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Legal Update

Anti-Money Laundering - Guideline For Financial Institutions On How To Avoid Dirty Laundry

February 2007
Mayer Brown JSM Legal Update

Summary

The Bank of Thailand (BoT) has recently issued a Policy Statement for financial institutions regarding know your customer (KYC) / customer due diligence (CDD) practices, which are major components of any financial institution's measures against money laundering and towards combating the financing of terrorism (AML/CFT). This Policy Statement aims to foster the observance of international standards relating to a financial institution's anti-money laundering measures. Finance companies, credit foncier companies and asset management companies shall adopt the policy statement to be proportionate with the business that they are permitted to undertake. The new measure will apply to licensed branches of foreign banks, which are included within the definition "commercial bank" under the Commercial Banking Act B.E 2505.

Full Update

1.  Introduction

Thailand passed the Anti-Money Laundering Act of B.E. 2542 in 1999 and set up under it the Anti-Money Laundering Office (AMLO) as a single law enforcement agency with broad powers to investigate the various methods by which criminals disguise the source and ownership of their illegally obtained wealth. According to section 3, the Act applies to any juristic person undertaking non-bank business related to finance as provided by the Ministerial Regulations. Financial institutions (such as banks, finance companies, savings cooperatives, etc.), land registration offices, and persons who act as solicitors for investors, are required to report significant cash, property, and suspicious transactions according to section 16.

In order to foster the observance of international standards relating to financial institutions' AML/CFT measures, the BoT on 19 January 2007 issued a Policy Statement Re: Measures on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Financial Institutions (Policy Statement) appropriate to the business that they are permitted to undertake. 

2.  Scope Of Application

The Policy Statement is applicable to all types of financial services that financial institutions provide to customers.

3.  Board and Senior Management Responsibilities

The board of directors and management of financial institutions are responsible for:

(a)  supporting and cooperating with all parties in accordance with the AML/CFT measures under the legal framework and international best practices; and

(b)  formulating AML/CFT policies by establishing appropriate KYC/ CDD procedures that can be effectively implemented.

4.  Implementation Measures

Financial institutions shall set up a unit independent from business units or have a compliance unit to monitor their compliance with the established polices and procedures, including assessing adequacy and appropriateness of the policies and procedures, reviewing operations of relevant staff, and reporting any discrepancy or non-compliance. The person in charge of the independent unit or the compliance unit should be drawn from senior management and report to the financial institution's board of directors.

What Financial Institutions should do:

4.1  Select your Customers - Customer Acceptance Policy

Financial institutions should establish a clear and written customer acceptance policy in order to investigate the background, country of residence or original transaction, social status, associated accounts, type of business, and other risk indicators, as well as defining the definition of customers requiring special attention, grouping customers by their money laundering exposures, and specifying a process for monitoring customer accounts on an on-going basis, customers requiring special attention, non-residents, private banking customers, correspondent banks, and customers whose source of fund is unclear.  Special attention should be given to all complex, unusually large transactions or unusual patterns of transactions, which have no apparent or visible economic or lawful purpose.

"Customers Requiring Special Attention" include customers who are entrusted with prominent public functions in a foreign country (so-called "Politically Exposed Persons", or PEPs), customers whose residence is in, or whose source of funds is, a country that does not apply the recommendations of the Financial Action Task Force on Money Laundering or that does not have anti-money laundering measures, customers who undertake suspicious transactions, customers whose names appear on a list of those who have committed defined money-laundering offences (or who have relations with a person appearing on such list), or customers in a high risk profession such as jewelry or precious metal, foreign exchange or informal lending business.

4.2   Know your Customers - Customer Identification and Verification

Financial institutions shall adopt the guidelines contained in the Notification of the Bank of Thailand Re: The Requirement for Commercial Banks on Practices in Accepting Deposits dated 24th December 2001) upon commencing any relationship or financial transaction with a customer, namely accepting deposits, granting credit facilities, conducting money transfers, undertaking securities or debt instrument related activities, any transactions through a corresponding bank, providing services and conducting any other similar transaction.

Financial institutions must use their best efforts to authenticate the identification document upon commencing any relationship or financial transaction with a customer. For customers requiring special attention, financial institutions should establish enhanced customer acceptance policies and procedures, and also risk mitigating procedures and measures for account opening of non-face-to-face customers and shall have effective monitoring procedures no less than those for customers who are personally present.

Financial institutions must keep records of documents or copies of documents which are already certified by customers in a vault or other safe place at the financial institution from the opening date of the account or the date when the relationship begins, and retain those documents for at least 5 years from the closing date of those accounts or the date when the relationship ends available for examination or to support an investigation or prosecution by the Bank of Thailand or other related authorities.

4.3  Observe your Customers - On-going Monitoring of Accounts and Transactions

Financial institutions should monitor the movement of customer accounts and update their related information, particularly in the case of Customers Requiring Special Attention, and in addition keep records of transactions for at least 5 years from the transaction date available for examination or to support an investigation or prosecution by the Bank of Thailand or other related authorities.

4.4  Take no risk - Risk Management

The board of financial institutions must establish a clear and appropriate risk management system for anti-money laundering and combating the financing of terrorism. The risk management system could include e.g. establishing clear written procedures for reporting suspicious transactions to the supervisory authorities as well as communicating to all relevant staff to acknowledge and comply with; establishing clear guidelines on risk assessment, risk rating, and frequency of risk review for each group of customers; and organising training on AML/CFT policies and procedures for all relevant staff on a regular basis to ensure that they are aware of the duties, importance, and impact or non-compliance penalty.


For further information, please contact:


Name: Sathaporn Jumsuk
Phone: +66 2 677 7555 x140
Fax: +66 2 677 7599

Name: Carolin Rost
Phone: +852 2843 2593
Fax: +852 2103 5184

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