Bhutan’s Journey Towards Financial Crime Prevention: A Quest for Economic Prosperity and National Security
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Bhutan, the land of Gross National Happiness, is on a mission to safeguard its financial system against money laundering and global risks, ensuring the sustained growth of its economy and national security. The country’s pursuit of national happiness has been buoyed by decades of robust economic growth, including a commendable achievement in lowering the national poverty rate.
The Need for Improved Security
As more money flows into Bhutan’s financial sector, there is a pressing need for improved security and protective infrastructure to prevent global risks such as:
- Money laundering
- Terrorism financing
- Fraud
- Cybercrime
These threats could destabilize the financial system and undermine economic growth.
The Royal Monetary Authority’s Response
To address these challenges, the Bhutanese government has identified the need to harmonize economic gains with a secure financial system. The Royal Monetary Authority (RMA), Bhutan’s central bank, is leading the Financial Market Development Program, a comprehensive roadmap to transform, stabilize, and strengthen Bhutan’s financial infrastructure and policies.
Key Reforms
Bhutan’s financial reforms are being executed gradually, with an unwavering commitment to sustainability. The incremental approach enables the country to achieve its objectives in stages, with assistance from development partners like the Asian Development Bank.
Some significant milestones include:
- Anti-Money Laundering and Combating the Financing of Terrorism Act 2018: This legislation complies with international standards established by the Financial Action Task Force (FATF) and has been integral in implementing reforms and fortifying Bhutan’s financial sector against illicit activities.
- Capacity-Building Program: The central bank has initiated a capacity-building program to increase financial literacy among the population, focusing on rural borrowers, young people, and women.
Enhancing Financial Integrity
In July 2020, the Bhutan Financial Intelligence Analysis System was launched, an automated digital platform designed to facilitate the reporting of financial transactions exceeding Nu 300,000 (approximately US$4,100). The system:
- Bolsters Bhutan’s financial integrity
- Strengthens its anti-money laundering capabilities
- Enables reporting entities to transmit suspicious transactions directly to the Financial Intelligence Department of the Royal Monetary Authority
Authorities can then pass these reports to law enforcement agencies in real-time, ensuring a swift response to potential financial crimes.
Challenges Ahead
Although significant progress has been made, Bhutan acknowledges that countless challenges remain. Continued reforms are necessary in areas like fintech, housing finance, risk management, and the insurance industry, stock market trading, and equity issuance regulations.
If executed with the same determination and focus as initially demonstrated, Bhutan’s efforts will surely usher in an even more secure and prosperous financial system, enriching the lives of its citizens and fostering a renewed sense of confidence in the country’s economy.