Nepal AML/CFT Progress: AI Fraud Detection, Increased STRs, FATF Grey List & Regulatory Reforms
1st April 2025, Kathmandu
Nepal is making progress in its fight against financial crimes. The latest report from Nepal Rastra Bank’s Financial Intelligence Unit (FIU-Nepal) highlights key improvements.
Nepal AML/CFT Progress
The country has intensified efforts to detect suspicious transactions, tighten anti-money laundering (AML) measures, and use technology to combat illegal financial activities. However, experts stress that continued reforms and political will are crucial to secure the financial system and remove Nepal from the global grey list.
Key Developments in Financial Monitoring
Rise in Suspicious Transactions
The report shows a significant increase in suspicious transaction reports (STRs). More financial institutions are identifying potential money laundering and terrorism financing. Banks, cooperatives, and remittance agencies are improving their monitoring practices.
Stronger AML/CFT Measures
Nepal has introduced stricter Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regulations. These align with global standards set by the Financial Action Task Force (FATF). High-risk sectors like remittances and real estate now face more scrutiny. Financial institutions must also check politically exposed persons (PEPs) and high-net-worth individuals more carefully.
AI and Data Analytics for Fraud Detection
Nepal is using artificial intelligence (AI) and big data to detect fraud. AI helps identify unusual transaction patterns. Real-time monitoring of cross-border funds has also improved, reducing reliance on informal channels.
Increased Global Cooperation
Nepal is working closely with international organizations, such as FATF, the Asia/Pacific Group on Money Laundering (APG), and the Egmont Group of FIUs. These partnerships help improve information sharing and joint investigations.
Focus on Vulnerable Sectors
The report highlights high-risk sectors like remittances, real estate, and cooperatives. Tighter controls are now in place for remittance inflows to prevent hundi transactions. Real estate deals now require stricter verification of fund sources.
Challenges and Steps Forward
Despite progress, Nepal remains on the FATF’s “grey list” due to ongoing weaknesses in enforcement. Experts believe more action is needed in the following areas:
Regulatory Overhaul
Penalties for non-compliant financial institutions should be tougher. Oversight of cooperatives must also be strengthened. Nepal should formalize informal remittance channels to reduce hundi operations.
Building Institutional Capacity
Training programs for law enforcement and financial investigators are essential. Advanced forensic tools are also needed to track digital crimes like cryptocurrency misuse.
Political Will and Unified Action
Political leaders must agree on pending AML/CFT reforms. Stronger enforcement by regulatory bodies, such as Nepal Rastra Bank (NRB) and the Department of Money Laundering Investigation (DMLI), is crucial.
Expert Views
Rajesh Khanal, a financial analyst, states, “The rise in STRs is positive. But Nepal must ensure these reports lead to convictions.” AML specialist Meena Acharya adds, “Technical progress won’t be enough. Nepal needs strong political commitment to leave the grey list.”
Conclusion
Nepal has made significant strides in improving its financial system. The use of AI and stronger international partnerships are positive steps. However, regulatory gaps and enforcement weaknesses remain. The next year will be critical in determining whether Nepal can regain global trust and secure a stable financial future.
For more: Nepal AML/CFT Progress
