Though the government has intensified high-level efforts to remove Nepal from the money laundering grey list, international monitoring bodies have continued to stress that merely enacting laws is not sufficient, and that Nepal must demonstrate tangible results in effective implementation, prosecution, and confiscation of criminal assets.
US Investment Climate Reports for 2024 and 2025 and the World Bank’s Business Ready Report 2025 had also flagged persistent investment risks in Nepal. They have strictly asked Nepal to urgently strengthen anti-money laundering and counter-terror financing (AML/CFT) compliance and restore regulatory credibility, if it hopes to safeguard foreign investment and protect its financial system from deeper isolation.
The reports also highlight that Nepal’s continued presence on the FATF grey list could increase transaction costs, discourage foreign direct investment (FDI), and jeopardize correspondent banking relationships, an outcome with serious implications for a remittance-dependent economy. “Financial governance weaknesses, including poor accounting standards, unreliable reporting, aggressive tax practices, and regulatory unpredictability, are cited as key vulnerabilities,” the reports warned.
While the 2025 report acknowledges amendments to eight laws aimed at improving the investment environment, most structural concerns remain unchanged. Nepal continues to be described as a market offering opportunities primarily for investors willing to tolerate regulatory uncertainty and long-term risk.
The reports underscored persistent barriers including political instability, endemic corruption, inconsistent implementation of laws, weak contract enforcement, rigid labor provisions, and delayed repatriation processes. Investors reportedly face a regulatory environment influenced more by personal relationships than standardized systems.
The World Bank’s Business Ready Report placed Nepal in the fourth quintile globally across regulatory framework, public services, and operational efficiency. The country scores particularly low in market competition and business insolvency, reflecting cartel dominance and the absence of a comprehensive bankruptcy framework.
Experts say exiting the FATF grey list, ensuring predictable tax administration, strengthening judicial independence, digitizing approval systems, enforcing competition laws, and adopting international accounting standards are critical next steps for Nepal.
As global investment becomes increasingly compliance-driven, Nepal’s ability to translate legislative amendments into credible, system-wide reform may determine whether it narrows the trust deficit or continues to see opportunity overshadowed by risk.
Meanwhile, a visiting delegation of Asia Pacific Group on Money Laundering (APG) –operating under the Financial Action Task Force (FATF) – also stressed the need to further strengthen law enforcement, inter-agency coordination, asset confiscation mechanisms, and investigative systems to come out of the grey list.
However, key government agencies have reiterated their commitment to reforms and implementation measures to the officials from the APG, who are visiting Nepal for the first time after Nepal has been put under the grey list.
During a discussion on the International Cooperation Review Group (ICRG) action plan held at the Finance Ministry today under the coordination of the Office of the Prime Minister and Council of Ministers (OPMCM), Finance Minister Dr Swarnim Wagle said Nepal would use all available means to get removed from the ‘grey list.’
In discussions with the APG delegation led by Deputy Executive Secretary David Shannon, Dr Wagle claimed that the current government has been moving forward with good governance at the center of its agenda, resulting in accelerated reforms in financial discipline and monitoring systems.
“The current grey list situation is the outcome of the misgovernance of the past 30 years,” he reported the visitors. “Since the formation of the new government, the public has been able to feel the impact of reforms related to good governance.”
Dr Wagle also stated that Nepal has been working intensively on the 15-point ICRG action plan to which it committed in order to exit the grey list. According to him, Nepal’s current situation is significantly different from the previous review period.
However, APG Deputy Executive Secretary Shannon made it clear that Nepal still has substantial work left to do. He stressed the need to further strengthen law enforcement, inter-agency coordination, asset confiscation mechanisms, and investigative systems.
The APG team also held talks with Minister for Law, Justice and Parliamentary Affairs Sobita Gautam today. The meeting discussed Nepal’s ongoing efforts to be removed from the grey list, implementation of anti-money laundering laws, coordination among investigative agencies, procedures for freezing and confiscating criminal assets, and management of skilled human resources.
Minister Gautam said the government has placed anti-money laundering efforts on high priority and pledged to accelerate necessary legal reforms.
She informed the visiting APG delegation that Nepal has already signed mutual legal assistance agreements with India and China and is preparing to expand such agreements with other countries as well.
Stating that laws related to freezing, controlling, and confiscating criminal assets are currently under amendment, she said the process would be prioritized once the necessary draft proposals are received.
Meanwhile, an APG delegation separately met Inspector General of Police (IGP) Dan Bahadur Karki at Nepal Police Headquarters in Naxal.
During the meeting, Nepal Police briefed the delegation on its coordination with other agencies, investigations, and enforcement actions aimed at strengthening the anti-money laundering system.
Police officials said priority has been given to information sharing, international coordination, and improving investigative capacity in controlling financial crimes.
The APG delegation also visited Nepal Rastra Bank today and held discussions with Governor Dr Bishwo Poudel. The discussion reviewed Nepal’s progress, regulatory reforms, and future strategies since being placed on the FATF grey list.
The meeting was attended by APG Deputy Executive Secretary Shannon, Policy Officer Kia Sasal, officials from the Financial Information Unit (FIU), joint secretaries from the Prime Minister’s Office, officials from Nepal Rastra Bank, and senior officers.
On February 21, 2025, FATF placed Nepal on the grey list for two years under the category of ‘Jurisdictions Under Increased Monitoring.’ Nepal has since committed to implementing the 15-point ICRG action plan to exit the list and has claimed to have accelerated reforms related to anti-money laundering and counter-terrorist financing laws, strengthening investigative mechanisms, and improving inter-agency coordination.
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