Finance ministry prepares five-year strategy to avoid FATF greylisting

KATHMANDU: In a bid to prevent Nepal from being greylisted by the Financial Action Task Force (FATF), the Ministry of Finance (MoF) has formulated a comprehensive five-year strategy to combat money laundering. On Wednesday, a committee led by Finance Minister Barsha Man Pun endorsed the strategy, which will be implemented after receiving final approval from the Cabinet.

The strategy, titled ‘National Strategy and Work Plan on Prevention of Financial Investment in Money Laundering and Terrorist Activities,’ is set to take effect from the next fiscal year. Mahesh Acharya, Joint Secretary of the MoF, emphasized that the strategy focuses on minimizing financial offenses such as corruption, revenue leakages, hundi (informal money transfer), and the trading of cryptocurrencies. It also addresses issues related to narcotics trading, organized crime, illicit earnings, internal terrorism, burglaries, fraud, counterfeit currency transactions, black market activities, smuggling, and forgery.

The government has faced pressure to introduce legislation addressing deficiencies highlighted in the Mutual Evaluation Report about Nepal by the Asia Pacific Group on Money Laundering (APG) of the FATF, released in September 2023. The report pointed out delays in legislative processes and warned that Nepal could be greylisted if it fails to enforce necessary laws in time.

The APG’s report outlined several deficiencies and recommended urgent legislative changes. It stressed the need to expedite law implementation and significantly enhance the capacities of relevant authorities. To address these concerns, the government endorsed the Anti Money Laundering and Business Promotion Bill in February and amended multiple laws, including the Land Tax Act 1977, Tourism Act 1978, Building Act 1998, Nepal Rastra Bank Act 2002, Securities Act 2007, and Human Trafficking and Transportation Control Act 2007.

Additionally, the government introduced necessary provisions in the Insurance Law (Amendment Bill) 2023, Cooperatives Act 2017, Foreign Investment and Technology Transfer Act 2019, Electricity Regulatory Commission Act 2017, and Prevention of Organized Crime Act 2013. These amendments aim to align Nepal’s legal framework with international standards on anti-money laundering and combating the financing of terrorism.

The FATF, a global anti-money laundering agency, sets standards to enforce actions against money laundering, terrorism financing, and proliferation financing. Nepal has committed to amending the necessary anti-money laundering laws and requested a one-year grace period from the FATF before being greylisted.

Countries placed on the greylist face severe economic and financial consequences, including restrictions on cross-border transactions, difficulties in obtaining credit, and limited foreign investment. Greylisting and blacklisting also damage a country’s reputation and reduce its international standing.

By implementing this strategy, the Nepalese government aims to address the highlighted deficiencies and strengthen its financial system to prevent money laundering and terrorist financing, thereby protecting the country’s economy and international reputation.