Nepal continues to be on the Financial Action Task Force’s (FATF) “grey list” for increased monitoring, even as the government and financial institutions work on implementing reforms to address concerns raised by the global anti-money laundering watchdog. The country was added to the grey list in February 2025 due to identified deficiencies in its anti-money laundering and counter-terrorist financing framework.
Since then, Nepal has been actively engaged in implementing necessary reforms as per the FATF action plan. While being on the grey list can lead to heightened scrutiny of cross-border financial transactions and potentially increased compliance costs for banks and businesses, it does not automatically result in economic sanctions.
The FATF conducts regular evaluations of jurisdictions globally and updates its list of countries under increased monitoring thrice a year. In its latest update, the FATF acknowledged Nepal’s efforts since February 2025 to strengthen its anti-money laundering and counter-terrorist financing regime by addressing technical compliance deficiencies in its financial sanctions framework.
The global anti-money laundering watchdog emphasized that Nepal must continue working on its FATF action plan to rectify strategic deficiencies, including improving its understanding of money laundering and terrorist financing risks. Additionally, Nepal is urged to enhance risk-based supervision of various sectors and demonstrate effective identification and sanctioning of illegal money transfer services.
The FATF also stressed the importance of bolstering the capacity and coordination of law enforcement and regulatory agencies in Nepal to investigate money laundering cases effectively. The country is expected to show tangible progress in money laundering investigations and prosecutions and enhance its ability to identify and confiscate proceeds of crime in line with its risk profile.
