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FATF “Gray Lists” Thailand’s Anti-Money Laundering Regime

  • February 19, 2012
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A leading international anti-money laundering body, the Financial Action Task Force (FATF), reports that Thailand has “strategic anti-money laundering deficiencies.”  The FATF’s 16 February 2012 report on Thailand says:

Despite Thailand’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT [counter foreign terrorism] deficiencies, Thailand has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain, although Thailand has faced external difficulties from 2009 to 2011 which significantly impacted the legislative process for the necessary laws and regulations

In other words, Thailand has not done enough to enforce its existing anti-money laundering laws, and although this may be attributed to domestic political strife over the last several years that has diverted attention from anti-money laundering enforcement, this doesn’t excuse the lapse in anti-money laundering enforcement, and Thailand needs to do more.

The FATF report makes three specific recommendations: “(1) adequately criminalizing terrorist financing; (2) establishing and implementing adequate procedures to identify and freeze terrorist assets; and (3) further strengthening AML/CFT supervision”.  On paper, Thailand has a fairly robust anti-money laundering regime; a summary of that regime can be found here.

There are 14 other countries listed with Thailand.  The Thai press has variously called this a “gray-list” or a “black-list”.  These terms do not appear on the FATF list, and to understand what this listing means for Thailand, its best to see how the FATF itself describes Thailand’s deficiencies and what other countries are listed with Thailand as having deficiencies material enough to merit such a listing.  The 14 countries other countries – besides Thailand – which the FATF says have such “deficiencies” include, among others, Myanmar, Nigeria and Syria.  There are also two jurisdictions where the FATF: “call[s] on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/TF) risks emanating from [those] jurisdictions”.  Those two jurisdictions are Iran and the Democratic People’s Republic of Korea.

The FATF report could lead to changes in Thailand’s anti-money laundering regime (and we will report on any such changes), but the FATF seems to be suggesting that the relevant regulators lack sufficient powers and tools to investigate anti-money laundering activities.  They want to see more proactive enforcement, and in the near future this could lead to more aggressive enforcement of Thai anti-money laundering laws – which, to a large extent, are delegated to Thai commercial banks – while further, more proactive measures, are considered.

Thailand’s placement on FATF’s grey list could make financial transactions involving Thailand subject to more scrutiny and make financial transactions involving Thai based businesses and the Thai government more complicated and cumbersome unless and until the FATF removes Thailand from its “gray list”.