Nepal Country Summary

FATF Status

Nepal is on the FATF List of Countries that have been identified as having strategic AML deficiencies

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 23 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.

Nepal is grappling with pervasive corruption that is deeply entrenched within its governmental processes, affecting both public and private sectors. Despite having laws like the Prevention of Corruption Act 2002, enforcement remains inadequate, leading to widespread impunity and a judicial system influenced by corruption, which undermines resilience against crime.

Criminal activities in Nepal are diverse, with significant issues including human trafficking, arms trafficking, and the illegal trade of wildlife and timber, often exacerbated by weak governance and political instability. The country's criminal networks, while generally small, have a substantial impact on the economy and governance, with state-embedded actors and foreign brokers playing key roles in various illicit markets.

Nepal's economy, with an annual GDP of approximately $54.81 billion and trade totaling $17.5 billion, holds significant potential in sectors such as energy, tourism, ICT, infrastructure, and agriculture. However, the investment climate is hampered by challenges including political instability, corruption, bureaucratic inefficiencies, and inconsistent legal frameworks, which deter foreign investment despite the government's efforts to attract it. Notably, the U.S. is among the top foreign investors, and initiatives like the Millennium Challenge Corporation's $500 million Compact aim to enhance economic growth and infrastructure, yet the practical implementation of reforms remains a concern, highlighting the need for a more conducive environment for resilient investors.