In 2007, the International Monetary Fund (IMF) released a detailed assessment of Thailand's compliance with the Financial Action Task Force's (FATF) recommendations and special recommendations on anti-money laundering (AML) and combating the financing of terrorism (CFT). This assessment was based on the FATF 2004 methodology. Per this report, Thailand's AML/CFT legal framework is lacking in several key areas, and the overall regime is not completely in line with FATF requirements. The Anti-Money Laundering Act of 1999 is the main law governing AML/CFT activities in the country. According to the IMF 2007 assessment, the Act does not properly criminalize money laundering. Further, the report indicates that all financial institutions are not properly covered by AML/CFT regulations, the financing of terrorism is not criminalized fully in accordance with international standards, and the country does not fully implement key United Nations (UN) Security Council resolutions. The IMF report also notes that there are no legally enforceable requirements in place in relation to any categories of Designated non-Financial Business and Professions. The Anti Money Laundering Office acts as the financial intelligence unit in the country and, according to the IMF's report, lacks adequate resources and provides insufficient guidelines and feedback to the public regarding its AML/CFT efforts. Despite Thailand's current shortcoming in implementing the FATF recommendations, the 2007 IMF report notes that the Thai authorities have indicated their desire to bring Thailand's AML/CFT regime on par with international standards.

General Overview

The staff of the International Monetary Fund (IMF) together with the staff of the World Bank conducted a detailed assessment of Thailand's anti-money laundering (AML) and combating the financing of terrorism (CFT) regime in 2007. In a nutshell, the IMF's assessment concluded that the AML/CFT regime in Thailand is not completely in line with the Financial Action Task Force's (FATF) requirements, and the legal framework in the country is wanting in certain key areas. For example, the Anti-Money Laundering Act (AMLA) of 1999 does not properly criminalize money laundering so that it covers all serious domestic predicate offenses, all financial institutions are not properly covered by AML/CFT regulations, the financing of terrorism is not criminalized fully in accordance with international standards, and the country does not fully implement key United Nations (UN) Security Council resolutions. However, the 2007 IMF report does note that authorities have indicated their desire to bring Thailand's AML/CFT regime on par with international standards.

The 1999 AMLA is the legislation that addresses most of the issues concerning money laundering in Thailand. Per the 2007 IMF report "AMLA criminalizes ML [money laundering] by reference to eight predicate offenses, establishes the Anti-Money Laundering Office (AMLO) as Thailand's financial intelligence unit (FIU), imposes some customer due diligence (CDD) obligations on a wide range of financial institutions (FIs), requires these FIs to report transactions to the AMLO, and creates a civil process for the AMLO to seize criminal assets and have them vested in the state" (p. 10). Financing of terrorism is criminalized under the Penal Code but needs to be amended to conform to FATF requirements per the 2007 IMF report. Terrorist financing is also a predicate offense for money laundering under the AMLA but again fails to meet FATF requirements.

The AMLO, according to the IMF report, is not a law enforcement agency but works with such agencies and disseminates AML/CFT reports. The IMF notes that the AMLO lacks adequate resources and provides insufficient guidelines and feedback to the public regarding its AML/CFT efforts. Agencies responsible for regulating and overseeing AML/CFT activities in the financial sector are the Bank of Thailand (BoT), the Securities and Exchange Commission (SEC), and the Department of Insurance (DoI). According to the IMF, the BoT and SEC are effective in their supervisory functions, but this is not the case with the DoI. In a 2007 issue of the "Thailand Economic Monitor", Bhaopichitr et al. notes that in September 2007 the DoI was replaced by the newly established insurance sector regulator, the Office of the Insurance Commission (OIC).

Thailand has signed, but not ratified, the Palermo Convention, and it has not fully implemented the Vienna Convention or the UN Terrorist Financing Convention. The AMLO is a member of the Egmont Group and has been proactive in exchanging information with other foreign FIUs. Thailand has also established the Anti-Money Laundering Board (AMLB), an agency responsible for coordinating the AML/CFT efforts in Thailand. Despite these efforts, Thailand still lacks an adequate AML/CFT regime per the IMF assessment, which notes that, since Thailand is susceptible to money laundering and terrorist activities, it is even more imperative for the Thai authorities to implement fully the FATF's 40+9 recommendations.

The Principles

1. Legal Systems and Related Institutional Measures

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Thailand's 1999 AMLA criminalizes money laundering, but according to the IMF's 2007 report, it is not in full conformity with the FATF requirements. The report indicates that Thailand partially complies with Recommendation (R) 1 and largely complies with R. 2 pertaining to criminalization of money laundering. Thailand partly complies with Special Recommendation (SR) II relating to criminalization of terrorist financing which, the IMF report notes, is covered under the Penal Code. The AMLA treats terrorist financing as a predicate offense for money laundering, but does not fully comply with international standards.

According to the 2007 IMF assessment, Thailand largely complies with R. 3 relating to confiscation, freezing, and seizing of proceeds of crime, and partially complies with SR III dealing with freezing of funds used for terrorist financing. The IMF assessors indicated that "the authorities need to place more emphasis on pursuing criminal investigations and prosecutions" (p. 11) for money laundering and terrorism financing. Thailand only partially complies with R. 26, R. 30, and R. 32 relating to the Financial Intelligence Unit and its functions. According to the IMF, the AMLO, Thailand's FIU, lacks sufficient resources to analyze properly suspicious transactions reports (STRs) and the AMLO doesn't provide adequate guidelines and feedback regarding its activities. The IMF report notes that Thailand only partially complies with R. 27 on law enforcement authorities and largely complies with R. 28 on powers of competent authorities. With regards to law enforcement agencies, the IMF 2007 assessment finds that most Thai law enforcement agencies need better training and more specialists in the investigation of money laundering and terrorism financing, particularly beyond the confines of Bangkok.

2. Preventive Measures - Financial Institutions

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The IMF's 2007 report states that "there is a limited range of preventive measures applying to the FIs contained in the AMLA, and regulations made pursuant to it, which apply to the most important types of FI in Thailand" (p. 12). The IMF also notes that Thailand is non-compliant with all FATF recommendations relating to CDD, including enhanced or reduced measures, namely R. 5-8. The report, however, notes that the BoT has invariably issued guidelines which explain know your customer (KYC) and CDD requirements for financial institutions. However, the BoT has limited powers of enforcement with regards to implementation of these measures and has to rely on the industry's commitment to do so. Thailand is non-compliant with R. 9 dealing with third parties and introduced business. Thailand, however, complies with R. 4 on financial institution's secrecy or confidentiality requirements and the IMF report indicates that secrecy laws in Thailand are consistent with the FATF recommendations.

Per the IMF 2007 assessment, Thailand only partially complies with R. 10 and is non-compliant with SR VII on record keeping and wire transfer rules, respectively. On record-keeping, the IMF states that "other than some securities firms, FIs are not required by law or regulation to keep transaction records or identification data except in relation to transactions that have been reported to the AMLO under the AMLA" (p. 277). The report also notes with regard to R. 11 on unusual transactions that "the obligation in the AMLA for FIs to pay special attention to all complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose does not extend to the FIs that are not subject to the AMLA" (p. 277). Thus, Thailand only partially complies with this requirement. As to R. 21 on increased attention to higher risk countries, the IMF finds Thailand non-compliant.

According to the 2007 IMF report, Thailand partially complies with R. 13 and R 14 on suspicious transactions reporting and SR IV on suspicious transactions reporting related to the financing of terrorism. Moreover, the report also notes that FIs outside the scope of definition in the AML are not obliged to file STRs and the reporting obligations do not cover all the predicate offenses required by the FATF. Thailand complies with R. 19 on other forms of reporting and partially complies with R. 25 on guidelines and feedback requirements by relevant competent authorities. Thailand partially complies with R. 15 on internal controls since, according to the IMF's 2007 report, "the only enforceable requirement for FIs to develop appropriate compliance management arrangements apply to the securities sector (excluding agricultural futures brokers)" (p. 278). Per the IMF report, Thailand does not comply with R. 22 on internal controls in foreign branches and subsidiaries of FIs. Thailand, however, partially complies with R. 18 on shell banks.

The IMF in its 2007 assessment reports that Thailand partially complies with all recommendations pertaining to supervisory and oversight system of FIs, namely R. 17, R. 23, R. 29, R. 30, R. 32 & R. 25. The supervisory agencies responsible for overseeing AML/CFT activities, such as the AMLO, BoT, SEC, and the DoI, all have been promoting better compliance with the FATF's 40+9 recommendations. However, the report indicates that owing to the lack of sufficient legislative backing, these efforts by the supervisory agencies have not been very productive, especially since many of the requirements put forth by these agencies have no enforceability in terms of AML/CFT measures. Further the sanctions capabilities of these agencies are limited and the BoT resorts to such measures as moral suasion and cooperation from FIs to implement its regulations and circulars on AML/CFT activities. According to the 2007 IMF report, Thailand partially complies with SR VI on money or value transfer services as authorized money transfer agents are not subject to the AMLA and enforceable CDD or internal control requirements.

3. Preventive Measures - Designated non-Financial Business and Professions

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The 2007 IMF report states that "there are no legally enforceable requirements in place in relation to any categories of the Designated non-Financial Business and Professions (DNFBPs) that operate legally in Thailand, [and] illegal casinos operate throughout Thailand" (p. 277). Hence Thailand is non-compliant with R. 12 and R. 16 relating to CDD and STRs for DNFBPs. Per the 2007 IMF report, Thailand is also non-compliant with R. 24 on the regulation, supervision, and monitoring of DNFBPs. Thailand partially complies with the two other recommendations relating to this principle, namely R. 20 and R. 25.

4. Legal Person and Arrangements & Non-Profit Organizations

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According to the IMF's 2007 report, Thailand partially complies with R. 33, as access to beneficial ownership information is not adequately and promptly available. The IMF also reports that R 34 is not applicable to Thailand and that the country does not comply with SR. VIII on regulating non-profit organization for FT activities.

5. National and International Co-operation

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According to the 2007 IMF report, except for R. 40, Thailand only partially complies with the FATF recommendations relating to this principle, namely R. 31, R. 32, R. 35, R. 36, R. 37, R. 38, R. 39, SR. I and SR. II. Thailand largely complies with R. 40 relating to other forms of cooperation. The IMF also notes that the formal coordination and cooperation mechanism in the AMLB is not as effective as required (R. 31) and Thailand has not ratified the Palermo Convention and has yet to fully implement the Vienna Convention and the United Nations (UN) Terrorist Financing Convention (R. 35). The report also indicates that with regards to mutual legal assistance (R. 36 & R. 38), there is only a narrow range of defined predicate offences, which impedes the rendering of adequate mutual legal assistance. Similarly, the report indicates that the narrow range of predicate offences prevailing in Thailand restricts the circumstances under which Thailand is able to extradite (R. 39). The IMF states that terrorist financing in Thailand "has not been criminalized consistent with SR. II because the... offence does not extend to the financing of the acts set forth in the treaties in the annex of the UN Convention" (p. 284) and moreover Thailand has not fully implemented the United Nations Terrorist Financing Convention.