Neeraj Singh Manhas is the Director of Research in the Indo-Pacific Consortium at Raisina House, New Delhi. He has authored three books and has diverse research interests covering Sino-Indian border issues; China in the Indian Ocean; India-China foreign policy; water security; defense and Indo-Pacific studies. His recently-edited book is “Analyzing the Current Afghan Context” (Routledge 2022). His works have appeared in the Institute for Security & Development Policy (ISDP), Observer Research Foundation (ORF), Lee Kuan Yew School of Public Policy, The Hindu Business Line, The Pioneer, Financial Express, and other online platforms. ApEx spoke with him about the risk of Nepal slipping into the gray list of FATF.
Different sources are claiming that Nepal will again be put into the FATF gray list. What are the chances?
I think the chances are 90 percent; there is a 10 percent chance that it can be averted, if any technical issue comes up with FATF. APG officials have said they would only incorporate progress made through December 16, 2022 in their mutual evaluation report, as Nepal (the country was on the greylist in 2008-2014) is once again placed in a vulnerable position and is at the risk of being greylisted. This will be quite harmful for Nepal because it has already had to deal with numerous other significant challenges.
In the past, several countries’ economies have suffered due to FATF-imposed restrictions. Do you think it will have the same impact on Nepal?
In June 2018, Pakistan was placed on a watch list. Numerous sources have proved that Pakistan’s economy suffered losses of over $30bn as a result of FATF’s restrictions. Pakistan, which has a friendly relationship with Saudi Arabia and the UAE, benefited from the latter’s bailout packages. The economic position of Nepal is dwindling, and its current status does not appear encouraging even as it seeks international investments. The lives of ordinary people have been affected, and the economy has been severely damaged by an expanding trade imbalance, a rapidly diminishing foreign exchange reserve, and surging inflation. Indeed, Nepal may slip into a serious financial crisis like Pakistan and Sri Lanka if serious action is not taken.
India has a potential role in helping Nepal frame new laws for money-laundering syndicates during 2008-2014, when it was on the FATF gray list. Do you think India will save Nepal from the FATF radar?
India has always believed in “Vasudhaiva Kutumbakam” (the world is one family). Former PM Atal Bihari Vajpayee once stated: “We can change friends but not our neighbors.” India’s position with its neighboring states has always been humble and helpful. Recently, when Sri Lanka was going through a financial crisis, India provided foreign aid multiple times. India helped Nepal frame new laws for money-laundering from 2008 to 2014, things are a bit more difficult for India this time around. Members of the 39-strong FATF have held discussions, with a majority stating that they may go against Nepal in the upcoming FATF meeting, making things pretty difficult for India. Let’s see what happens until then.
China has heavily invested in Nepal in its infrastructure, railways, and FDI; the current Prime Minister also shares close ties with Xi Jinping. Do you think China will have a significant role?
China has always helped Nepal fill its infrastructure gaps. As part of China-Nepal BRI Cooperation, both countries signed several MoUs, including Investment and Cooperation on Production Capacity, Human Resource Development Cooperation, and Economic and Technical Cooperation. PM Prachanda is on good terms with Xi Jinping, and everyone is hoping that China will help Nepal in this case. However, China is going through a massive upheaval, what with the Covid-19 pandemic, and mass resentment against their government. It will be interesting to see the Chinese moves vis-a-vis the FATF matter involving Nepal.
What significant challenges does Nepal face as it tries to return to track?
There are myriad problems facing Nepal, including an economic crisis, lack of better infrastructure, political instability, corruption, brain drain, unemployment, border security, and underutilization of resources. If Nepal slips into the FATF gray list, its challenges will only increase. However, Nepal has identified 15 laws that must be amended to make them compatible with the FATF anti-money laundering case. Some of the significant laws that need amendment are the Assets Laundering Prevention Act-2008, Land Revenue Act-1978, Tourism Act-1978, Securities Act-2007, Human Trafficking and Transportation (Control) Act-2008, Confiscation of Criminal Proceeds Act-2014, Mutual Legal Assistance Act-2014, Organized Crimes Prevention Act-2014, Criminal (Code) Act-2017 and Cooperative Act-2017. In February, when the APG is expected to produce its preliminary report, it will give its opinion. It will prepare its final report, which will determine whether Nepal will be under the International Cooperation Review Group (ICRG) monitoring of the FATF.