Enforce the law or join pariahs on the blacklist

Representatives of the capital markets recently urged the government to step up its effort to combat money laundering. They suggested, for instance, that the government beef up the existing anti-money laundering legislation to identify dirty money and its owners. Otherwise, they said, Thailand may be put on international priority watchlists, which would hamper the flow of legal capital into the country.

This concern is valid indeed. The views of the representatives coincided with the annual meeting of the Financial Action Task Force (FATF) on money laundering, which is taking place this week in France. 

Paiboon Nalintharuangkul, chairman of the Federation of Thai Capital Market Organisations, said that the FATF might downgrade Thailand from its second watchlist to its first watchlist, which currently includes countries such as Burma, Sri Lanka, Cuba, Bolivia and Ethiopia. The second group includes the likes of Vietnam, the Philippines, Indonesia and Thailand. He said the main reason for the possible downgrade is the delay in passing new anti-money-laundering and anti-terrorist-financing laws. The first watch list is close to the FATF's blacklist for so-called non-cooperative countries such as North Korea and Iran, he said.

While the threat of a downgrade is understandable, the root cause of the issue may not be simply whether Thailand enacts new pieces of legislation to fight dirty money. The issue here is related to the enforcement of the existing anti-money laundering law. 

The Anti-Money Laundering Act was passed in March, 1999 with the aim of combating the drug trade, as well as other related criminal activities like corruption, fraud and prostitution. The law was amended in March 2008 to broaden the scope of criminal liability and increase the power of the authorities to conduct investigations and seizures. The Act also established the Anti-Money Laundering Prevention and Suppression Office (AMLO) to work with financial institutions in reporting potentially illegal transactions.

Nonetheless, the private sector’s concern over the possibility of a watchlist downgrade reflects the fact that the effort to combat dirty money has so far been unsatisfactory. There are many alleged criminal cases that the authorities could solve via the Anti-Money Laundering Act, but results are below expectation. For example, the public deserves an answer on the source of a huge hoard of cash found at the home of Transport Permanent Secretary Suphoth Sublom. In addition, Prime Minister Yingluck Shinawatra could help clear the name of newly appointed PM’s Office Minister Nalinee Taveesin – who is accused by the US Treasury Department of business dealings with the Mugabe regime in Zimbabwe – by assigning AMLO to look into the issue once and for all.

AMLO has not responded to public doubts over these cases. Even worse, the agency has sometimes become politicised. In 2002, AMLO launched an investigation into journalists known to be critical of the then government of Thaksin Shinawatra. The Administrative Court later ruled that AMLO had overstepped its jurisdiction.

The private sector’s concern is legitimate. The fight against dirty money will enhance good governance both in the public and private sectors. If Thailand were to be downgraded to the worst list of countries for money laundering, we could face a slowdown in foreign capital inflow and long-term stagnation in development projects and the real estate sector.

But new legislation may not be the solution. In fact, if the authorities perform their duties honestly and to their best ability, Thailand may not need additional laws to deal with this issue. The anti-money laundering effort requires the best and brightest people who are free from political pressure. It involves not only a suppression element but also requires cooperation from various agencies. Technical knowledge about financial transactions is required, as well as the ability to keep up with the latest technology that criminals use to transfer dirty money. 

The current legislation came into existence in response to the public’s concern over widespread government corruption and the massive proliferation of illegal activities such as drug trafficking and prostitution. The fresh concern from the private sector should be heeded. But instead of simply responding to international pressure, Thailand should review its effort to fight money laundering and ensure that the law is enforced to serve the public interest.