Strengthening Financial Integrity in Nepal
Challenge
Nepal’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework was weak, undermining the country’s financial stability, making transactions susceptible to corrupt practices, and discouraging foreign investment. Moreover, the transition from monarchy to democracy had put an additional strain on human and political resources.
Approach
Nepal’s Financial Information Unit (FIU) initiated a partnership with the Nepal Rastra Bank (NRB) and the IMF to improve financial integrity and effectiveness. The goal was to better understand and mitigate risks in the country’s financial sector, develop and implement important AML/CFT laws, and strengthen the AML/CFT supervisory framework and the FIU’s governance and operations.
Beginning in 2010, this six-year strategic and operational partnership was supported by the IMF’s multi-partner AML/CFT Fund. It required not only close cooperation with the Nepalese authorities, but also with other developmental partners, including the World Bank, the Asia/Pacific Group on Money Laundering, and the Australian FIU.
Impact
Positive results began with the Government of Nepal’s adoption of a national AML/CFT strategy in 2011. Nepal’s AML/CFT laws now largely follow international standards; and directives and handbooks guide staff in operational procedures. In 2014, the Financial Action Task Force took note of Nepal’s significant progress and removed the country from its “gray list.”
Now, Nepal continues to implement its AML/CFT framework, despite challenges such as the devastating earthquake in 2015. Collaboration, persistence, and knowledge sharing are creating a solid foundation, and Nepal’s financial system has benefited from AML/CFT measures – helping the country attract investment, mobilize resources, and boost economic stability.