By Our Reporter
Nepal’s continued presence on the Financial Action Task Force (FATF) grey list is a warning that the country’s institutions remain ill prepared to confront financial crime despite years of promises, policy papers and political commitments. The latest FATF review makes one point clear: Nepal has amended laws, formed committees and issued commitments, but it has failed where it matters most, implementation.
The FATF’s decision to keep Nepal under increased monitoring did not come as a surprise. The international watchdog has repeatedly flagged weaknesses in Nepal’s ability to investigate and prosecute money laundering cases, dismantle illegal hundi networks, regulate high risk sectors and confiscate assets linked to criminal activities. These are not new concerns. Many of them have remained unresolved for years.
The government may argue that it has initiated reforms. Amendments have been proposed to more than a dozen laws. Officials have held consultations and pledged compliance with international standards. Yet FATF’s latest assessment suggests that these efforts have produced little measurable impact. Nepal has made progress on paper, not on the ground.
The bigger concern is that even a government enjoying a comfortable parliamentary majority has failed to move reforms at the pace required. The Rastriya Swatantra Party led administration entered office promising efficient governance and decisive action. Its leaders repeatedly identified FATF compliance as a national priority. Finance Minister Swarnim Wagle publicly committed to taking Nepal off the grey list through legal and policy reforms.
A year later, the results are difficult to find. Many of the proposed legal amendments remain incomplete. More importantly, laws alone do not satisfy FATF. The organization measures effectiveness. It wants evidence that authorities can identify suspicious transactions, investigate complex financial crimes, prosecute offenders and recover illicit assets. Nepal continues to struggle on all these fronts.
One reason is the weak coordination among agencies responsible for financial oversight and law enforcement. Information sharing remains fragmented. Investigations often move slowly. Cases involving politically connected individuals frequently raise questions about whether enforcement is being applied equally. This perception weakens confidence in the entire system.
The country’s large informal economy also remains a major challenge. Hundi networks continue to operate despite repeated crackdowns. The persistence of illegal money transfer channels suggests that enforcement efforts are either inadequate or inconsistent. FATF’s concern over hundi operations reflects a broader problem: state institutions have not developed sufficient capacity to monitor financial flows across the economy.
Equally troubling is the lack of effective oversight in sectors considered vulnerable to money laundering. Cooperatives, casinos, real estate transactions and dealers in precious metals have long been identified as high risk areas. Yet regulatory monitoring remains weak. Nepal’s recent cooperative scandals exposed how large sums of money can move through poorly supervised institutions without triggering timely intervention.
The costs of remaining on the grey list are real. Foreign investors pay close attention to FATF assessments. Increased scrutiny raises compliance costs for businesses and financial institutions. International banking transactions become more complicated. Remittance transfers can become more expensive. At a time when Nepal desperately needs investment, jobs and economic confidence, these additional barriers are the last thing the country needs.
The most frustrating aspect of the current situation is that Nepal has been here before. The country was first placed on the grey list in 2008 and managed to exit in 2014 after implementing reforms. Policymakers therefore understand what needs to be done. The challenge is not a lack of knowledge. It is a lack of political urgency and institutional discipline.
FATF has effectively told Nepal that promises are no longer enough. The country must demonstrate results. That means stronger investigations, more prosecutions, tighter supervision, tougher action against illegal financial networks and genuine accountability regardless of political influence.
Until that happens, Nepal will remain trapped in a cycle of commitments without consequences, and the grey list will continue to serve as a reminder of reforms that exist more in speeches than in practice.
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