Understanding regulations around financial fraud in Thailand

Thai law enforcement agencies have introduced various legislation and increased surveillance of potential financial crimes over the years. Investors around the world continue to lose millions of dollars every year to fraud, whether in real estate, cryptocurrency, agricultural products, or financial securities, causing losses that are both financial and psychological.

In Thailand, fraud can be treated as either a civil or criminal offence, depending on the nature of the fraudulent activity and whether it was communicated publicly or privately. Fraud is covered in Thailand by various pieces of legislation, including Thailand’s Penal Code and the Civil & Commercial Code. Both Codes state that a person is deemed to have committed fraud by either obtaining property from another person through deception or concealment of facts, or by preventing creditors from receiving debt repayments.[1] In addition, provisions found under Sections 352-356 of the Penal Code address crimes involving embezzlement,[2] while Section 39 of the Accounting Act B.E. 2543 (2000) provides criminal liability for those who intentionally make false entries or alter existing entries with fraudulent intent, or neglect to correct false entries.

“Obtaining loans” amounting to public cheating – Ponzi Scheme regulations

The Emergency Decree on Obtaining Loans Amounting to Public Cheating and Fraud B.E. 2527 (1984) was introduced quietly as an emergency decree by the government of General Prem Tinsulanonda, and covers investment schemes, deposits, and the receipt of money or property between a lender and a borrower under the general term “obtaining loans.”

The Emergency Decree sets out the definition of these investment frauds in Thailand, with Sections 4 and 5 of the Decree addressing the public solicitation of investments into businesses that solely rely on continuous investments from other investors to pay out commitments, commonly known as Ponzi schemes. Ponzi schemes classically have overly optimistic business plans and offer unrealistically high returns, more than what an investor would otherwise expect.

Provisions under Sections 4 and 5 define a perpetrator of investment fraud as a person who publicly advertises or announces investment offerings with express or implied knowledge that they will pay an investor by either using the proceeds of investments made by another investor (in the case of Ponzi schemes) or by offering higher rates of return than those offered by authorized financial institutions. These two sections require that a perpetrator have express or implied knowledge that they cannot carry out legal activities without a sufficient yield to pay each lender or refuses to comply with orders issued by competent officials, to be held liable.

Unless the perpetrator can prove their business activities yielded sufficient returns to repay investors, or that the failure of the investment offer was caused by extraordinary economic conditions or can provide any other reasonable causes deemed appropriate by authorities, then they are subject to prosecution under the Decree. Section 7 permits officials to summon witnesses to assist in their investigation. The official may also force the suspected perpetrator to report their business activities, as well as provide accounts related to the investments, and their assets and liabilities.

If an alleged fraudster is insolvent or bankrupt, officials are entitled to seize their assets to protect the interests of the investors. Section 8, however, specifies that seized assets cannot be held for more than 90 days unless the court issues an order allowing the seizure of such assets amidst demand for payment or during bankruptcy proceedings. Under Section 10, a prosecutor may initiate bankruptcy proceedings against a suspected perpetrator if it can be proven that the perpetrator has insufficient funds or assets to repay debts of THB 100,000 or more.

Penalties and liabilities

A person found guilty of committing offences defined in the Decree faces imprisonment up to 10 years and is subject to a fine of between THB 500,000 to THB 1,000,000. In addition, a guilty person will be subject to a daily fine of up to THB 10,000 for each day the perpetrator commits the said offences. Those considered to have obstructed justice or are unwilling to cooperate with the official during their investigation will be punished with imprisonment of up to one year and fined up to THB 100,000. Those who ignore any summons made by a competent official or refuse to provide answers during interview will be subject to up to three months imprisonment, as well as a fine of up to THB 30,000.

If an offender is a juristic person, then the director, manager, or another responsible person who led the fraudulent investment scheme will be personally liable for the same offence, unless they can prove, beyond reasonable doubt, that they did not participate in such activities.

Perpetrators of investment schemes described in this Decree may also be subject to additional penalties and liabilities under other regulations, such as the Thai Penal Code and Civil and Commercial Code. Additional penalties may be levied by the Securities and Exchange Commission and the Bank of Thailand.

Concluding comments

Thailand’s capital and real estate markets have grown significantly leading to changes to Thai regulations surrounding investments into these markets, including the Emergency Decree discussed in this article. While mechanisms and frameworks exist, regulators face obstacles regarding enforcement. Regulators also struggle to stay ahead of fast-paced market changes, emerging technologies, and labyrinthine schemes designed to lure unwitting investors. Moreover, victims of investment fraud will find that remedial procedures are often protracted and involve complex processes that may not necessarily yield the full return of their lost investment. It is important to stay vigilant of seemingly risk-free investment opportunities that yield suspiciously high returns.

The adage “if it sounds too good to be true, it probably is” remains true.

If you believe you have been defrauded or would like to find out more about regulations surrounding investment fraud, please contact us at [email protected] or using the contact form provided.

[1] Section 341 and 350 of Thailand’s Penal Code and Chapter 3, Sections 341-348 of Thailand’s Criminal Code

[2] Section 352-356 of Thailand’s Penal Code