WORLD NEWS | FATF may place Nepal on money laundering and terror financing ‘grey list’

Kathmandu [Nepal]Jan 3 (ANI): Nepal faces real risk of being graylisted by Financial Action Task Force (FATF) due to deficiencies in laws and enforcement related to money laundering and terrorist financing, writes Kathmandu Post Shrestha in .

Nepal is grappling with deficiencies to comply with the Paris-based regulator’s standards related to anti-money laundering and terrorism financing, and has identified at least 15 weak laws.

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The greylisting could damage Nepal’s struggling economy, which relies heavily on foreign aid, remittances and imports. Countries on the gray list may face lack of trade opportunities, rating downgrades and subsequent economic contraction.

A delegation from the Asia Pacific Money Laundering Group (APG), a FATF-style regional anti-money laundering body, recently visited Nepal for two weeks to assess the country’s response to money laundering and terrorist financing, Shrestha reported.

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Officials said APG would only include progress as of Dec. 16 in its mutual assessment report, leaving Nepal vulnerable again and risking being greylisted, if not blacklisted.

“Blacklist” is FATF’s term for the list of “High Risk Jurisdictions Requiring Action”. Currently, North Korea, Iran, and Myanmar are all on the blacklist.

The ‘grey list’ is used to denote a group of countries/jurisdictions that have a ‘strategic gap’ in their systems to combat money laundering and terrorist financing.

Once listed by FATF as a “jurisdiction subject to enhanced surveillance”, they must develop an action plan within a certain period of time. Countries on the gray list are exempt from sanctions. However, according to the Kathmandu Post, the gray list is a signal to the international banking system that doing business with the aforementioned countries may increase transaction risk.

However, Pakistan is an example of how graylisting can hit the economy. The gray listing of Pakistan by the FATF could result in a cumulative loss of $38 billion in gross domestic product (GDP) from 2008 to 2019, of which consumer spending , exports, and FDI declines.

Nepal was on the FATF gray list from 2008 to 2014. The FATF finally removed Nepal from the list in 2014 following a series of developments in the anti-money laundering regime, including the 2008 Amendment to the Anti-Money Laundering Act and other laws.

“There is a real risk of being greylisted because of our shortcomings in legislation and enforcement related to money laundering and terrorism financing,” said a senior Nepal Central Bank official, who declined to be named.

Shrestha said Nepal has identified 15 laws that need to be amended to bring them in line with FATF anti-money laundering standards.

“We started the amendment process, but before the amendment, the term of the former House of Representatives expired,” said Dhan Raj Gyawali, secretary to the Prime Minister’s Office.

The government has tried to amend these laws through some Nepal Act Amendment procedures. Most of the group of 19 laws are designed to address deficiencies in compliance with FATF’s anti-money laundering and terrorist financing standards.

Some of the major laws that need to be amended are the Prevention of Asset Laundering Act 2008, Land Revenue Act 1978, Tourism Act 1978, Securities Act 2007, Trafficking in Persons and Transportation (Control) Act 2008 , Confiscation of Proceeds of Crime Act 2014, Mutual Legal Assistance Act 2014, Organized Crime Prevention Act 2014, Criminal (Code) Act 2017 and Cooperation Act 2017, Kathmandu Post reported.

The proposed amendments make these laws more stringent against money laundering and terrorist financing. But the bill is still stuck in the House.

The government sent a decree containing such amendments to President Bidya Devi Bhandari for certification in early November. But the president kept the statute, which later lapsed with the election of a new House of Representatives.

“If the decree is verified by December 16 before the APG team completes the site visit, Nepal may not be placed on the gray list,” the NRB official said.

“The APG team will only include in its report the progress made as of that date, which could be damaging,” the official added.

In February, APG is expected to submit a preliminary report, on which Nepal will comment. According to Gyawali, the face-to-face interaction is expected in April before APG prepares its final report.

The report will then be presented to the APG plenary meeting, which will decide whether Nepal will come under the oversight of FATF’s International Cooperation Review Group (ICRG).

According to the IMF, the consequence of the gray list is the possibility of being blacklisted in the future and losing correspondent banking business with many of the world’s major banks. (Arnie)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)