Financial Crime World

Nepal Takes Crucial Step Towards Avoiding FATF Greylist with Money Laundering Bill

The Lower House of Nepal Parliament has endorsed a key bill, “Amendment Bill to Amend Some Acts to Prevent Money Laundering and Promote Business”, marking a significant step for Nepal in its bid to avoid the Financial Action Task Force (FATF) greylist.

Nepal and FATF

The FATF is an international anti-money laundering body that maintains two lists of countries based on their compliance with its standards: a ‘blacklist’ and a ‘greylist’. Nepal faces the risk of being placed on the FATF greylist due to deficiencies in its money laundering prevention measures identified by the Asia-Pacific Group on Money Laundering (APG).

FATF Lists

The terms ‘Blacklist’ and ‘Greylist’ are not official FATF lexicon but colloquial phrases commonly used. The ‘Blacklist’ consists of countries subject to a Call for Action, with North Korea, Iran, and Myanmar currently listed. The ‘Greylist’ signifies jurisdictions with ‘strategic deficiencies’ in their anti-money laundering and countering of terrorist financing regimes, requiring them to develop an action plan and show significant progress in implementation (FATF, n.d.).

Nepal’s Progress and Challenges

In its mutual evaluation report published last year, the APG found that Nepal fully complied with only five of the 40 FATF recommendations and largely complied with 16. Nepal partially complied with 16 recommendations and did not comply with three others (APG, 2020). “One of the areas highlighted in the mutual evaluation report was the deficiencies in our legislations,” stated Gunakar Bhatta, spokesperson for the Nepal Rastra Bank (NRB) (Rana, 2022).

Addressing Legislative Deficiencies

The amendment Bill to Amend Some Acts to Prevent Money Laundering and Promote Business includes revisions of 20 laws, such as:

  • Money Laundering Prevention Act-2020
  • Cooperative Act-2017
  • Tourism Act-1978
  • Nepal Penal Code Act-2017
  • Foreign Investment and Technology Transfer Act-2019
  • Insurance Act-2022

The bill seeks to:

  1. Provide money laundering investigation authority to the appropriate crime investigation agencies.
  2. Empower them to take swift action against suspected cases.
  3. Criminalise both terrorist acts and proliferation of weapons of mass destruction.
  4. Enable authorities to implement targeted financial sanctions to combat financing for such activities.

However, legislation alone will not be enough to save Nepal from being greylisted. “Along with legislation, enforcement of laws must be strong and visible,” stressed an NRB official, speaking on condition of anonymity (Rana, 2022).

Conclusion

Nepal was on the FATF greylist from 2008-2014 but managed to escape the list by addressing legislative and enforcement issues. To avoid being placed back on the list, Nepal must show considerable improvement in both areas before the FATF plenary scheduled for February 2025 (Rana, 2022). With the passage of this bill by the Lower House, Nepal is making significant progress towards one of the primary tasks required to avoid the FATF greylist.