Finance Ministry Unveils Five-Year Strategy to Combat Money Laundering Amidst Threat of Greylisting
In a proactive measure aimed at averting potential greylisting by the Financial Action Task Force (FATF), the Ministry of Finance (MoF) has formulated a comprehensive five-year strategy to combat issues associated with money laundering.
Led by Finance Minister Barsha Man Pun, a committee endorsed the strategy on Wednesday, pending final approval from the Cabinet. The MoF has outlined plans to implement the strategy, titled 'National Strategy and Work Plan on Prevention of Financial Investment in Money Laundering and Terrorist Activities,' starting from the next fiscal year.
Mahesh Acharya, Joint-Secretary of the MoF, underscored the strategy's primary focus on mitigating financial crimes such as corruption, revenue leaks, illicit financial flows (hundi), and cryptocurrency trading. Additionally, the strategy encompasses addressing concerns pertaining to narcotics trafficking, organized crime, illicit gains, domestic terrorism, fraud, counterfeit currency transactions, black market activities, and smuggling.
The urgency to enact legislation stems from the Mutual Evaluation Report issued by the Asia Pacific Group on Money Laundering (APG) of the FATF in September 2023. The report identified numerous deficiencies within Nepal's legal framework, warning of potential greylisting if corrective measures were not implemented promptly.
Echoing the APG's recommendations, the report emphasized the critical need for legislative amendments and capacity-building initiatives within relevant authorities. The FATF, as the global anti-money laundering agency, sets standards to combat money laundering, terrorist financing, and proliferation financing.
In response to these concerns, Nepal has demonstrated its commitment to addressing deficiencies by urging the FATF for a one-year grace period before any potential greylisting. Subsequently, the government endorsed the Anti Money Laundering and Business Promotion Bill in February, alongside amendments to several laws to align with international anti-money laundering and counter-financing of terrorism standards.
Consequences of greylisting are far-reaching, potentially impacting a country's economy and financial system. Restrictions on cross-border transactions, challenges in obtaining credit, and diminished foreign investment inflows are among the potential ramifications. Moreover, greylisting tarnishes a country's reputation and diminishes its global standing.
*Note: Greylisting is like being put on a watchlist. When a country is greylisted by organizations like the Financial Action Task Force (FATF), it means that the country's financial system is under scrutiny because there are concerns about how well it's fighting against things like money laundering and terrorism financing. Being on this list doesn't mean immediate trouble, but it's a signal that the country needs to make improvements in its laws and practices to meet international standards. If improvements aren't made, the country could face more serious consequences, like restrictions on financial transactions and a damaged reputation. So, it's a warning sign that there's work to be done to keep the financial system safe and trustworthy.
