KATHMANDU: Nepal’s efforts to strengthen its anti-money laundering (AML) framework and exit the Financial Action Task Force (FATF) grey list have brought the real estate sector under tighter regulatory scrutiny, but the implementation of new rules has raised several legal and practical questions.
Nepal was placed on the FATF grey list in February 2025 and remained there in the June 2026 review. Although the FATF has acknowledged Nepal’s progress in strengthening its AML laws, it has also pointed to weaknesses in their effective implementation.
The real estate sector is considered vulnerable to money laundering because illegally acquired funds can be invested in property and made to appear legitimate. To address this risk, the government has introduced new requirements for property transactions and begun licensing institutions to facilitate real estate deals.
Under the new arrangement, real estate transactions worth more than Rs 30 million between legal and natural persons, or between two legal persons, within metropolitan and sub-metropolitan areas must be conducted through licensed real estate transaction institutions.
The Department of Land Management and Archives has started issuing licenses to such institutions. The government has also allowed land-service providers to facilitate transactions that fall outside the mandatory scope of licensed institutions.
However, the new framework has created questions over how AML obligations should be applied in different types of property transactions.
Transactions involving two natural persons, deals worth less than Rs 30 million, and transactions outside metropolitan and sub-metropolitan areas are not currently subject to the same institutional requirement. This could result in different regulatory standards being applied to transactions of a similar nature.
Another major question concerns who should be considered the customer in a property transaction. A sale cannot be completed without both the buyer and seller. If both are treated as customers, licensed institutions may have to conduct customer identification and risk assessments on both parties. If only the party seeking the service is considered the customer, questions arise over how information about the other party will be collected and verified.
The involvement of multiple licensed institutions in a single transaction could create further complications. For example, if the buyer is represented by one institution and the seller by another, it remains unclear how customer due diligence, risk assessment and reporting responsibilities should be divided.
The reporting of threshold transactions also requires clearer guidance. A property worth Rs 60 million, for instance, may be paid for in several installments through different accounts and on different dates. It needs to be clearly established whether each payment should be treated as a separate transaction or whether the entire property deal should be considered a single transaction for reporting purposes.
The timing of reporting also needs clarification—whether the reporting obligation begins when money changes hands or when ownership of the property is formally transferred.
The same concern applies to land-service providers. While licensed institutions and land-service providers are subject to AML obligations as reporting entities, many land-service providers may operate as individuals. Imposing the same level of compliance requirements on individual operators and institutional entities could prove difficult in practice.
Experts say simply requiring reporting entities to comply with AML rules is not enough. Clear guidelines are needed on customer identification, beneficial ownership, risk assessment, threshold transaction reports and suspicious transaction reports.
The government’s decision to bring real estate transactions within a formal AML/CFT framework is a positive step, particularly as Nepal seeks to fulfill the FATF action plan. However, effective implementation will require clear legal interpretation, practical reporting procedures, stronger supervision, trained personnel and greater use of technology.
If these gaps are addressed promptly, Nepal can use the reform not only to strengthen its chances of exiting the FATF grey list but also to make the real estate sector more transparent, accountable and investment-friendly.
