Finance Minister Khanal urges immediate action to remove Nepal from FATF grey list

KATHMANDU: Finance Minister Rameshwar Prasad Khanal has urged all sectors and institutions in Nepal to work diligently to remove the country from the Financial Action Task Force (FATF) ‘grey list’ as soon as possible, warning that up to 5 percent of the nation’s GDP could be linked to illicit financial activity.

Speaking at the National Anti-Money Laundering Day 2082, held under the theme “Anti-Money Laundering: Transparency and Financial Governance”, Minister Khanal emphasized that all reforms should be completed ahead of schedule, aiming for full compliance within the next year.

He clarified that the reforms are not driven by external pressure but are intended to strengthen Nepal’s economy, improve transparency, and ensure corruption-free governance.

Minister Khanal highlighted that ongoing anti-money laundering reforms would not impose unnecessary costs on the economy.

He pointed out that weak confidence in the financial system has been a factor behind lower-than-expected foreign investment and stressed that strengthening governance and transparency is essential to improve the investment climate.

According to the Finance Minister, the FATF and the Asia-Pacific Group have issued a set of recommendations requiring reforms by January 2027. While some progress has been made over the past year, he stressed that the remaining reforms must be completed by the end of 2026.

Minister Khanal further stressed the importance of effective investigation, prosecution, and enforcement in money laundering cases, calling for strong evidence-based cases and immediate asset seizure mechanisms.

He also announced a new regulation effective from 1 Magh 2082, requiring all commercial transactions exceeding NPR 500,000 to be conducted through the banking system to enhance transparency. Despite concerns from the private sector, he confirmed that the cash transaction limit would not be increased.

Law, Justice, and Parliamentary Affairs Minister Anil Kumar Sinha noted that Nepal faces both legal and institutional challenges in achieving financial integrity and governance but stressed that the current situation is not only a challenge but also an opportunity for self-assessment and reform.

He said a concrete action plan has been set to exit the grey list by Magh 2083, with all institutions expected to fulfill their responsibilities.

Deputy Governor of Nepal Rastra Bank, Bam Bahadur Mishra, warned that remaining on the grey list could lead to stricter measures from international financial institutions, potentially increasing costs for remittances, international transactions, and travel for Nepali citizens.

He emphasized that grey list status signals weaknesses in controlling financial crimes and necessitates effective reforms.

Director General of the Department of Money Laundering Investigation, Gajendra Kumar Thakur, underlined that combating money laundering is not the responsibility of a single agency but requires collective action from over 50 government institutions and more than 80,000 reporting entities.

Thakur warned that 3–5% of Nepal’s GDP could be linked to illicit activities, with high risks in real estate and gold and silver markets. He highlighted challenges including a largely cash-based informal economy, weak regulation of modern financial systems, shortage of skilled personnel and technology, and ineffective legal enforcement.

He stressed the need for risk-based systems, legal updates, coordination among investigative agencies, international cooperation, modern technology for crime reduction, integrated information sharing, digital economy regulation, and cybercrime control.