Financial Crime World

Bhutan’s Journey to Fortify Its Financial System: Combatting Money Laundering and Enhancing Financial Literacy

Amidst the picturesque landscapes of Bhutan, an economic transformation is underway. Known for its pursuit of “Gross National Happiness,” this tiny Himalayan kingdom is working to protect its financial system from global risks and strengthen its regulatory framework.

Economic Development and New Challenges

Bhutan’s rapid economic development over the last three decades has significantly reduced its national poverty rate. However, this growth has brought new challenges as the country’s financial sector evolves and becomes more interconnected with the global economy.

  • Better infrastructure and security are essential to safeguard Bhutan’s economic gains and ensure its unique brand of national happiness.
  • New financial instruments, especially digital platforms, are gaining popularity but expose Bhutan’s financial system to international risks such as money laundering, terrorism financing, fraud, and cybercrime.

Combating Money Laundering

In response to these concerns, Bhutan’s government has recognized the importance of balancing economic progress with financial security. In 2018:

  1. Bhutan’s legislature passed the Anti-Money Laundering and Combating the Financing of Terrorism Act.
  2. The Royal Monetary Authority (RMA), Bhutan’s central bank, took charge of implementing the Financial Market Development Program.

Financial Market Development Program

This medium-term plan focuses on reforming, stabilizing, and strengthening Bhutan’s financial infrastructure and policies:

  • Reforms ensure the sustainability of this initiative.
  • Technical assistance from the Asian Development Bank and other development partners support these efforts.

Financial Literacy

Financial literacy is another crucial aspect of Bhutan’s financial security:

  1. As digital banking expands.
  2. Rural borrowers and vulnerable sectors need the skills to navigate the banking system effectively.
  3. The RMA launched a capacity-building program to promote financial literacy.

Financial Surveillance and Reporting Capabilities

To boost Bhutan’s financial surveillance and reporting capabilities:

  1. RMA introduced the Bhutan Financial Intelligence Analysis System in 2020.
  2. This automated digital platform enables reporting entities to report transactions equal to or exceeding Nu 300,000 (US$4,100) directly to the Financial Intelligence Department of the RMA.
  3. Suspicious transactions can be handed over to law enforcement authorities in real-time.

Ongoing Efforts

Despite making significant strides, Bhutan realizes that more work is needed:

  • RMA continues to implement reforms in areas such as fintech, housing finance, risk management, insurance, stock market trading, and equity issuance regulations.
  • Continued collaboration with development partners is essential to build on initial progress and create an even more robust financial system.

Conclusion

Bhutan’s determination to strengthen its financial system and ensure a prosperous, secure future for its people underscores the importance of balancing economic progress with financial security. By tackling money laundering and enhancing financial literacy, Bhutan can create a robust financial system that preserves its unique national identity and promotes “Gross National Happiness” for generations to come.