Nepal’s Money Laundering Risk Remains ‘Medium-High’ Amid Weak Implementation

KATHMANDU — A recent government study has revealed that Nepal’s money laundering risk continues to hover at a ‘Medium-High’ level. According to the National Risk Assessment (NRA) 2026 report, while the country has made significant progress in establishing strong legal and policy frameworks in recent years, the practical enforcement of these laws has been severely lacking. The report concludes that state agencies are falling short in investigation, prosecution, and institutional coordination rather than in the drafting of legislation.

The assessment, published by the Department of Money Laundering Investigation (DMLI), identifies institutional corruption, tax and customs evasion, illegal Hundi networks, cooperative fraud, and the misuse of virtual assets as the primary threats. Real estate and precious metals have been categorized as the "highest-risk" sectors, as they are frequently used as the ultimate destinations to legitimize 'black money.' Similarly, the banking system, digital payment platforms (fintech), and the cooperative sector have been classified as 'Medium-High' risk areas.

A major obstacle in combating financial crime is the systemic failure to accurately identify the 'beneficial owners' of corporate assets, coupled with a severe shortage of skilled investigators. The frequent transfer of trained personnel across regulatory bodies disrupts ongoing investigations and erodes institutional memory. Highlighting the poor management of frozen and confiscated illicit assets, the report recommends the immediate establishment of an integrated 'Central Database' to streamline asset recovery.

Due to the lack of result-oriented actions in controlling money laundering, the Financial Action Task Force (FATF) has kept Nepal under 'increased monitoring' since February 2025. To expedite the recovery of illicit wealth, the assessment suggests introducing non-conviction-based civil confiscation, which would allow authorities to seize assets without waiting for lengthy final court verdicts. Moving forward, the report emphasizes that Nepal must prioritize the strict enforcement of existing laws by aggressively adopting a 'follow the money' approach, rather than merely creating new legislation.