Bhutan’s Economy Under Threat: Money Laundering and Ponzi Scams in the Himalayan Kingdom

Thimphu, Bhutan - With the removal of the television and internet ban in 1999 and the emergence of a democratic government, Bhutan has opened up to the world. This small Himalayan nation, with a population of just under 700,000, has faced growing vulnerability to cross-border financial crimes.

Financial Challenges in a Liberalizing Economy

Bhutan’s domestic political and economic liberalization has brought new challenges in the realm of financial monitoring. The country’s limited technical and financial capabilities have left it susceptible to financial crimes. These concerns have been compounded by two major incidents - money laundering and Ponzi scams - which have significantly impacted the Bhutanese economy and private citizens.

Money Laundering and Ponzi Scams

2018: Illicit Financial Activity

The first instance occurred in 2018 when it was revealed that millions of dollars were being laundered through Bhutan’s banking system. The money, believed to be from India, flowed into Bhutanese banks via shell companies, with some funds being transferred to Thailand and other countries. This illicit financial activity not only drained the Bhutanese economy but also tarnished the reputation of its financial institutions.

2019: Ponzi Scheme

Just a year later, in 2019, the country was rocked by a Ponzi scheme that swindled thousands of investors out of their life savings. The scheme, orchestrated by a locally based firm, promised high returns on investments but was found to be a fraud. The loss to investors, many of whom were middle-income families, totaled millions of Ngultrums (Bhutan’s currency). The incident highlighted the need for stronger financial regulations and the dangers of hasty investments.

Efforts to Strengthen Financial Monitoring Capabilities

In response to these incidents, the Bhutanese authorities have stepped up efforts to strengthen their financial monitoring capabilities and enhance regulatory frameworks. The Royal Monetary Authority of Bhutan (RMAB), the country’s central bank, announced new measures to prevent and detect money laundering and terrorism financing activities. The RMAB also introduced stricter Know Your Customer (KYC) regulations and undertook staff training programs to enhance the monitoring capabilities of banks and financial institutions.

Future Directions

These efforts, however, are just the beginning. Bhutan needs to continue investing in its financial monitoring capabilities and regulatory frameworks to protect its economy from the potential harm of cross-border financial crimes. The stakes are high, as the fallout from a major financial crime could have significant long-term consequences for the country.

About the Author

Tenzing Lamsang is a freelance journalist based in Thimphu, Bhutan. He covers economics, politics, and society in the region. His work has appeared in various international publications.