Kathmandu. Nepal continues to fail to meet international standards on controlling money laundering and terrorist financing. The Financial Action Task Force (FATF) has again placed Nepal in the grey list.

A plenary and working group meeting of the FATF held in Paris, France, concluded that although Nepal has made efforts to improve some areas, the strategic weaknesses in the anti-money laundering and terrorist financing control system have not been fully addressed.

The FATF said it has taken some significant corrective steps after Nepal made high-level political commitments in February 2025 to make the anti-money laundering and terrorist financing (ML-CFT) system more effective. The FATF assesses that Nepal has made progress in addressing technical deficiencies in the targeted financial sanctions system, particularly against terrorist financing (TF) and the financing of weapons of mass destruction (PF).

However, Nepal still needs to effectively implement the action plan given by the FATF. According to the FATF, Nepal should develop a clear identification and understanding of the key risks related to money laundering and terrorist financing, and make risk-based monitoring and supervision of commercial banks, high-risk cooperatives, casinos, precious metals and stone businesses, and real estate more effective.

Similarly, the committee has also pointed out the need to identify illegal hundi and illegal money transfer service providers and show effective action against them, enhance the capacity and coordination of the bodies carrying out money laundering investigations and increase the number of investigations and prosecutions.

The FATF has also suggested Nepal to be more effective in identifying, searching, impounding, confiscating and bringing the property earned from crime into the ownership of the state as per the need.

If Nepal is in the grey list, it will have a negative impact on international financial transactions, attraction of foreign investment, credibility of the banking system and relations with international financial institutions. Therefore, Nepal has the challenge of completing the remaining reforms as soon and effectively as per the FATF’s action plan to get out of the grey list.