Bhutan Takes Steps to Combat Financial Crimes Amid Rapid Growth

Ensuring Financial Stability in a Rapidly Growing Economy

In a bid to ensure that its rapid economic growth does not compromise the country’s financial stability, Bhutan is strengthening its regulatory framework and increasing transparency in its financial sector. The Himalayan nation has been working with international partners to develop its financial market and mitigate risks of money laundering, terrorism financing, and other financial crimes.

Pursuing “Gross National Happiness”

Bhutan’s pursuit of “Gross National Happiness” - enshrined in its Constitution since 2008 - has led to significant economic progress, with a declining national poverty rate. However, the influx of new funds into the country’s finance sector has created vulnerabilities that need to be addressed. New financial instruments and digital platforms have entered the market, exposing Bhutan’s financial system to global risks.

Implementing Financial Market Development Program

The Royal Monetary Authority (RMA), Bhutan’s central bank, is taking a leading role in implementing the Financial Market Development Program, a roadmap for reforming and strengthening the country’s financial infrastructure and policies. The program aims to ensure sustainability through incremental reforms, with technical assistance from the Asian Development Bank (ADB) and other development partners.

Key Legislation: Anti-Money Laundering and Combating the Financing of Terrorism Act 2018

One key legislation passed by Bhutan’s legislature is the Anti-Money Laundering and Combating the Financing of Terrorism Act 2018, which requires the country’s financial system to comply with international standards set by the Financial Action Task Force. The law has been a foundation for reforms in the financial sector.

Capacity-Building Program for Financial Literacy

To increase financial literacy among the population, particularly rural borrowers and vulnerable groups like the poor, youth, and women, the RMA has created a capacity-building program. This will help Bhutanese citizens understand their rights and responsibilities under the banking system, as digital banking opens up new economic opportunities.

Enhancing Financial Integrity with Digital Platforms

In July 2020, the RMA launched the Bhutan Financial Intelligence Analysis System, an automated digital platform that allows for seamless reporting of financial transactions above Nu 300,000 (approximately US$4,100). This strengthens Bhutan’s financial integrity and enhances anti-money laundering capacities by enabling real-time reporting to law enforcement authorities.

Ongoing Reforms and Initiatives

Bhutan acknowledges that much remains to be accomplished. The RMA continues to implement incremental reforms in areas like fintech, housing finance, risk management, insurance, stock market trading, and equity issuance regulations, as well as financial literacy initiatives through consumer groups, cooperatives, and microfinance institutions.

Conclusion

If Bhutan’s determination and focus on reforming its financial system continue, there is no doubt that the country can achieve greater “Gross National Happiness” - with renewed security for its financial system.