Financial Crime World

Bhutan Fortifies Financial System against Money Laundering and Global Risks

Bhutan, a country renowned for its unique development philosophy of “Gross National Happiness,” has been navigating unprecedented challenges in its financial sector. With rapid economic growth over the past three decades, the Himalayan nation has made significant progress in reducing poverty, but this financial influx has highlighted the need for stronger protections against money laundering, terrorism financing, and other financial crimes.

Strengthening Financial Infrastructure

In an effort to establish a secure financial system that aligns with its national goal, Bhutan’s government has been taking proactive steps. The Royal Monetary Authority (RMA), Bhutan’s central bank, has assumed a leading role in implementing the Financial Market Development Program. This comprehensive, medium-terms roadmap aims to reform, stabilize, and strengthen Bhutan’s financial infrastructure and policies.

Incremental Reforms

The RMA is committed to implementing reforms incrementally to ensure the program’s sustainability. The Bhutanese authorities have sought technical assistance from development partners, including the Asian Development Bank (ADB). The government aims to reform various sectors, such as:

  • Fintech
  • Housing finance
  • Risk management
  • Insurance industry

Combating Financial Crimes

Legislative reforms, like the Anti-Money Laundering and Combating the Financing of Terrorism Act (AML-CTF Act) enacted in 2018, are bolstering the country’s financial crime prevention efforts. The AML-CFT Act requires Bhutan’s financial sector to comply with international standards set by the Financial Action Task Force (FATF).

Automated Digital Platform

The AML-CFT Act also led to the creation of the Bhutan Financial Intelligence Analysis System, which went live in July 2020. This automated digital platform allows reporting entities to report any suspicious financial transactions worth Nu 300,000 ($4,100) or more directly to the Financial Intelligence Department (FID) of the RMA.

Real-time Reporting

The report can then be passed on to law enforcement agencies in real-time if necessary, ensuring efficient and effective response to potential threats.

Enhancing Financial Literacy

Recognizing that financial literacy is essential for the population to protect themselves from potential financial risks, the RMA has also launched initiatives aimed at increasing financial literacy, especially among:

  • Rural borrowers
  • The poor
  • Youth
  • Women

This enhanced financial knowledge will enable the population to understand their rights and responsibilities under Bhutan’s banking system, and particularly in the context of digital banking that has opened up new economic opportunities.

Challenges Ahead

Despite the progress Bhutan has made, there’s more work to be done. The RMA plans to tackle challenges in areas like:

  • Fintech (focusing on IT auditing roadmaps and cybersecurity)
  • Housing finance
  • Risk management
  • Insurance industry

If Bhutan continues its unwavering dedication to these financial reforms, it is poised to further secure its financial sector, bring in even more prosperity, and safeguard the nation’s aspiration towards perpetual happiness.