Regulators dealing with pioneering industries such as Fintech and blockchain face a constant challenge of ensuring that existing guidelines provide sufficient protection and oversight. This is particularly true as money laundering activities around the world continue to evolve, often bypassing current checks and balances.

With this, the Financial Action Task Force (FATF) has recommended revisions to Thailand’s existing Anti-Money Laundering Act B.E. 2542 (AMLA) and the Counter-Terrorism Proliferation of Weapons of Mass Destruction Financing Act B.E. 2559 (CFTA) to ensure they are consistent with international best practices.

While proposed recommendations have already passed a public hearing on 15 June 2020, we are still awaiting a decision from Thailand’s cabinet and parliament. Nonetheless, key changes to relevant regulations can be surmised based on the draft amendments. This includes an expanded definition of a ‘financial institution’ under the AMLA, an established appeal process for those deemed to be terrorists and other changes to due diligence requirements.

Possible changes to AMLA

One of the most central changes to AMLA is expected to be broadening of the definition of a ‘financial institution.’ The term has been extended to encompass Fintech services, namely asset management and digital asset businesses, peer-to-peer lending businesses, and trustees in capital market trusts. It is also expected that ‘financial institutions will include non-bank credit card service providers, nano-finance businesses, as well as crowdfunding platforms.

The definition of “Section 16 Professions” has been broadened to include several new occupations and business activities, including accounting, auditing, auto-trading, and leasing, legal consulting, and others considered at-risk for money laundering. As a result, these professions will be obligated to observe recordkeeping duties, in addition to their current reporting duties, for cash transactions that exceed thresholds mandated by law.

Revisions to AMLA also include an expansion of the Anti-Money Laundering Office’s mandate to act as a financial intelligence agency tasked with regulating, monitoring, and rating the operation of businesses that operate both within and beyond Thailand.

Amendments to due diligence

On top of changes made to AMLA, further changes have been made to regulations on customer due diligence through a new Ministerial Regulation on Customer Due Diligence B.E. 2563, which came into effect on 14 August 2020, replacing its previous iteration. The latest regulations feature several updates, including clarification on the definition of a “politically-exposed person” (PEP) which now includes senior managers, intimate partners, family members, and anyone who has a business relationship with elected officials or hold positions in public office. In this context, Thai law defines a business relationship as a “transaction conducted between a customer and a financial institution or person engaging in professions under Section 16 of the Ministerial Regulation on Consumer Due Diligence B.E.2563 to use financial, business, trading, or professional services of the financial institution or person either for a continuous or agreed period.

In essence, the scope of a PEP also encompasses anyone who is:

• Considered a “close associate” of a public official, which is defined under Thai law as “an individual who controls or manages assets or other benefits of a PEP,” and “has a close relationship [with the PEP] due to establishing or continuing a business venture,” or
• A father, mother, children (adopted or otherwise), biological or stepsiblings, or spouse of a PEP.

Measures for assessing and mitigating risks have also been modified to fit global best practices and now require additional layers of approval from senior management, or any other authorized person responsible for planning, supervising, or controlling the administration of a financial institution and persons engaging in professions under Section 16, to ascertain a customer’s risk level. Moreover, foreign nationals considered to be PEPs from countries in FATF’s list of high-risk jurisdictions will be treated as high-risk customers while Thai PEPs will be referred to the CDD for further risk assessment.

Procedures for know-your-customer (KYC) and customer due diligence have been expanded to include certain types of customers, including juristic persons and trusts. Risk assessment procedures include:

• Acquiring information from reliable sources or obtaining additional information from customers regarding their sources of income or wealth as well the objectives of their transactions. They may also be asked to provide information regarding the nature of their business, occupation, as well as other personal information such as their employer’s name and work address. They will also be required to provide a specimen of their signature or e-signature under the regulations covering electronic transactions;
• Obtaining written internal consent from senior executives when establishing business relationships or conducting transactions with high-risk customers;
• Conducting reviews on a customer’s risk level which will be used by senior managers to decide whether to continue with the business relationship; and
• Monitoring high-risk customers by increasing the frequency, procedures, or methods for monitoring transactions and business relationships, as well as performing periodic verification of customers.

Concluding comments

As financial services continue to become more sophisticated, regulators will update existing legislation to ensure unscrupulous players are not given the means to exploit the advances in the finance, Fintech, and blockchain industries. These proposed amendments are under review and may change. Silk Legal will continue to monitor developments on this matter and provide updates when available.

For more information regarding KYC and AML procedures, as well as best practices surrounding customer due diligence, please contact us at [email protected] or using the contact form provided on this page.