering distrust in transactions involving countries on the negative list.

In such a scenario, foreign investments wane, the nation’s financial reputation erodes on the global stage, and both government and citizens face jeopardized assets abroad.

“In February of the previous year, the government exhibited caution by proposing legislative amendments. Consequently, the then government expedited the process to pass this legislation,” divulged an insider. However, following political realignments and the subsequent formation of a new government, the issue failed to garner attention or discussion. “Had the bill been ratified, Nepal’s inclusion on the grey list this time could have been averted. Regrettably, that avenue has now been closed,” lamented the source.

Since the APG presented its initial report to the Nepalese government in January, no progress has been observed in tackling money laundering and financial crime, eliminating any possibility of evading the grey list, according to informed sources.

Previously, the APG team visited Nepal in December to conduct an on-site assessment, recommending Nepal’s placement on the grey list. Subsequently, the APG team engaged in bilateral discussions with Nepalese authorities in May, examining the preliminary report and Nepal’s response.

Continuous online deliberations have since transpired between the APG team and Nepali officials. Although the Nepalese authorities maintain they are diligently working towards reform, confidence in their efforts remains elusive. The final APG report will be deliberated upon during the FATF Annual General Meeting, culminating in the ultimate decision.