Nepal boosts cooperative oversight after FATF grey listing

KATHMANDU: In response to Nepal’s recent designation on the Financial Action Task Force (FATF) grey list, the government has escalated its regulatory vigilance over cooperative institutions across the nation.

A comprehensive directive now mandates all cooperative federations and entities to submit detailed compliance reports pertaining to anti-money laundering (AML) measures.

Guided by the Cooperative Department’s directive, the Ministry of Federal Affairs and General Administration has formally instructed all local government units to enforce strict reporting requirements. Cooperatives within their jurisdictions must provide exhaustive disclosures within prescribed deadlines.

This heightened scrutiny stems from the mounting global challenges posed by sophisticated economic crimes, which have prompted Nepal’s grey listing by FATF and the Asia/Pacific Group on Money Laundering (APG).

Following a meticulous assessment, sixteen critical strategic sectors requiring urgent reform were identified.

To chart a course for removal from the grey list, the government has promulgated the National Strategy and Action Plan (2081-82, 2085-86) aimed at eradicating money laundering and terrorist financing activities.

At the heart of this initiative lies a robust framework to strengthen regulation and supervision of the cooperative sector.

In alignment with Section 7 of the Anti-Money Laundering Act, 2064, cooperatives categorized as high-risk are subject to enhanced risk-based oversight. Consequently, all cooperatives are required to submit their financial records for the fiscal year 2081-82, using designated formats, by the end of Shrawan.

The Cooperative Department’s nationwide enforcement appeal, relayed through the Ministry of Federal Affairs and General Administration, has galvanized all rural municipalities and urban local bodies to ensure full compliance in their areas of responsibility.

This pivotal intervention aims to eliminate financial opacity within the cooperative sector and to bolster a risk-sensitive supervisory regime. Nepal’s grey listing has intensified the scrutiny of cooperative financial transactions, compelling the government to reinforce regulatory controls.

Currently, more than two dozen cooperatives are mired in operational and financial distress, with law enforcement agencies estimating that approximately Rs 300 billion of public deposits remain vulnerable.

As of Falgun 2081, there are 32,965 registered cooperatives nationwide, collectively comprising over 10.9 million members and holding share capital valued at Rs 143.29 billion.

The sector oversees deposits and savings amounting to Rs 1.125 trillion and has disbursed loans worth Rs 923.47 billion.

Employment within the cooperative sector stood at roughly 94,000 direct jobs in Ashad 2081, experiencing a modest decline to 90,265 by Falgun 2081.

Additionally, cooperatives affiliated with the Cooperative and Poverty Information Management System increased from 17,696 in Ashad 2081 to 18,899 by Falgun 2081.