Once again, Nepal has fallen into the grey list of the FTTF, just above the blacklist. It was certain that Nepal would be included in the grey list given the background of rampant corruption, bad governance, and non-transparent and non-accountable performance of the government. A plenary and working group meeting of the Financial Action Task Force (FATF) held in Paris on Friday (February 21) categorised Nepal on the grey list of assets laundering and terrorist investment risks. This is not the first time that Nepal has been included in the grey list. Just two years ago, the FATF's Asia Pacific Group (APG) Mutual Evaluation Report called for implementing the recommendations, however, Nepal failed to improve its performance and follow the recommendations. The situation could have been avoided if the government had taken timely improvement measures on issues related to money laundering.

Now, Finance Minister Bishnu Prasad Poudel is saying that Nepal will come out of the grey list before the stipulated time. This situation arose when Nepal failed to follow FATF guidelines in the stipulated time.

The FATF is an inter-governmental body set up by countries around the world to combat money laundering and terrorist financing. Countries that are at risk of asset cleanup have been placed on the black list and the grey list.

Although Poudel claims to be out of the list soon, it is not likely. Nepal is one of the countries where corruption is rampant. According to the 'Corruption Perceptions Index 2024' report released by Transparency International last month, Nepal is on the list of the most corrupt countries. Nepal has been given 34 points out of 100 in the CPI-2024. Nepal is ranked 107th among 180 countries. In the CPI 2023, Nepal was ranked 108th with 35 points.

The increase in corruption is also due to Nepal's refusal to clean up its assets. Earlier, Nepal came out of surveillance after introducing some legal provisions and structures, including the Prevention of Organized Crime Act. After this move, Nepal was considered a country complying with international standards on asset purification. This third assessment focuses specifically on the effectiveness of asset cleanup prevention.

Although the Finance Minister claims to get out of the grey list soon, there is a need for policy and procedural reforms. If so, Nepal will be removed from the list within a year. Otherwise, Nepal may be blacklisted by FATF.

Earlier, Nepal was placed on the grey list in 2008. The country was upgraded from that list only in 2014.

Nepal was almost placed on the blacklist in 2012. After a strong commitment from the Nepal government authorities, a special consideration was made for Nepal by FATF.

The countries in the grey list may suffer different financial hurdles, including trade and receiving financial support from international agencies.