Financial Crime World

Bhutan’s Financial Crime Prevention Strategy: Fortifying National Happiness and Financial Integrity

Bhutan, known for its unique development philosophy, “Gross National Happiness” (GNH), is taking proactive steps to protect its financial system from potential risks. With the advancement of its economy and increasing financial transactions, new challenges have arisen pose threats to GNH. In this article, we discuss Bhutan’s strategy to fortify its financial system against money laundering, terrorism financing, fraud, cybercrimes, and other financial crimes.

Challenges Facing Bhutan’s Financial System

  • Escalating financial activities
  • Emergence of digital platforms
  • Threat to Bhutan’s happiness and financial integrity

Bhutan’s economy has experienced impressive growth over the past three decades, reducing poverty, and improving living standards. However, concerns over financial security and infrastructure have become increasingly crucial as international financial instruments and digital platforms have entered the Bhutanese market, increasing the nation’s exposure to global risks.

Bhutan’s Response: Strengthening the Financial System

The Royal Monetary Authority (RMA), Bhutan’s central bank, has taken the lead in domestic reforms through the Financial Market Development Program. The program aims to:

  1. Enhance infrastructure, policies, and reforms in the financial sector
  2. Address vulnerabilities in the financial sector

Adhering to Global Standards: Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)

In 2018, Bhutan’s legislature passed the Anti-Money Laundering and Combating the Financing of Terrorism Act, requiring the financial sector to comply with Financial Action Task Force (FATF) standards. The act marked the beginning of reforms aimed at global compliance.

Financial Literacy and Capacity Building

RMA initiated a capacity-building program to increase financial literacy within the population, focusing on rural borrowers, the poor, youth, and women. Financial literacy is essential for navigating digital banking, exploiting new economic opportunities, and understanding responsibilities within the banking system.

Bhutan Financial Intelligence Analysis System

RMA launched the Bhutan Financial Intelligence Analysis System, a digital platform enabling seamless reporting of financial transactions exceeding Nu 300,000 (approximately US$4,100). This system emphasizes Bhutan’s commitment to financial integrity and enhances anti-money laundering capabilities.

Ongoing Efforts: Digital Banking, Fintech, and Regulation

RMA continues its efforts to address various areas in the financial sector, including:

  1. Digital banking and fintech
  2. Housing finance
  3. Risk management and the insurance industry
  4. Stock market trading and equity issuance regulations
  5. Consumer protection via cooperatives, microfinance institutions, and more.

With determination and focus, Bhutan’s efforts aim to bring more economic gains and financial security to its people, supporting its unique development philosophy and pursuit of happiness.