AML/CFT, Sanctions, Correspondent Banking and the Remittance Industry

Grey-listing is often described as a reputational event. It is more usefully understood as a change in where a transaction gets refused. Nepali law did not become stricter on 21 February 2025, when the Financial Action Task Force (FATF) placed Nepal under increased monitoring. What changed is that every foreign bank in the chain reclassified Nepal, and a payment that used to clear on the documents now clears on the documents plus an explanation.

What FATF is asking for

The June 2026 statement credits Nepal with addressing the remaining technical compliance deficiencies in its targeted financial sanctions regime for terrorist and proliferation financing. That is the part Nepal has done. The list of what it has not done is more revealing than any general statement about compliance culture:

• improving understanding of key money laundering and terrorist financing risks;
• risk-based supervision of commercial banks, higher-risk cooperatives, casinos, dealers in precious metals and stones, and real estate;
• identifying and sanctioning illegal money value transfer service and hundi providers;
• increasing capacity for money laundering investigations;
• demonstrating more investigations and prosecutions;
• identifying, tracing, restraining, seizing and confiscating proceeds of crime.

Press reporting of the same review put meaningful progress at 9 of 15 action plan items, with the remaining 6 only partially implemented as at January 2026. Four of the six outstanding items concern enforcement outcomes rather than rules. That distinction matters commercially. The remedy is prosecutions and confiscations rather than a statute a government can pass quickly, and those take years, showing up in statistics long before they show up in a delisting.

The two items a business will feel are supervision of cooperatives and real estate, and the hundi item.

Remittance and hundi

For balance of payments purposes, remittance is closer to being the economy than a sector of it: NPR 1,916.90 billion, about USD 13.26 billion, in the first ten months of FY 2025/26, up 41.2 percent year on year, and the direct cause of the reserve position described in Nepal’s foreign exchange regime.

Because the flow is so large and so decentralised, the informal channel, hundi, has always competed with the licensed one on price and on the absence of documentation. FATF’s action plan names illegal money value transfer providers explicitly, which puts Nepal in the position of having to suppress a channel that a substantial number of migrant workers use, without pushing volume away from the formal system it is trying to grow.

NRB’s chosen instrument has been consolidation by capital. The Remittance Bylaw 2079, issued on 28 January 2023, set tiered minimum paid-up capital, five-year licence terms with licence fees, and cash or bank guarantee collateral, together with a phased schedule under which existing licensees step up their capital annually to mid-July 2028, with mergers and acquisitions expressly available as a route to compliance. The bylaw has been amended twice since, most recently on 1 April 2026. The direction is fewer, larger, better-capitalised remittance companies, which is a defensible supervisory answer and also a barrier to entry.

What the rules require

The Asset (Money) Laundering Prevention Act 2064 (2008) and the Rules 2073 (2016) place the duties on reporting entities rather than on their customers. FIU-Nepal, which sits inside NRB, identifies those entities as banks and financial institutions, money changers and remittance companies, insurers, securities intermediaries, the pension and social security funds, and cooperatives. NRB’s Unified Directive 19 for A, B and C class institutions carries the detail for banks.

A commercial customer therefore experiences the regime as a series of requests. A published policy from Rastriya Banijya Bank shows the mechanics: three-tier risk rating, with politically exposed persons, sanctioned parties, cash-intensive businesses, multi-layered corporate structures and high-value wire transfer customers rated high; beneficial owner identification triggered at 10 percent shareholding; enhanced due diligence and senior management approval for high-risk relationships. Threshold and suspicious transaction reports go to FIU-Nepal under guidelines it updated in July 2025.

We do not state the cash reporting threshold. The figure appears inconsistently in bank documents in circulation and we could not obtain the current guideline. That is a live gap, and one worth resolving with your bank in writing if your business handles cash.

Sanctions obligations have also moved outward. NRB issued Targeted Financial Sanctions Guidelines for licensed payment institutions on 11 August 2025, and the Unified Directive on Payment Systems 2082 names prevention of money laundering and terrorist financing as one of its four subjects. A wallet operator in Nepal now carries screening duties that five years ago belonged to banks alone. See payments regulation.

Two overlapping rulebooks

A foreign-owned company in Nepal is usually subject to two compliance regimes that were never designed to fit together. Its Nepali bank applies the Asset (Money) Laundering Prevention Act, NRB Directive 19 and FIU-Nepal guidance. Its group applies a sanctions and financial crime policy written for the jurisdictions where the parent is regulated, which will typically treat a FATF-monitored country as elevated risk by default.

The friction shows up in ordinary decisions. A group policy may require screening against lists that Nepal does not implement, or prohibit categories of counterparty that are entirely lawful in Nepal. A Nepali bank may ask for documents the group considers commercially sensitive. Neither institution is being unreasonable, and neither will defer to the other. The answer is to decide, at the point of establishing the Nepali entity, which policy governs where they conflict, and to write it down. Groups that leave this to be resolved transaction by transaction end up resolving it at the worst moment, when a payment is already in flight.

The four categories FATF singles out for weak supervision — cooperatives, casinos, dealers in precious metals and stones, and real estate — are also the ones most likely to appear in a Nepali counterparty’s ownership or funding history. A counterparty whose shareholders are cooperative-linked is lawful in Nepal, and still a question your correspondent bank may ask.

Correspondent banking

Nepal has no domestic clearing for US dollars, euros or any other convertible currency. Every foreign currency payment into or out of Nepal settles through a correspondent bank abroad, and the correspondent applies its own risk appetite to the jurisdiction, the Nepali bank, the transaction and the parties.

Grey-listing operates at that layer. Reporting in June 2026 described international transactions becoming slower and more expensive because of additional documentation and compliance procedures, and raising the country risk premium in a way that discourages investment. We were unable to find published data quantifying how many correspondent relationships Nepali banks have lost or how pricing has moved, so that observation is reported rather than measured, and it is flagged as such.

Two consequences follow for anyone structuring a transaction with a Nepali leg. The identity of the Nepali bank matters more than it would elsewhere, because its correspondent network determines which currencies clear and how fast. And the documentary file that supports a payment should be assembled to satisfy a compliance officer in London, Singapore or New York who has never seen a Nepali approval letter: invoice, contract, regulatory approval and beneficial ownership, in English, before the payment is initiated rather than in response to a query.

What would change the position

Delisting requires FATF to be satisfied on the enforcement items, and those are measured in investigations, prosecutions and confiscations. FIU-Nepal’s own strategic analysis series — virtual assets in January 2026, cyber-enabled fraud in November 2024, suspicious tax evasion in 2023 — reads as the work of an institution that understands its risk landscape better than the supervisory record suggests. The mutual evaluation was in January 2024 and a technical compliance follow-up report was published on 22 May 2026, so the technical side is moving.

Effectiveness is the harder half, and there is no version of this in which it resolves quickly. A business planning cross-border flows through Nepal should model the current friction as the base case for the medium term, rather than as a temporary condition awaiting a favourable announcement.

Sources

1. Jurisdictions under Increased Monitoring — 19 June 2026

   Financial Action Task Force · 19 June 2026 · Tier 3 — Multilateral institution

   Supports: Nepal's continued listing, the February 2025 high-level political commitment, progress on targeted financial sanctions for terrorist and proliferation financing, and the six outstanding action plan items.

   Accessed 26 August 2026

2. Nepal — country page

   Financial Action Task Force · Listing 21 February 2025; follow-up report on technical compliance 22 May 2026; mutual evaluation report January 2024 · Tier 3 — Multilateral institution

   Supports: The date Nepal was placed under increased monitoring and the sequence of mutual evaluation and follow-up reporting.

   Accessed 26 August 2026

3. Asset (Money) Laundering Prevention Act, 2064 (2008)

   Government of Nepal · 2008, as amended — in force · Tier 1 — Primary legal instrument

   Supports: The statutory framework for customer identification, reporting, investigation and the offence of asset laundering.

   Accessed 26 August 2026

4. Financial Intelligence Unit — reporting entities, guidelines and publications

   Nepal Rastra Bank, FIU-Nepal · Reporting guidelines updated July 2025; Annual Report 2081/82 published 13 January 2026; strategic analysis reports 2022 to 2026 · Tier 2 — Official publication

   Supports: The population of reporting entities, the existence of separate threshold and suspicious transaction reporting guidelines, and the published strategic analysis series.

   Accessed 26 August 2026

5. Nepal still on 'grey list' as FATF shares its review report

   The Kathmandu Post · 20 June 2026 · Tier 6 — Professional or news source

   Supports: That meaningful progress was recorded on 9 of 15 action plan items with 6 only partially implemented as at January 2026, and that international transactions have become slower and more expensive through additional documentation and compliance procedures.

   Accessed 26 August 2026

6. AML/CFT Policy and Procedures 2074 (amended 2081)

   Rastriya Banijya Bank Limited · Amended 2081 (2024/25) · Tier 4 — Audited disclosure / filing

   Supports: How a Nepali commercial bank implements the regime: three-tier customer risk rating, high-risk categories including politically exposed persons and multi-layered structures, the 10 percent beneficial ownership trigger, and reliance on NRB Directive 19.

   Accessed 26 August 2026

7. Payment Systems Department — Targeted Financial Sanctions Guidelines

   Nepal Rastra Bank · 11 August 2025 · Tier 2 — Official publication

   Supports: That sanctions screening obligations were extended to licensed payment institutions in August 2025.

   Accessed 26 August 2026

8. NRB Remittance Bylaws 2079 issued, require paid-up capital at Rs. 250 million

   The Rising Nepal · Reporting the bylaw issued 28 January 2023 · Tier 6 — Professional or news source

   Supports: Tiered paid-up capital requirements for remittance companies, five-year licence terms, collateral requirements and the phased compliance schedule for existing licensees.

   Accessed 26 August 2026

9. Current macroeconomic and financial situation, ten months of FY 2025/26

   Nepal Rastra Bank, reported by Nepalnews · Data to mid-May 2026 · Tier 6 — Professional or news source

   Supports: Remittance inflows of NPR 1,916.90 billion (USD 13.26 billion) over ten months, up 41.2 percent year on year.

   Accessed 26 August 2026