Government tightens oversight of cooperatives as Nepal lands on FATF grey list

Kathmandu: The government has stepped up scrutiny of the cooperative sector after Nepal was placed on the Financial Action Task Force (FATF) “grey list.”

Authorities are now closely monitoring transactions conducted through cooperatives, which have increasingly come under suspicion in the global fight against financial crime.

In a recent move, the Department of Cooperatives issued a nationwide directive requiring all cooperatives to submit anti-money laundering compliance reports.

Acting on this, the Ministry of Federal Affairs and General Administration has instructed all local governments to ensure that cooperatives under their jurisdiction file the required details by the end of Shrawan for the current fiscal year 2024/25.

The directive notes that Nepal was added to the grey list following evaluations by the FATF and the Asia/Pacific Group, which identified the need for significant improvements in 16 strategic areas of law enforcement.

To address these deficiencies, the government has implemented the National Strategy and Action Plan for the Prevention of Money Laundering and Terrorist Financing (2024–25 to 2028–29), which includes stronger regulation and supervision of the cooperative sector.

Under Section 7 of the Anti-Money Laundering Act 2008, cooperatives considered at higher risk will be subject to risk-based monitoring. The government expects this measure to discourage opaque financial dealings within cooperatives and reinforce the risk-based supervision system.

The move comes as more than two dozen cooperatives across the country face financial trouble, with an estimated Rs 300 billion in public deposits at risk, according to police estimates.

As of February 2025, Nepal had 32,965 registered cooperatives with over 10.9 million share members and share capital totaling Rs 143.29 billion. The sector mobilized Rs 1.125 trillion in savings and disbursed Rs 923.47 billion in loans.

Direct employment in the sector fell from 94,202 people in July 2024 to 90,265 in February 2025. The number of cooperatives integrated into the Cooperative and Poverty Information Management System rose from 17,696 to 18,899 in the same period.

Government officials say that enhanced monitoring is critical not only for meeting FATF requirements but also for safeguarding public deposits and restoring trust in the cooperative sector.