FATF status

Nepal is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement - 27 June 2014

The FATF welcomes Nepal’s significant progress in improving its AML/CFT regime and notes that Nepal has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2010. Nepal is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Nepal will work with APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

Compliance with FATF Recommendations

The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Nepal was undertaken in 2023. According to the Evaluation, Nepal was deemed Compliant for 5 and Largely Compliant for 16 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.

Corruption in Nepal is described as endemic and institutionalized, significantly impacting government procurement, licensing, and revenue management. The Prevention of Corruption Act 2002 aims to combat these issues, but its enforcement is inadequate, leading to pervasive corruption within the judicial system and among officials. Despite some efforts by the Commission for the Investigation of Abuse of Authority (CIAA) to address corruption, particularly among lower-level bureaucrats, the overall environment remains highly corrupt, as evidenced by Nepal's low ranking on the Corruption Perception Index.

Nepal's economy has an annual GDP of approximately USD 53.81 billion, with significant trade totaling USD 17.5 billion. Despite its potential in sectors like energy, tourism, and agriculture, the country faces challenges such as political instability, corruption, and bureaucratic inefficiencies that hinder foreign investment. However, foreign direct investment has been on the rise, and the government's recent initiatives, including the Millennium Challenge Corporation's Compact, aim to enhance economic growth through infrastructure development.

Nepal's investment climate is hindered by political instability, corruption, and bureaucratic challenges, despite the government's stated commitment to attracting foreign investment. Although foreign direct investment (FDI) has been increasing, significant barriers remain, including restrictions on certain sectors, a minimum investment threshold, and a lack of understanding of international business standards among officials. The recent ratification of the Millennium Challenge Corporation's Compact aims to improve infrastructure and energy sectors, potentially enhancing the investment landscape.