Financial Crime World

Bhutan’s Efforts to Enhance Due Diligence in Financial Transactions Fall Short

The Financial Action Task Force (FATF) has recently released an assessment of Bhutan’s efforts to combat money laundering and terrorist financing. Unfortunately, the country has been found to be “partially compliant” with several FATF Recommendations, indicating that it still needs to strengthen its measures to prevent financial crimes.

Progress Made, but Gaps Remain

While Bhutan has made progress in some areas, such as national cooperation and coordination, confiscation and provisional measures, and targeted financial sanctions related to terrorism and terrorist financing, significant gaps remain in other critical areas. These include:

  • Customer due diligence
  • Record keeping
  • Transparency and beneficial ownership of legal persons and arrangements

Recommendations for Improvement

The FATF report highlights several key areas where Bhutan needs to improve its efforts to prevent financial crimes:

  • Assess risks and apply a risk-based approach to financial transactions
  • Strengthen regulations and supervision of financial institutions and non-profit organizations
  • Improve powers of supervisors and law enforcement authorities
  • Enhance correspondent banking, wire transfers, and reliance on third parties
  • Improve reporting of suspicious transactions, tipping-off and confidentiality measures
  • Regulate and supervise designated non-financial businesses and professions (DNFBPs)

Consequences for Foreign Investment

Bhutan is working to strengthen its financial sector and attract more foreign investment. However, the country must first address these gaps in order to demonstrate its commitment to combating financial crimes and protecting its financial system.

Response from Bhutanese Authorities

In response to the assessment, Bhutan’s authorities have pledged to take immediate action to address the identified deficiencies and improve its compliance with the FATF Recommendations. It is essential that the country prioritizes these efforts in order to maintain the trust of international partners and investors.