Still on the grey list: what FATF scrutiny means for Nepal's banks and remitters

Nepal has been on the Financial Action Task Force's grey list since 21 February 2025, The Kathmandu Post reports. The FATF, which The Himalayan Times notes was set up by the G7 in 1989, writes the global standards for fighting money laundering and terrorist financing. Its grey list, formally the list of "jurisdictions under increased monitoring", names countries with strategic weaknesses that have committed to fix them within a deadline. It does not impose sanctions, ShareSansar notes, but it changes how the rest of the financial world treats a country's money.

At its plenary in Paris on 17 to 19 June 2026, the FATF kept Nepal on the list, Nepalnews reported. According to ShareSansar, Nepal is one of 22 jurisdictions now under increased monitoring; a list compiled by the compliance publisher AML UAE includes Kenya, Vietnam, Lebanon, Monaco and Laos among them. The FATF meets three times a year, in February, June and October, Nepalnews noted, so the next verdict on Nepal is due this month.

How Nepal got here, again

Nepal has been on the list before. It left in 2014 after legal reforms, according to The Himalayan Times; accounts of when that earlier listing began differ, with The Himalayan Times giving 2008 and The Kathmandu Post 2011.

This time the problem is less the law than what the law produces. When Nepal was listed, The Kathmandu Post reported, it received a 15-point action plan and two years to complete it, split into five four-month phases to match the FATF's review cycle. Progress then collided with politics. The Gen Z uprising of September 2025 led to snap elections, and a new government formed in late March 2026 inherited many unfinished items, the Post reported.

The FATF works through regional bodies, and for Nepal that is the Asia/Pacific Group on Money Laundering (APG). At a January 2026 review, the Post reported, the APG found meaningful progress on nine of the 15 items and only partial implementation on the other six; Nepali officials said the six had improved since.

In May the APG sent a two-member delegation to Kathmandu, led by its deputy executive secretary, David Shannon. According to the Post, it met the finance minister, Swarnim Wagle, and the central bank governor, Bishwo Nath Poudel, among others, called Nepal's progress disappointing and warned that the country risked being blacklisted. It also questioned an ordinance of 1 May. Parliament had amended the anti-money laundering law in April 2024 so that 13 offices investigating underlying crimes, from the police to forest authorities, would also investigate the related laundering, leaving the Department of Money Laundering Investigation largely confined to older cases, the Post explained. The ordinance let the department again probe laundering linked to offences such as smuggling, tax evasion, market manipulation and banking crimes. Shannon asked whether the change had been made after enough consultation with investigators, regulators and prosecutors, the Post reported. The Post also listed the cases filed so far: 121 by the department, 21 by the police and six by the anti-graft Commission for the Investigation of Abuse of Authority, numbers the APG called insufficient.

What the assessors want to see

The FATF's June statement, as summarised by ShareSansar, set out six areas of work: understanding the country's money laundering risks; supervising banks, higher-risk cooperatives, casinos, dealers in precious metals and real estate; identifying and sanctioning illegal hundi operators, the informal networks that move money outside the banking system; building the capacity of investigating agencies; increasing investigations and prosecutions; and tracing, seizing and confiscating the proceeds of crime.

A nine-member Nepali delegation, led by a deputy attorney general and including Nepal Rastra Bank Deputy Governor Dirgha Bahadur Rawal, then faced the APG at a review in Malaysia in September. According to Clickmandu, the assessors judged regulation of conventional banking satisfactory but raised grave concerns about cooperatives, real estate, casinos and the precious metals trade. They singled out the Department of Criminal Proceeds Management, set up under the home ministry, saying it had produced virtually no practical results. They also warned that investigators were filing hastily prepared cases that lacked solid evidence and collapsed in court, which in turn prevents assets from being forfeited.

Nepal's officials, Clickmandu reported, pointed to a published National Risk Assessment, a new Cooperative Regulatory Authority, new directives and on-site inspections for property and casinos, and ten technical officers deputed from the central bank to supervise cooperatives. The assessors' answer, according to Clickmandu, was that they wanted tangible results rather than laws on paper.

The weak spots sit outside the banks. Clickmandu reported that the review identified fragile oversight of cooperatives as a primary structural risk; our explainer on the cooperative crisis sets out how that sector grew. In a commentary for The Himalayan Times, an anti-money laundering specialist listed further steps under way, including a risk-based monitoring system with automatic alerts and stricter disclosure of the real owners behind companies.

What it costs banks and the families they serve

A grey listing does not oblige foreign banks to stop dealing with Nepal. What it does, Beema Post reported, is lead international banks to raise their due diligence requirements, making cross-border transactions more expensive and complex and making foreign investors more cautious. Bankers told The Kathmandu Post that international transactions were already slower and dearer because of extra documentation and compliance checks. Officials warned the Post that development lenders including the World Bank, the International Monetary Fund and the Asian Development Bank could cut assistance or attach stricter conditions.

At home the burden falls on compliance departments. The Kathmandu Post, citing the annual report of Nepal Rastra Bank's Financial Intelligence Unit, reported 9,565 suspicious transaction and activity reports in the 2024/25 fiscal year, up 30.34% on the year before. Commercial banks filed 7,303 of them, or 76%. Remittance companies filed 100, and cooperatives 36.

The exposure is largest where Nepal can least afford it. Remittances rose 28.1% to $16.19bn in 2025/26, according to ShareSansar's summary of the central bank's annual report, and The Himalayan Times commentary warned that extra checks by international banks could make remittances slower and more expensive. We examined that dependence in remittances outran the budget.

What to watch

The first marker is the October plenary, the first since the Malaysia review; the FATF's wording on Nepal's progress will show whether the assessors' September concerns have carried through. The second is the 2027 deadline for completing the action plan. Countries do leave: at the June plenary Algeria and Namibia were removed, Nepalnews reported, while Bosnia and Herzegovina and Iraq were added.

The third is the downside. The FATF's blacklist, formally the list of high-risk jurisdictions subject to a call for action, currently holds Iran, North Korea and Myanmar, according to AML UAE, with countermeasures applied to the first two and enhanced due diligence to Myanmar. The Himalayan Times commentary noted that Iran faces near-total isolation from correspondent banking. The APG warned in May, the Post reported, that Nepal risked being placed on it without sufficient progress. The assessors have said what would keep it away: convictions that hold in court, criminal assets actually confiscated, and supervision that reaches the cooperatives, casinos and property dealers as well as the banks.