Bhutan’s Financial Record Keeping Requirements Under Scrutiny

Introduction

In a recent review, Bhutan has been evaluated on its compliance with the Financial Action Task Force (FATF) Recommendations, which aim to combat money laundering and terrorist financing. The country has made progress in some areas, but still has work to do in others.

Risk Assessment and Approach

Bhutan has demonstrated a good understanding of risk assessment and application of a risk-based approach, as seen in its efforts to identify and mitigate potential threats. This is reflected in the country’s ability to assess risks and implement measures to address them effectively.

National Cooperation and Coordination

The review found that Bhutan has made significant strides in national cooperation and coordination, with various agencies working together to combat financial crimes. However, there are still opportunities for improvement in this area.

Compliance with FATF Recommendations

Money Laundering Offence and Confiscation Measures

• Partially complied with FATF Recommendation R.3 (money laundering offence)
• Partially complied with FATF Recommendation R.4 (confiscation and provisional measures)

Bhutan has established a money laundering offence, but needs to improve its confiscation and provisional measures to effectively combat financial crimes.

Terrorist Financing Offence and Sanctions

• Partially complied with FATF Recommendation R.5 (terrorist financing offence)
• Partially complied with FATF Recommendation R.6 (targeted financial sanctions related to terrorism and terrorist financing)

Bhutan has established a terrorist financing offence, but needs to improve its targeted financial sanctions to effectively combat terrorism.

Financial Institution Secrecy Laws

• Partially complied with FATF Recommendation R.9

While the country has taken steps to enhance transparency, it still needs to improve its laws to ensure effective implementation of anti-money laundering measures.

Customer Due Diligence and Record Keeping

The review found that Bhutan has largely complied with FATF Recommendations R.10 (customer due diligence) and R.11 (record keeping). The country has established robust customer due diligence procedures, but needs to improve its record-keeping requirements to ensure effective implementation of anti-money laundering measures.

Politically Exposed Persons and Correspondent Banking

Bhutan has largely complied with FATF Recommendations R.12 (politically exposed persons) and R.13 (correspondent banking). The country has established procedures for managing politically exposed persons, but needs to improve its correspondent banking requirements to ensure effective implementation of anti-money laundering measures.

New Technologies and Wire Transfers

The review found that Bhutan has largely complied with FATF Recommendations R.15 (new technologies) and R.16 (wire transfers). The country has established procedures for managing new technologies, but needs to improve its wire transfer requirements to ensure effective implementation of anti-money laundering measures.

Reporting of Suspicious Transactions

Bhutan has partially complied with FATF Recommendation R.20 (reporting of suspicious transactions). While the country has established a reporting mechanism, it needs to improve its procedures for identifying and reporting suspicious transactions.

Internal Controls and Foreign Branches and Subsidiaries

The review found that Bhutan has largely complied with FATF Recommendations R.18 (internal controls and foreign branches and subsidiaries). The country has established robust internal controls, but needs to improve its procedures for managing foreign branches and subsidiaries.

Transparency and Beneficial Ownership of Legal Persons and Arrangements

Bhutan has partially complied with FATF Recommendations R.24 (transparency and beneficial ownership of legal persons) and R.25 (transparency and beneficial ownership of legal arrangements). While the country has established procedures for transparency, it needs to improve its requirements for beneficial ownership of legal persons and arrangements.

Regulation and Supervision of Financial Institutions

The review found that Bhutan has partially complied with FATF Recommendation R.26 (regulation and supervision of financial institutions). While the country has established a regulatory framework, it needs to improve its supervision of financial institutions to ensure effective implementation of anti-money laundering measures.

Financial Intelligence Units

Bhutan has largely complied with FATF Recommendation R.29 (financial intelligence units). The country has established a robust financial intelligence unit, but needs to improve its procedures for sharing information with other agencies.

Conclusion

Overall, Bhutan has made progress in implementing the FATF Recommendations, but still needs to address some areas of concern. The country’s efforts to combat money laundering and terrorist financing are ongoing, and it is expected that further improvements will be seen in the coming years.