Nepal races against time to fix money laundering deficiencies ahead of FATF review

Nepal is currently on the Financial Action Task Force (FATF) ‘grey list’ – officially, the ‘jurisdictions under increased monitoring’ – and has a deadline to implement its action plan by January 2027.
As Nepal is under continuous observation of the international evaluators, officials are scrambling to demonstrate that the country has made real progress in its fight against flow of dirty money.
Financial Action Task Force (FATF), the global watchdog that monitors illicit financial flows, has kept Nepal under ‘increased monitoring’ – a status popularly known as the grey list – after identifying serious gaps in the country’s enforcement and supervision systems.
However, authorities claim that Nepal is actively working with the FATF and the Asia Pacific Group (APG) to address its Anti-Money Laundering / Combating the Financing of Terrorism (AML/CFT) shortcomings. Prime Minister Sushila Karki, on Sunday, took stock of the situation with Finance Minister Rameshore Prasad Khanal, Nepal Rastra Bank Governor Bishwonath Poudel, and Department of Money-Laundering Investigation (DMLI).
Nepal is trying to address the issues raised by FATF and potentially exit the grey list is January 2027, albeit in a lousy pace because the global body to watch flow of dirty money’s decision this year, came with a clear message: Nepal’s laws look better on paper than they work in practice.
The message was: Nepal government does not walk the talk despite passing several regulations and setting up mechanisms to counter money laundering and the financing of terrorism but tangible results – like investigations, prosecutions, and confiscations – remain scarce, not due to successive governments’ inability but due to affiliation of governments with the infamous gangs and ‘middlemen’ like Therman Gun Gang.
The DMLI on Sunday reported the Prime Minister Karki that the department has frozen 1,600 ropanis of land within the Kathmandu Valley alone, in suspicious of Money Laundering.
However, the successive government’s lack of urgency in coming out of the grey list and its failure to meet the requirements by the deadline may result in Nepal being moved to the ‘black list’ – High-Risk Jurisdictions subject to a Call for Action – that will lead to severe economic sanctions and international financial isolation.
Though the erstwhile government led by Prime Minister KP Sharma Oli and his finance minister Bishnu Poudel, both, have claimed to bring Nepal out of the grey list, they have – in reality – been protecting the infamous Therman Gun Gang, which is allegedly involved in most of the money-laundering cases like illegal and suspicious transactions, by stationing their henchmen in the regulators.
The then KP Sharma Oli government has even withdrawn their cases from the Department of Money-Laundering Investigation (DMLI) and even Central Bank due to their affiliation with infamous gangs has also worsened the situation.
“We are responsible for investigation only,” said Director General of the DMLI Gajendra Thakur. But the department has always been under pressure not to investigate on suspicious transactions and therefore the department saw new head almost frequently.
Similarly, the investigation that the then Oli government withdrew against the infamous Thermal Gun Gang including Deepak Bhatta, the department seems at loss, whom to investigate and whom not. “The situation will put Nepal further in red-zone, as the FATF is closely monitoring the country,” according to those, who are privy to the investigation.
However, NRB and Finance Ministry are preparing the agendas to put forward the FATF during the review. Finance Minister Khanal and NRB Governor Poudel, on Sundy, appraised the Prime Minister.
The illicit flow of money is not only rampant among the ‘middlemen’ but also among the political leaders affiliated to the cooperatives sector.
Most of the cooperatives are run by the political leaders and their families, who are, despite cheating people’s money, getting protection from their respective parties, and law enforcement bodies are mere spectators.
FATF, on the contrary, has more focus on politically exposed persons (PEPs) because they are much powerful to cover the illicit money, earned with the help of their political clout.
According to officials familiar with Nepal’s preparation to face the FATF, the FATF wants proof that Nepal’s Financial Information Unit (FIU), law enforcement agencies, and regulators are not only coordinating among themselves but also not producing any measurable outcomes meaning taking action against the flow of dirty money. And it’s not a surprise as the regulatory capture by the infamous gang has made these law enforcement agencies and regulators impotent. “However, this time, FATF is neither interested in new laws or plans nor in paper works, it wants the tangible result,” according to the official, who is involved in the national response team. “FATF wants to see cases, numbers, and results."
In its last assessment, FATF pointed to persistent weaknesses: limited understanding of the country’s biggest money-laundering and terrorist-financing threats; weak supervision of high-risk sectors like cooperatives, casinos, and real-estate businesses; and a lack of visible action against illegal money transfer networks, popularly known as hundi.
The global watchdog also noted a shortage of prosecutions and asset recovery cases, raising concerns about Nepal’s ability to enforce its own laws.
Thus, Nepal will have to convince FATF and its regional counterpart, the Asia-Pacific Group on Money Laundering (APG), of which Nepal is a member, that Nepal has turned its commitment into action.
The face-to-face review will decide whether Nepal’s recent reforms and actions are credible enough to move it closer to removal from the grey list or continued deficiencies will prolong its stay.
Analysts warn that remaining on the list could damage Nepal’s reputation, discourage foreign investment, and make cross-border transactions more difficult. “Grey listing doesn’t shut Nepal out of the global system, but it raises the cost of doing business,” said a senior banker. “Every transaction gets extra scrutiny,” he said, adding that it affects business confidence.
Nepal is trying to get out of the grey list. Officials say the government has already begun working on a short-term action plan. It has prepared key priorities including publishing an updated National Risk Assessment (NRA) that identifies major threats, conducting risk-based inspections of banks and non-bank sectors, and launching visible enforcement against illegal hundi operations, and middlemen like Thermal Gun Gang.
The FIU under NRB is also expected to present detailed records of suspicious transaction reports (STR) enforcement actions, and ongoing investigations. In recent years, the STR has also been increasing, also due to regular and mandatory reporting system of the financial sector.
“But we need to prove effectiveness, not just intent,” according to a source, who is following the FATF process. “If we can show credible numbers, we have a good chance to convince FATF."
Experts also recommend that Nepal demonstrate at least one significant asset seizure or confiscation case before the review. “A clear example of money-laundering proceeds being traced and frozen”, they say, “would help signal that enforcement is moving from policy to practice."
They have also called for a high-level political statement reaffirming Nepal’s commitment to anti-money-laundering reforms before the FATF meeting. Coordination among the FIU, central bank, police, and prosecutors has been described as ‘critical,’ with several agencies already instructed to document all enforcement actions taken since the last evaluation.
However, insiders admit that bureaucratic inertia and overlapping mandates remain challenges. “Different agencies have done different works though in isolation, but what FATF wants is a coherent picture, a single narrative showing how Nepal’s system functions together."
Nepal’s response team has reportedly prepared a concise evidence dossier summarizing actions taken since the last review. If Nepal can demonstrate real progress – more inspections, visible enforcement, and actual asset recoveries – it could begin the process of exiting the grey list starting the next year.
But if Nepal fails to convince the evaluators, Nepal risks a prolonged stay under global watch list. For a country struggling to attract investment and rebuild economic confidence – also after the Gen Z movement on September 8 and 9 – that would be a setback it can hardly afford. After all the Gen Z movement had also called on ‘Corruption free Nepal’, transparency and accountability.

(Originally published at NepalKhabar: https://en.nepalkhabar.com/news/detail/16621/)

MCA-Nepal signs two contracts for road maintenance project

MCA-Nepal is pleased to announce the recent signing of two essential contracts totaling $23.66 million for road maintenance under the Millennium Challenge Corporation (MCC) Nepal Compact. These contracts jointly represent a major step forward for the Compact’s goal to advance Nepal’s long-term economic growth and development, according to a press note issued by the MCA-Nepal.
MCA-Nepal signed today a $20 million contract with Sharma-Kumar Joint Venture for the Road Upgrading Works using Full-Depth Reclamation and Superpave Technology on the Dhankhola to Lamahi section of the East-West Highway, as part of implementing the Road Maintenance Project under the MCC Nepal Compact. Additionally, MCA-Nepal recently signed a supporting $3.66 million contract with Intercontinental Consultants and Technocrats Pvt Ltd (ICT) for Consulting Services for Supervision of upgrading works of this road section and Design and Construction Supervision for Periodic Maintenance of the Narayanghat to Mugling Road Section.
Executive Director at MCA-Nepal Khadga Bahadur Bisht signed and exchanged the contract for the Dhan Khola-Lamahi Road works with the authorised representative of Sharma-Kumar Joint Venture Saurav Sharma, in the presence of the US Ambassador to Nepal Dean Thompson, Joint Secretary at the Ministry of Finance Dr Dhani Ram Sharma, Joint Secretary at the Ministry of Physical Infrastructure and Transport Sushil Babu Dhakal, the Director General at the Department of Roads Dr Bijaya Jaishi, MCA-Nepal Board Members, MCC Nepal Acting Country Director Sanjay Poudyal and MCC and MCA-Nepal officials.
The project includes the construction of a 7-meter carriage way and 2.5-meter shoulder on both sides of the road, making it 12 meter wide using Full-Depth Reclamation and Superpave technology for the upgradation of the 40km Dhan Khola to Lamahi section of the East-West Highway and periodic maintenance of the Narayanghat to Mugling Road Section. The upgrading and maintenance works will be conducted with new technologies, ie., Full Depth Reclamation and Superior Performing Asphalt Pavement (Superpave), for the first time in Nepal.
Addressing the event, the US Ambassador to Nepal Dean Thompson said, “The upgrading of the Dhan Khola-Lamahi Road project and the Narayanghat-Mugling Road Maintenance project represent much more than individual contracts."
"Together, they are another milestone reflecting the strength of the US-Nepal partnership, the momentum of the Millennium Challenge Compact, and a shared commitment at all levels of government to delivering tangible results for the people of Nepal and American businesses working in Nepal," he said, “As the Compact delivers essential road infrastructure across Nepal, these two contracts will introduce American excellence in road maintenance technology by using Full Depth Reclamation and Superpave."
Likewise, Joint Secretary at the Ministry of Finance Dr. Dhani Ram Sharma, on the occasion, expressed his confidence that the latest technologies going to be used in Nepal for the first time will open the road to sustainable, effective and cost-effective road maintenance, and MCA-Nepal would complete the project within the timeline.
Joint-Secretary at the Ministry of Physical Infrastructure and Transport, Sushil Babu Dhakal, said, “The progress reflects MCA-Nepal’s continued efforts to implement the MCC Nepal Compact by introducing new technologies that improve the quality of Nepal’s road system."
MCC Nepal Acting Country Director Sanjay Poudyal said that this project will contribute meaningfully to improving Nepal's road reliability and serve as a practical model that Nepal can replicate more broadly across its road network. He said well-built and well-maintained roads are not merely a consequence of economic growth; they are one of its essential drivers.
MCA-Nepal Executive Director Khadga Bahadur Bisht, on the occasion, said, “It is indeed a remarkable milestone to sign two contracts to move ahead with the Road Maintenance Project. The activities under the contracts will help in lowering trade and vehicle operation costs, increase road safety, decrease travel time, and improve travel quality. I would like to acknowledge the support of the Government of Nepal and our key stakeholders – the Ministry of Physical Infrastructure and Transport, Department of Roads, the MCA-Nepal Board and MCC for their continued support."
The Road Maintenance Project is a component of the MCC Nepal Compact, aimed at reducing transportation costs and improving road conditions in Nepal.

UN expert says minorities and Dalits must be empowered to fulfill their rights

Nepal must close the gap between clear constitutional and legislative provisions and their meaningful implementation to effectively prohibit discrimination against persons belonging to minorities, including Dalits, a UN expert said today.
“Minorities’ and Dalits’ unhindered access to education is the gateway to building skills and confidence, and breaking through cycles of poverty that have prevented them from realising the full enjoyment of their rights and their meaningful contribution to society as a whole,” said the UN Special Rapporteur on minority issues Nicolas Levrat, in a statement at the end of his visit to the country.
Levrat urged the donor community to efficiently support Nepal in designing and implementing empowering programmes conceived with and for the benefit of persons belonging to minorities. He called for a partnership with local authorities who have the means to deliver effective support to minorities and Dalits in the communities where they reside.
“In this period of political transition, it is time to rebuild trust in the Nepali social contract. Minorities and Dalits must feel that they can trust State institutions to protect them, and Nepali society as a whole must trust that their contributions enrich and uplift society,” the Special Rapporteur said, adding that minorities and Dalits must have trust in themselves to advocate for and realise their civil, political, economic, social and cultural rights.
“State institutions must better reflect the diversity of Nepali society in their composition and leadership,” he said, “Minorities must be able to recognise themselves in those exercising power. They must feel heard and understood by public servants - including teachers, judges, and the police - in their mother tongue language."
The expert expressed profound concern about the high rate of impunity for crimes against Dalits, such as violence linked to inter-caste marriages.
“Access to justice must include well-functioning enforcement mechanisms and sanctions of perpetrators,” he said. “It will lead to the dismantlement of a system and mindsets that have enabled caste-based violence and discrimination as well as a culture of impunity.”
Levrat warned about the curtailment of religious freedom, through selective use of the anti-conversion provision, leading to discrimination against religious minorities, including Muslims and Christians.
He welcomed the draft of a comprehensive anti-discrimination legislation protecting ethnic, religious and linguistic minorities, including those affected by forms of intersectional discrimination such as Dalit women, the Badi community, the Tharu community, minorities belonging to the LGBTQIA+ community, minorities with disabilities, Madhesis, Muslims and Christians.
The Special Rapporteur will present a full report to the UN Human Rights Council in March 2026.