28 January 2021 saw the release of a Notification Concerning Guidelines for the Identification and Verification of Customers and Ultimate Beneficial Owners (“AMLO Notification”) by the Anti-Money Laundering Office (“AMLO”). Financial institutions and certain professions along with others (“Reporting Entities”) as defined under Sections 13 and 16 of the Anti-Money Laundering Act (1999) (“AML”) must now implement much more stringent customer verification measures and ‘Know Your Customer’ (“KYC”) procedures from 25 September 2021 onward. The level of verification needed for transactions will depend on the risk associated with a given product or service, whether parties to the transaction are individuals or entities, Thai or foreign nationals, resident in Thailand or otherwise, and also the particular type of entity in many cases. For example, whether a transaction; happens face-to-face, is conducted electronically, is cash-based or cross-border in nature among various other criteria will impact the kinds of safeguards which must be deployed to prevent any instances of money-laundering as defined and prohibited by the AML. The Notification outlines two categories (low-risk and high-risk) for products and services which will determine the appropriate level of verification that will be necessary to validate the authenticity of a given transaction and the identities of the relevant parties.
For low-risk products or services:
Face-to-face (“F2F”) transactions
Thai nationals – for customers present in person at the bank or financial institution, their National ID card must be checked by staff to ensure that the card details match up with the person wishing to conduct a transaction. The online database of the Department of Provincial Administration (“DOPA”) may also be checked to verify the details of the cardholder.
Foreign nationals – staff or officials of the Reporting Entities must verify the photo and details on the passport with the customer appearing in person.
Non face-to-face (“Non F2F”) transactions
Thai nationals –the customer must send a portrait ‘selfie’ via his or her smartphone and/or a photographed or scanned copy of their Smart ID card to be scanned by a dedicated card reader to verify its authenticity and where necessary cross-referencing this with details on any Thai national or relevant organizational database (i.e. online DOPA).
Foreign nationals – the customer must send a portrait ‘selfie’ via his or her smartphone and/or a photographed or scanned copy of his or her passport information page to be verified by staff at the relevant Reporting Entities and where necessary checking the biometric data encoded on the passport against any Thai government databases of foreign nationals residing in the Kingdom (where available).
For high-risk products or services:
Products or services and any relevant transactions under this category will require the most stringent levels of verification introduced by the AMLO Notification and typically relate to cash-based transactions or those with a substantial cross-border element. The documents required for the different types of entities are:
- Legal entities registered in Thailand: A registration certificate issued by the registrar no later than six months ago (affidavit) from the attempt to enter into a particular transaction.
- Legal entities registered outside of Thailand: Evidence of legal status (certification) issued by a reputable agency or organization no later than six months from the attempt to enter into a given transaction.
- Government agencies/organizations, state enterprises: A letter of intent to conduct a transaction and a letter of authorization or a power of attorney.
- Cooperatives, foundations, associations, clubs, temples, mosques, shrines, and other legal organizations of a similar nature: A letter of intent to conduct a transaction along with a registration certificate from the relevant agency, and a letter of authorization or a power of attorney will be required.
The AMLO Notification, with its delayed implementation timeframe to properly afford sufficient time for Reporting Entities to equip themselves with the technology, put procedures in place and train up staff on how to handle these new customer identity verification checks is emblematic of Thailand’s commitment to stamping out corrupt financial practices. Money laundering and the relative earlier ease with which it could be performed was proving costly to the Thai state budget and depriving the Thai Revenue Department of much needed revenue, especially during economically constrained pandemic conditions, largely as a result of inadequate transaction and customer verification mechanisms. The enforcement of the AMLO Notification now makes money laundering or using Thailand as a location to conceal the illicit origin of criminal proceeds much harder, while simultaneously compelling these Reporting Entities to overhaul their transaction handling and payment processing systems. This will prove crucial to ensuring smoothly operating customer/transaction verification mechanisms in a much more advanced business ecosystem where electronic payments are increasingly the norm with customers able to partake in a dizzying variety of new fintech services using electronic devices whether outside or within Thailand. As Thailand slowly begins to re-open its borders and welcome tourists back to its shores as the pandemic subsides, this modernization of its underlying financial procedures, infrastructure and systems will help pave the way for a sustainable and durable recovery in the coming months and years. Beyond these considerations, money laundering is an international problem, and international co-operation is a critical necessity in the fight against money laundering schemes. With the new measures, Thailand brings law enforcement and financial regulatory authorities together, with financial institutions and reporting entities jointly enabled to deal more effectively with the problem. This accompanies moves being made by other jurisdictions in the fight against money laundering, its instruments, and enablers using ever more creative means in attempts to circumvent a particular government’s countermeasures.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
