BOT cracks down on grey capital, tightens gold and exchange controls

The Bank of Thailand (BOT), under Governor Vitai Ratanakorn, is undertaking one of its most significant overhauls in years as it moves to tighten oversight of illicit funds, high-risk transactions and “grey capital” flows that have long operated beyond the central bank’s line of sight.

It also plans to broaden its oversight of gold shops, currency-exchange outlets and e-wallet operators, noting that gaps in supervision have contributed to periods of baht appreciation. 

Vitai said at the Governor Connect roadshow that the central bank is redesigning its supervisory framework to confront illegal money movements that have raised public concern. 

For years, he noted, the BOT has lacked visibility over many baht-denominated transactions because existing laws require financial institutions to report such information only to the Anti-Money Laundering Office (AMLO). These include cash deposits above 2 million baht and suspicious activity reports.

Because these data streams bypass the central bank, it has had no legal access to much of the flow of funds moving between individuals, companies or across jurisdictions. “If we don’t see the data, we cannot monitor it. But we also cannot remain indifferent, because these risks ultimately harm the public and the stability of the financial system,” Vitai said.

To close this gap, the central bank will invoke supervisory powers under the Financial Institutions Business Act, tools that have been seldom used, to bring specific high-risk activities under its oversight. 

New rules are now being drafted requiring banks to report “unusual transactions” directly to the BOT, such as large inflows and immediate transfers out of accounts that are inconsistent with a customer’s normal behaviour. These requirements will be separate from AMLO reporting obligations and are intended to help the central bank detect and act on suspicious patterns more rapidly.

Vitai said the BOT will not interfere with transactions already governed by anti-money-laundering laws, but it will introduce additional categories that financial institutions must report and respond to. If banks fail to act, they will face penalties under the revised framework. He added that the measures will significantly curb grey-market money, including flows linked to online scams and gambling networks often revealed by late-night, fragmented transfers to multiple accounts.

The central bank is also moving to strengthen supervision of non-bank players, such as more than 2,000 currency-exchange shops, money-transfer operators and e-wallet providers, where oversight has historically been weaker. Tighter know-your-customer (KYC) rules will apply, particularly for remote account openings. Accounts opened without face-to-face verification will be subject to low transaction limits, with higher limits permitted only once full identity checks are completed in person.

These steps, Vitai said, are essential to identifying risks quickly and preventing illicit activity from slipping through regulatory gaps. Exchange shops and other non-bank operators will be required to meet higher standards rather than operating freely with minimal controls. The package of reforms marks a major undertaking for the central bank and will be rolled out in phases in the months ahead.

Closer scrutiny of gold-trading transactions

The central bank is also preparing to tighten oversight of Thailand’s gold sector, a major industry that currently operates without direct regulatory supervision. Vitai said the Bank of Thailand is reviewing how far its remit should extend in the future.

He noted that gold trading has shifted dramatically. In the past, most transactions took place at physical gold shops, but today the bulk of activity has moved to baht-denominated trading apps, where large volumes are executed around the clock. Despite this rapid change, key information on customer behaviour is not captured by state regulators, whether purchases are made over the counter or through online platforms. As a result, the BOT has no visibility over these flows.

Vitai acknowledged that gold transactions have had a noticeable impact on the currency, particularly baht-based trades that cause sudden fluctuations. When customers trade gold in baht, gold shops must hedge by executing cross-border gold transactions and buying or selling foreign currency, all of which affect exchange-rate movements.

At present, the central bank only sees data when gold shops conduct foreign-exchange transactions with local banks. It has no insight when they trade gold directly with overseas markets, route FX flows through offshore affiliates or settle transactions using cryptocurrency. The BOT is therefore working with the Finance Ministry to amend regulations so it can better assess the currency impact and design more targeted policies.

“If an exporter ships gold to Cambodia and settles the payment in cryptocurrency, we have no visibility at all,” Vitai said. “Those trades take place entirely outside the Thai financial system. We need to study how to address this and gain greater visibility. For now, we are relying on the Foreign Exchange Transactions Act, which allows us to request certain information from operators so we can better understand these activities.”

Vitai reiterated that the central bank’s core mandate is to safeguard macroeconomic stability, maintain low and predictable inflation and ensure the resilience of the financial and payment systems. Thailand’s most pressing vulnerabilities, he said, stem from deep-rooted structural problems that require the central bank to take on a broader supporting role.

He stressed that the BOT will intervene only in areas consistent with its responsibilities as a central bank, in line with its guiding principle of “standing firm, looking far, reaching out and staying grounded”. The aim is to move closer to the public and help address economic, social and structural challenges.

Nearly two months into his tenure, Vitai said the central bank has already begun advancing this agenda through a series of targeted programmes and measures.

The first measure focuses on tackling household debt through the “Close the Debt, Move Forward” scheme, targeting non-performing debts of up to 100,000 baht across 1.6 million accounts. The programme is expected to help between 500,000 and 800,000 borrowers exit NPL status and re-enter the formal economy. Vitai stressed that structural problems cannot be solved with a single intervention; they require a series of coordinated “jigsaw pieces” to be put together to improve the broader picture.

BOT prepares 20-billion-baht scheme to revive SME lending

Another major initiative underway is a plan to reverse the prolonged contraction in SME lending, which has been negative for 13 consecutive quarters. As of last month, SME credit was still shrinking by around 4%, squeezed by weak demand in a slow economy and banks’ reluctance to lend amid heightened credit-risk concerns.

The BOT, the Finance Ministry and the Thai Bankers’ Association are developing a new SME credit-guarantee mechanism designed to reduce credit-cost burdens and encourage banks to extend fresh loans. The scheme would draw on about 20 billion baht from the Financial Institutions Development Fund (FIDF) to create a guarantee pool that could support roughly 100 billion baht in SME loans.

The programme will initially target medium- to large-size SMEs in high-potential sectors such as processed food, agri-processing and wellness, with possible expansion to wholesale and retail businesses. Participating banks would receive risk protection of 10–30%, averaging about 20%. For example, a bank issuing 10 billion baht in SME loans would receive roughly 2 billion baht in loss protection—helping ease fear of non-performing loans and enabling new credit expansion.

Discussions are ongoing on loan-size criteria and the specific FIDF funding structure. A final proposal is expected by year-end, with implementation planned for 2026. Although using FIDF funds will delay repayment of the fund’s liabilities by about six months, Governor Vitai stressed that inaction would leave Thailand’s structural weakness—such as the 13-quarter decline in SME lending—unresolved.

More room for interest-rate cuts

Vitai said monetary policy remains accommodative, with the Monetary Policy Committee having cut the policy rate by a total of 1% since late last year to support a sluggish economy. Officials agree that interest rates must “support recovery” and not become an obstacle. At the next meeting, the committee will again assess whether further easing is necessary.

He noted, however, that Thailand’s slow growth stems largely from structural issues rather than interest rates alone. Monetary policy is only a “supporting tool”, not a cure for structural problems. If needed, Thailand still has “room” to cut rates further to ease liquidity pressures and help contain bad-debt risks.

Baht volatility and intervention risks

Vitai attributed the recent appreciation of the baht to two main factors:

1. the US dollar weakening by roughly 7%, and
2. Thailand’s large current-account surplus.

He said the central bank wants the baht to reflect true economic fundamentals. Any currency intervention must be used cautiously because Thailand already meets two of the three thresholds monitored by the United States when assessing potential currency manipulation. If Thailand purchases foreign currency in excess of 2% of GDP, it risks being seen as distorting the exchange rate, even though the country has ample reserves.

Therefore, the Bank of Thailand can only smooth excessive volatility, not push the baht to any fixed level unless there is severe market dysfunction.

Gold Traders Association says banking system and anti-money laundering laws already provide strict oversight

Following reports that the BOT plans to tighten supervision of “grey money” transactions linked to the gold sector, the Gold Traders Association has asserted that gold trading is already subject to rigorous controls.

Jitti Tangsithpakdi, president of the association, said all domestic and cross-border gold purchases must go through the banking system, where financial institutions are required to report relevant information to the appropriate authorities.

He added that gold businesses are also governed by Thailand’s Anti-Money Laundering Act, which carries severe penalties, including asset seizure, for violations. These strict legal consequences, he said, ensure that operators are highly cautious and deterred from engaging in unlawful activities.