Nepal is approaching what regional anti-money laundering regulators have called a decisive review this month of its progress toward exiting the international "grey list" a status that has already made some banking transactions and remittance transfers slower and more expensive, with regulators warning that failure to show progress could push Nepal toward outright blacklisting.
Nepal was placed on the Financial Action Task Force (FATF) grey list formally, the list of "jurisdictions under increased monitoring" in February 2025, after international assessors found persistent gaps in the country's systems for detecting money laundering and terrorist financing. It was given a 15-point action plan and, per most recent reporting, a deadline extending into 2027 to complete it.
In May, a delegation from the Asia/Pacific Group on Money Laundering (APG) the regional body that monitors Nepal on FATF's behalf visited Kathmandu and delivered an unusually blunt message: Nepal had made meaningful progress on only 9 of its 15 required actions, according to reporting on the visit by the Kathmandu Post. The delegation, led by APG Deputy Executive Secretary David Shannon, described the visit as the final high-level intervention before what it called a decisive review this September.
At FATF's most recent full plenary session, held in Paris in June, the organisation kept Nepal on the grey list, citing continued weak enforcement too few money-laundering prosecutions, low rates of tracing and confiscating criminal assets, and inadequate oversight of high-risk sectors including cooperatives, casinos and real estate, according to the Kathmandu Post and other outlets that reviewed the FATF statement. FATF's plan for Nepal also calls for a crackdown on illegal "hundi" money transfer networks informal channels that operate outside the banking system while explicitly cautioning against measures that would disrupt legitimate remittance flows.
ICN was not able to confirm the precise nature of the "September 2026 review" cited in APG's messaging whether it refers to an internal APG assessment feeding into FATF's broader process, or coincides with a separate FATF plenary session. Different sources describe it differently, and none specify an exact date. This should be treated as an important, imminent checkpoint in Nepal's grey-list status rather than a confirmed date for a final blacklist-or-not decision
.What grey-listing has already changed
According to reporting by Nepal News, the grey-list status has already had measurable effects: foreign investment commitments fell to around Rs 40 billion in the current fiscal year from about Rs 60 billion the previous year by the same point, according to Department of Industry figures, and foreign aid disbursement has lagged well behind government targets. Nepali travellers and businesses have also reported longer visa-processing times and additional scrutiny from foreign missions and banks, which the same reporting linked to heightened due-diligence requirements tied to the grey listing.
Despite this, Nepal's overall remittance inflows have continued to grow. Nepal Rastra Bank data cited by Nepal News show remittance inflows rising by double-digit percentages through the current fiscal year, partly attributed to a stronger US dollar and stricter anti-money laundering checks that have pushed more transfers through formal, traceable channels rather than informal ones.
What's at stake if Nepal is downgraded further
FATF's own guidance states that grey-list status alone does not require banks to apply enhanced due diligence or sanctions, and the organisation has specifically cautioned against financial institutions "de-risking" cutting off relationships with a country's banks altogether in ways that would disrupt legitimate transfers, including remittances and humanitarian aid.
Blacklisting is a different matter. Analysts and past FATF experience elsewhere suggest that a formal blacklist designation typically prompts international banks to cut correspondent relationships with a country's financial institutions, making cross-border transactions slower, costlier, or in some cases unavailable through formal banking channels the same channels most diaspora remittances rely on. Nepal was previously grey-listed from 2008 to 2014 and narrowly avoided blacklisting in 2012 before improving its standing.
What this means for you
If you regularly send money to Nepal, there is no indication that formal remittance channels are currently blocked or that transfers have become unavailable. But if Nepal's status deteriorates further at this month's review, banking-sector analysts have flagged remittance costs and processing times as among the first things likely to be affected. Using formal, licensed remittance operators and banks rather than informal hundi networks remains the most reliable way to ensure a transfer isn't disrupted by future compliance measures, and is also the channel FATF says it wants to protect from being caught up in over-cautious "de-risking."
