In June 2024, the Asia/Pacific Group on Money Laundering (APG) released Nepal’s first Enhanced (Expedited) Follow-Up Report (FUR). While Nepal has taken steps to align its AML/CFT framework with international standards, critical weaknesses persist—exposing systemic, operational, and technological gaps that continue to hamper compliance and enforcement.
This article outlines those deficiencies in detail, offers actionable insights for regulatory reform, and explains how RegTech innovation—led by ZIGRAM—can support Nepal’s transition toward full compliance.
Persistent Deficiencies in Nepal’s AML/CFT Framework
| No. | Recommendation | Status | Key Deficiencies |
|---|---|---|---|
| 1 | R.1 – Risk Assessment | ❌ Partially Compliant | No updated NRA since 2020; limited analysis of TF, legal persons, cross-border risks; no risk-aligned resource allocation |
| 2 | R.6 – TFS (Terrorism) | ❌ Partially Compliant | No timely freeze orders; unclear guidance to FIs/DNFBPs; weak de-listing/unfreezing and third-party protection |
| 3 | R.7 – TFS (Proliferation Financing) | ❌ Partially Compliant (upgraded) | No evidence of 24-hour freezes; freeze orders lack future-proof clauses; weak outreach to FIs/DNFBPs |
| 4 | R.8 – NPOs | ❌ Non-Compliant | No TF-specific risk assessment; no risk-based monitoring; weak sanctions; poor international coordination |
| 5 | R.10 – Customer Due Diligence | ❌ Partially Compliant | Legal arrangements excluded from “customer”; weak BO verification; gaps in risk-based controls |
| 6 | R.24 – Transparency of Legal Persons | ❌ Partially Compliant | BO data inaccessible; poor enforcement and operational oversight |
| 7 | R.25 – Transparency of Legal Arrangements | ❌ Partially Compliant | No BO register for trusts; limited oversight |
| 8 | R.28 – Regulation of DNFBPs | ❌ Partially Compliant | Casinos, real estate agents, lawyers not supervised; no STRs filed |
| 9 | R.34 – Guidance and Feedback | ❌ Partially Compliant | No binding AML/CFT guidance for reporting entities; no reporting or freezing protocols |
| 10 | R.38 – Mutual Legal Assistance | ❌ Partially Compliant | No formal channels or SOPs for foreign asset freezing and confiscation |
What Nepal Needs to Do?
To address these weaknesses, Nepal must:
- Update its National Risk Assessment to reflect emerging threats and sector-specific vulnerabilities.
- Operationalize TFS implementation with 24-hour freeze mechanisms, real-time alerts, and defined de-listing procedures.
- Launch a centralized BO registry covering legal persons and arrangements with secure authority access.
- Deploy risk-based supervision for DNFBPs and NPOs, alongside tailored compliance obligations and enforcement action.
- Enhance inter-agency collaboration through formal SOPs, digital case tracking, and training.
- Facilitate international cooperation by streamlining MLA request handling and integrating secure evidence exchange platforms.
Final Word
Nepal’s AML/CFT journey remains heavily paper-based—strong on legislative momentum but weak on real-world application. The 2024 FUR confirms that deficiencies are not just in laws, but in the systems, processes, and data that enable enforcement.
To move forward, Nepal must embed compliance into its institutional DNA—driven by automation, transparency, and risk intelligence. This means rethinking outdated supervisory models, embracing technology-first solutions, and building regulatory capacity for the digital era.
How ZIGRAM Can Help?
Nepal’s challenges lie not just in drafting laws—but in deploying the digital, data-driven infrastructure necessary for real-world AML/CFT enforcement. This is where ZIGRAM’s expertise becomes indispensable.
✅ Name Screening & Risk Identification
PreScreening.io
A quick-scan name screening platform that helps institutions and regulators assess customers and third parties for risks related to money laundering, financial crimes, and sanctions exposure.
✅ Systematic Customer Risk Classification
Entity Hero
A risk evaluation platform that categorizes customers by AML risk levels using customizable parameters and seamless integration into onboarding and eKYC workflows.
✅ Transaction Monitoring & Red Flag Detection
Transact Comply
A real-time transaction screening solution with configurable rules, designed to detect suspicious activities using AI/ML-enhanced behavior tracking—ideal for enterprises and regulators.
✅ Due Diligence & Investigative Intelligence
DueDiliger
A report-driven platform that delivers both short and long-form due diligence reports powered by structured research and AI/ML tools—helping identify red flags before exposure.
✅ Why ZIGRAM?
Beyond individual tools, ZIGRAM offers a holistic, cost-effective RegTech solution designed for countries like Nepal navigating FATF scrutiny and regulatory reform. Learn more in this dedicated article:
Also, read about our other products: Risk App Ecosystem
Conclusion
Nepal has reached a pivotal point in its AML/CFT evolution. The reforms are no longer about alignment—they’re about action. What’s needed now is speed, consistency, and precision. The country must shift from compliance aspiration to compliance execution.
This transformation cannot happen manually, slowly, or in isolation. It requires smart systems, risk-driven tools, and tech-enabled supervision. With the right partnerships and digital infrastructure, Nepal can not only address its deficiencies—but lead as a regional example of resilient AML/CFT governance.
Source:
Asia/Pacific Group on Money Laundering (APG) –
Nepal: 1st Enhanced Follow-Up Report, June 2024 (PDF)
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23 Apr 2025
