Anti-Money Laundering Law in Nepal: AML, FATF & DMLI Guide

Yes. In February 2025, the Financial Action Task Force placed Nepal on its Grey List (“Jurisdictions under Increased Monitoring”) after the Asia-Pacific Group’s mutual evaluation found strategic deficiencies in Nepal’s AML/CFT regime. Nepal was previously on the Grey List from 2008 to 2014.

The Department of Money Laundering Investigation (DMLI) is the sole investigative agency for money laundering and terrorism financing offenses in Nepal. Located in Pulchowk, Lalitpur, DMLI has investigated 58 ML cases, resulting in 45 prosecutions and 32 convictions. The 2080 amendment expanded ML investigation powers to CIAA and Nepal Police as well.

The Financial Information Unit (FIU-Nepal) is an autonomous unit under Nepal Rastra Bank, established in 2008 under Section 9 of the AML Act. It receives suspicious transaction reports (STRs) from reporting entities, analyzes financial intelligence, and disseminates findings to law enforcement agencies. FIU-Nepal is a member of the EGMONT Group of Financial Intelligence Units.

Individuals convicted of money laundering face imprisonment up to 10 years, a fine equal to the amount laundered, and confiscation of assets. Entities face fines, business closure, and license revocation. Failure to report suspicious transactions and KYC non-compliance also carry regulatory penalties.

All financial institutions and designated businesses must verify customer identity, identify beneficial ownership, conduct enhanced due diligence for high-risk customers (including PEPs), maintain ongoing transaction monitoring, keep records for a minimum of 5 years, and file suspicious transaction reports (STRs) with FIU-Nepal.

Reporting entities include commercial banks and BFIs, cooperatives, insurance companies, securities firms, casinos, real estate businesses, remittance companies, money changers, and designated non-financial businesses and professions (DNFBPs) such as lawyers, accountants, and dealers in precious metals.

Nepal’s 2020 National Risk Assessment identified corruption, tax evasion, banking offenses, hundi (informal value transfer), and human trafficking as high-risk predicate crimes for money laundering. The APG evaluation also noted that financial sector crimes remain a significant threat.

The FATF Grey List (“Jurisdictions under Increased Monitoring”) includes countries with strategic deficiencies in their AML/CFT regimes. Grey-listed countries must develop action plans to address deficiencies. While not subject to sanctions, grey listing signals enhanced transactional risk to the international banking system and can affect foreign investment and development partnerships.

An STR is a mandatory report filed with FIU-Nepal by reporting entities when they suspect a transaction is connected to money laundering or terrorism financing. Filing an STR is a legal obligation; failure to report can result in regulatory penalties. Reporting entities are prohibited from “tipping off” (alerting the customer that an STR has been filed).

As per the APG mutual evaluation, DMLI has achieved 32 convictions from 58 investigated cases and 45 prosecutions. The majority of convictions are self-laundering related to banking offenses. In 2025, CIB arrested 21 individuals in a case involving NPR 17.86 billion in laundered funds through digital wallets and gold smuggling.

Yes. The AML Act authorizes confiscation of assets derived from or used in money laundering. Nepal also has provisions for non-conviction based confiscation, with 10 successful cases to date. However, the APG evaluation noted that the value of recovered confiscation orders remains low relative to the scale of illicit financial flows.

In 2080 B.S. (2024), Nepal amended 19 laws to strengthen AML compliance. Key changes include expanding investigative authority to CIAA and Nepal Police for ML cases linked to their primary investigations, strengthening targeted financial sanctions implementation, and enhancing cooperation between law enforcement agencies.

Yes. Payment service providers, digital wallets, and fintech platforms licensed by NRB must comply with full AML/CFT obligations including KYC, transaction monitoring, and STR filing. The 2025 CIB bust involving NPR 17.86 billion laundered through digital wallets highlighted vulnerabilities in this sector.

Asset confiscation orders under the AML Act can freeze joint bank accounts, seize property, and block investments, directly affecting property division during divorce. Courts must distinguish legitimate marital property from proceeds of crime. Our divorce lawyer can advise on protecting legitimate assets.