Nepal
has been re-listed on the FATF Gray List once again due to ongoing concerns
over its anti-money laundering (AML) and counter-terrorism financing (CFT)
measures. This means that Nepal has not fully addressed the issues raised by
the FATF in previous evaluations and is under increased scrutiny. Being on the
Gray List means that Nepal is considered to have deficiencies in its financial
systems that could make it vulnerable to misuse for illegal activities such as
money laundering or terrorist financing. However, it is also seen as a country
that is committed to improving its systems and is working with the FATF to make
necessary changes.
By establishing
international rules and recommendations, the Financial Action Task Force (FATF)
aims to prevent financial crimes such as money laundering and terrorism
financing. Here is a condensed explanation of its function:
- Setting Global Standards:
Developing and promoting international AML/CFT standards, including the 40
Recommendations that countries must follow to prevent money laundering and
terrorism financing.
- Monitoring Compliance: Evaluating
countries’ compliance through Mutual Evaluations, assessing their legal
frameworks and effectiveness in implementing AML/CFT measures.
- Issuing Recommendations and
Guidelines: Providing updates and guidance on emerging financial threats,
such as cryptocurrencies, and ensuring that countries adapt to new risks.
- Grey and Blacklisting: Maintaining
lists of countries (grey list and blacklist) based on their compliance
levels with FATF standards, which impacts their international financial
standing.
- International Cooperation:
Promoting collaboration between governments, law enforcement, financial
regulators, and the private sector to share information and combat illicit
financial activities globally.
Being
on the Gray List leads to increased scrutiny from investors and global
financial institutions, as it signals potential risks related to money
laundering and terrorist financing. This heightened oversight could result in
penalties or restrictions on cross-border financial transactions, complicating
international trade and investments. The added risk might discourage foreign
investors, leading to a decline in foreign direct investment (FDI).
Consequently, Nepal's economic growth could be hindered, as international
organizations may be reluctant to engage with the country due to the associated
risks.
In
2018, Nepal was placed on the Financial Action Task Force's (FATF) grey list.
An international organization called the Financial Action Task Force (FATF) is
in charge of establishing guidelines to stop money laundering and terrorism
financing. Being on the grey list indicates that a nation is actively
attempting to fix strategic shortcomings in its anti-money laundering (AML) and
fighting the financing of terrorism (CFT) regimes.
- Nepal was added to the grey list
primarily because of concerns related to the country's AML/CFT measures.
- FATF expressed concerns about
Nepal's lack of sufficient controls in preventing money laundering and
terrorism financing, especially related to non-profit organizations (NPOs)
and cross-border financing.
- The FATF recommended that Nepal
address these deficiencies through stronger regulations and enforcement
mechanisms.
After
being grey-listed, Nepal took various steps to improve its financial regulatory
framework:
Amendments to Laws:
The country made amendments to its Money Laundering Prevention Act and Banking
Act to align with international standards.
Enhanced Supervision:
Nepal strengthened the role of regulatory authorities like the Financial
Information Unit (FIU) and law enforcement agencies in monitoring suspicious
financial activities.
Awareness and Training:
Authorities worked on increasing awareness of AML/CFT standards within the
financial institutions and non-profit sector.
Nepal needs to show that it is making good progress in implementing the FATF's recommendations and take additional measures to fortify its frameworks against money laundering and counterterrorism financing. The FATF may eventually remove Nepal off the Gray List if it satisfies its requirements.
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