The Nepali delegation comprises Prime Minister’s Office Secretary Udayaraj Sapkota, Law Secretary Dhanraj Gyawali, NRB Executive Director Dev Kumar Dhakal, and NRB’s Financial Information Unit Chief Dirgha Rawal. The delegation will also have senior officials from the Finance Ministry, Office of the Attorney General, CIB of Nepal Police, Department of Money Laundering Investigation, Securities Board of Nepal, and Insurance Authority of Nepal.
A senior official at the Finance Ministry said that Nepal will present the progress made in the AML regime to date. “The central bank has taken action against banks not complying with AML and the Securities Board has also initiated action against the insider trading in the capital market,” he said. However, government officials admit that the deficiencies pointed out by the APG have not been addressed. “We have even failed to amend the legislation. Now, the only option is to persuade the FATF board by promising the law amendment,” he said. According to a senior NRB official, around 80 percent of deficiencies pointed out by the APG with regard to the legislation would have been addressed, had the parliament passed the bill. “The failure to endorse the bill from the parliament could prove costly for us,” he said. The Asia Pacific Group (APG) on Money Laundering team that visited Nepal twice in the last six months had pointed out several deficiencies of Nepal to comply with the standards on anti-money laundering and counter-terrorist financing (AML/CFT). The APG team made a field visit to Nepal in December 2022 as a part of the mutual evaluation of Nepal’s compliance. During the Nepal visit, the APG team held discussions with regulating agencies including NRB, the Nepal Insurance Authority, and the Securities Board of Nepal along with private sector representatives. The APG report prepared after the visit stated that the biggest weakness of Nepal is the enforcement of the laws. The report has shown deficiencies in taking legal action against big fishes of corruption and other illegal activities. It has also shown weakness in taking against reporting entities that are failing to comply with anti-money laundering measures. With the risk of Nepal finding a place on the ‘gray list’ of the Financial Action Task Force (FATF), the government in February first week had already decided to expedite the endorsement of amendment bills related to anti-money laundering (AML). The government sought to amend those laws through Some Nepal Acts Amendment processes and the Ministry of Law, Justice, and Parliamentary Affairs registered the Bill for the purpose. However, the parliament is yet to endorse the bill. A majority of the 19 laws in the group are meant to address deficiencies in compliance with the FATF’s anti-money laundering and terrorist financing standards. Some of the major laws that need amendment are the Money 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 Cooperatives Act 2017. Nepal is currently under pressure from FAFT and international lenders like the International Monetary Fund (IMF) to enact a number of laws to address the deficiencies to comply with the standards on AML and counter-terrorism financing (CFT). The ‘gray list’ is used to denote a group of countries/jurisdictions with “strategic deficiencies” in their regime to counter money laundering and terror financing. Once listed as ‘jurisdiction under increased monitoring’ by the FATF, they must develop an action plan within a specific period. A country on the gray list is not subject to sanctions. However, the gray list signals to the international banking system that there could be enhanced transactional risks from doing business with the said country. Nepal was on the FAFT's ‘gray list’ from 2008-2014. After a series of progress made on the AML/CFT regime that includes an amendment to the Anti-Money Laundering Act 2008, and the enactment of other laws, the FATF finally removed Nepal from the list in 2014.
