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 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.

Nepal is grappling with pervasive corruption that is deeply entrenched within its political and institutional frameworks, significantly undermining governance and public trust. Despite having anti-corruption laws in place, enforcement remains weak, and the judicial system is often compromised, which allows various criminal activities, including human trafficking, extortion, and drug trafficking, to flourish with little resistance.

Nepal's economy, with an annual GDP of approximately USD 53.81 billion and trade totaling USD 17.5 billion, holds significant potential in sectors such as energy, tourism, ICT, infrastructure, and agriculture. However, the investment climate is hindered by persistent political instability, corruption, and bureaucratic inefficiencies, which have discouraged foreign investment despite government efforts to attract it. While foreign direct investment (FDI) has been on the rise, challenges such as restrictive laws, profit repatriation difficulties, and a lack of alignment with international business practices continue to pose risks for investors, particularly in a landscape marked by frequent political upheaval and inadequate regulatory enforcement.