Nepal has remained on the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring, commonly known as the “grey list”, although the Nepali government has been taking several measures to address concerns raised by the global anti-money laundering watchdog.
Nepal was placed on the FATF grey list in February 2025 after the watchdog identified shortcomings in the country’s anti-money laundering and counter-terrorist financing framework. Since then, the government, regulators, and financial institutions have been working to implement reforms required under the FATF action plan.
Being on the grey list can increase scrutiny of cross-border financial transactions and may raise compliance costs for banks and businesses, although it does not trigger economic sanctions. The FATF conducts regular reviews of jurisdictions worldwide and updates its list of countries under increased monitoring three times a year.
In its latest update, the FATF said that since February 2025, when Nepal made a high-level political commitment to work with the FATF and the Asia/Pacific Group on Money Laundering (APG) to strengthen the effectiveness of its anti-money laundering and counter-terrorist financing (AML/ CFT) regime, the country has taken steps to improve its framework by addressing the remaining technical compliance deficiencies in its targeted financial sanctions regime for terrorist financing and proliferation financing.
According to a global anti-money laundering watchdog, Nepal should continue to work on implementing its FATF action plan to address its strategic deficiencies, including improving its understanding of key money laundering and terrorist financing risks; enhancing riskbased supervision of commercial banks, higher-risk cooperatives, casinos, dealers in precious metals and stones, and the real estate sector; and demonstrating the identification and sanctioning of materially significant illegal money or value transfer services (MVTS), commonly known as hundi operators, without hindering financial inclusion.
The FATF also highlighted the need to enhance the capacity and coordination of law enforcement and regulatory agencies responsible for investigating money laundering cases.