Thailand

Global Financial Regulations 2022

Financial regulations in Thailand

Thailand has long been a notable emerging market due to its solid GDP growth, poverty reduction and modernization efforts, but in recent years its progress has stalled.

Country Overview

Thailand has long been a notable emerging market due to its solid GDP growth, poverty reduction and modernization efforts, but in recent years its progress has stalled. A slowdown in public investments, lower demand for exports, challenges to agricultural production and education system shortcomings have all contributed to faltering economic and social outcomes.1 The COVID-19 pandemic further exacerbated Thailand’s weakening economic performance as exports shrunk and the tourism sector came to a halt. 

The Thai economy contracted by 6.1% in 2020,2 with a shrinkage of 2.6% in the first quarter of 2021,3 and its recovery is forecasted to be slow and rocky.4 In April 2021, Thailand’s most severe outbreak of COVID-19 infections hit, further dampening the country’s economic prospects. The central bank maintains that the Thai banking system is still strong, with high capital buffers and liquidity safeguarding against a more drastic economic performance.5 

Meanwhile, the pandemic drove surges in e-commerce, digital payments and overall digitalization efforts in Thailand. The Thai government has historically been eager to promote digital transformation in the economy and society. In 2016, the government launched the Thailand 4.0 initiative, which has sought to propel economic growth through the development and adoption of innovative technologies. Alongside expansions in smartphone ownership and internet connectivity, Thai banks have increasingly invested in digital infrastructures6 like blockchain technology and mobile banking solutions. Shifting consumer preferences, especially given Thailand’s young and tech-savvy population, will further encourage competition in the banking sector. A key challenge will be ensuring that digitalization does not widen socioeconomic inequalities between Bangkok and rural areas.  

Thailand’s 2021 digital agenda focuses on the possible development of a central bank digital currency (CBDC), regulating virtual currencies, improvements to the AML/CFT framework and adopting innovative technologies while mitigating risk. The Bank of Thailand’s Strategic Plan 2020-2022 identified seven strategic challenges to address, including the rapid digitalization of the financial sector, cyber threats and challenges to the central bank’s independence. Additionally, the Electronic Transactions Development Agency (ETDA) is reportedly developing a Digi-ID and spearheading the widespread government adoption of e-signatures.7 A more digitally robust Thailand could help to reassert the country’s status as a major emerging market, attract more foreign direct investment, bolster its reputation as a Southeast Asian innovation hub and reach its goal of being a high-income country. 

Financial Regulatory Authorities

The Bank of Thailand (BOT) is the central bank of Thailand.  

The Securities and Exchange Commission (SEC) supervises the Thai capital market and ensures fairness and transparency. 

Other Regulatory Authorities

The Anti-Money Laundering Office (AMLO) enforces the Anti-Money Laundering Act 1999.  

Policy, Laws and Regulations

Enforcement of the Personal Data Protection Act (PDPA), 01 June 2022. 

Due to the COVID-19 pandemic, the Thai Cabinet postponed the enforcement of the Personal Data Protection Act (PDPA) to 01 June 2022. The PDPA, which was published in May 2019, draws on the EU’s General Data Protection Regulation (GDPR) and outlines requirements for the processing of personal data and the responsibilities of data controllers and processors. The law has extraterritorial scope, so it applies to any entity that utilizes the personal data of a Thai citizen, even if the entity does not reside in Thailand. In the case of cross-border transfers of personal data, the recipient country must adhere to “adequate personal data protection standards.” The PDPA will also establish a national data protection agency to monitor compliance, called the Personal Data Protection Committee (PDPC).

Thai Cabinet Postpones Enforcement of Personal Data Protection Act, 05 May 2021 

Due to the COVID-19 pandemic, the Thai Cabinet postponed the enforcement of the Personal Data Protection Act (PDPA) to 01 June 2022. The PDPA, which was published in May 2019, draws on the EU’s General Data Protection Regulation (GDPR) and outlines requirements for the processing of personal data and the responsibilities of data controllers and processors. The law has extraterritorial scope, so it applies to any entity that utilizes the personal data of a Thai citizen, even if the entity does not reside in Thailand. In the case of cross-border transfers of personal data, the recipient country must adhere to “adequate personal data protection standards.” The PDPA will also establish a national data protection agency to monitor compliance, called the Personal Data Protection Committee (PDPC). 

Anti-Money Laundering Office Announces New Identity Verification Requirement for Crypto Exchanges, 03 May 2021 

The Anti-Money Laundering Office announced that crypto exchanges must conduct identity verification of new customers in-person, utilizing a dip-chip machine. The dip-chip machine will scan chips embedded in Thai ID cards, precluding investors from submitting documents online as previously allowed. The move aims to tamp down on document forgery and the exploitation of anonymity in crypto for illegal activities, and could prevent non-Thais from accessing exchanges. Thai interest in crypto assets has soared, with the number of accounts registered with Thai crypto exchanges at 700,000 in early May, up from 160,000 at the end of 2020.8 The Bank of Thailand is concerned about the possible implications of the widespread adoption of privately-issued currencies, which could threaten financial stability, and the strict measure could significantly deter potential new investors. The requirement went into effect 01 July 2021.   

Thailand and Singapore Launch Linkage of Real-Time Payment Systems, 29 April 2021 

The Bank of Thailand and the Monetary Authority of Singapore (MAS) introduced the linkage of Thailand’s PromptPay and Singapore’s PayNow real-time retail payment systems. The first system of its kind in the world, customers at participating banks will be able to make real-time transactions of up to S $1000 or THB 25,000 per day across the two countries. The system will be simple to use—similar to using PromptPay and PayNow’s domestic interfaces—and customers will need only a mobile number to complete a transaction. Transfers of funds will take mere minutes. In Thailand, Bangkok Bank Kasikornbank, Krung Thai Bank and Siam Commercial Bank will offer the service, although the Bank of Thailand and the Monetary Authority of Singapore plan to increasingly scale up the system to include more participants and allow for a higher limit on funds. Eventually, the partnership aims to broaden the linkage to encompass other retail payment systems across ASEAN.  

Croos-border linkages of real-time payment systems is very exciting and will make the world a little smaller. The security and convenience Singapore and Thailand have brought to their banking customers is just the beginning. Future linkages to more countries' real-time payment system will improve international commerce.

 

"This service by the MAS and the BOT will effectively address customers' long standing pain points in the area of cross-border transfers and remittances including long transaction times and high costs," BOT governor Sethuput Suthiwartnarueput said in the joint statement.

Bank of Thailand Investigating a CBDC, 01 April 2021 

The Bank of Thailand published a discussion paper entitled The Way Forward for Retail Central Bank Digital Currency in Thailand, which overviews the bank’s investigation into the possible introduction of a retail CBDC, alongside the opportunities, risks and challenges it would present. Through Project Inthanon, a 2018-2020 pilot project in partnership with eight commercial banks, the Bank of Thailand successfully created a proof-of-concept wholesale CBDC prototype based on distributed ledger technology (DLT). The prototype was tested in several use cases, including a successful cross-border transfer in partnership with the Hong Kong Monetary Authority. In late 2020, the central bank began to explore the role of a CBDC in business, for functions like trade and conditional payments. On 07 March 2021, the Bank of Thailand published a report entitled Central Bank Digital Currency: The Future of Payments for Corporates - Leveraging Technology to Enhance Efficiency and Innovation in the Business Sector, which outlines this recent phase of investigation. 

The discussion paper identifies the emergence of privately-issued digital currencies as the principal motivation in exploring the possible development of a CBDC. A widespread usage of privately-issued currencies could eventually put Thailand’s monetary and financial stability, users and payment systems at risk. A CBDC would offer a safe, reliable and accessible alternative, but it would also pose risks, including the disintermediation of financial intermediaries and an increased possibility of bank runs. A CBDC system would also require “maintenance of high security standards and public trust.” Despite such risks and challenges, the Bank of Thailand remains confident in its risk mitigation measures, and identifies three capacities in ensuring a successful CBDC implementation: user accessibility, digital infrastructure and legal and regulatory frameworks. Going forward, the central bank does not believe there is an immediate need to issue a CBDC, but still aims to take the necessary steps towards its possible development. Per the paper, over 2021-22, “…we intend to focus our efforts on the research and development of a retail CBDC while closely monitoring business adoption, consumer trends and technology advancements.” 

Bank of Thailand Stablecoins Regulation Policy, 19 March 2021 

The Bank of Thailand released its stablecoins regulation policy in a press release, which briefly outlines requirements for baht-backed stablecoins. Since they are pegged to the local currency, baht-backed stablecoins are classified as e-money per the Payment Systems Act 2017. Entities seeking to provide services involving baht-backed stablecoins are required to first consult with the Bank of Thailand. Before pursuing regulatory guidelines on other stablecoins, the bank welcomes comments and feedback. The press release reiterates the bank’s interest in adopting innovative technologies, and points to its investigation into the development of a retail CBDC. The policy comes a day after the bank banned the use of the Thai Baht Digital (THT), a stablecoin issued on the Terra platform.  

Anti-Money Laundering Office Publishes Guidelines on Risk Factors and Risk Management in Money Laundering, Terrorist Financing and Proliferation Financing (ML/TF/PF), 27 January 2021 

The Anti-Money Laundering Office passed a spate of guidelines to further implement provisions of the Ministerial Regulation on Customer Due Diligence, which came into effect 12 August 2020. The regulation:

  • Clarifies and expands upon the definition of a Politically Exposed Person (PEP) 
  • Strengthens customer due diligence and know-your-customer (KYC) measures in certain contexts 
  • Streamlines risk assessment and mitigation measures to more closely align with international standards 
  • Requires that, in the case of the international transfer of electronic funds below THB 50,000 (approximately USD $1500), the transferring financial institution transmit information on the parties involved to the receiving financial institution9

The regulation applies to financial institutions and other entities. 

The Guideline for Consideration of ML/TF/PF Risk Factors requires obliged entities to apply appropriate risk assessment measures in conducting business. This includes monitoring the customer profile, transaction patterns, products and services, delivery channels and geographic location. Closely related, The Guidelines for Formulating Policies and Procedures for Assessment, Management and Mitigation of ML/TF/PF Risks calls for a risk-based approach to the adoption and implementation of AML/CFT policies and procedures.  

The Guidelines for Customer and Beneficial Owner Verification and Identification provides an overview of methods and requirements for verifying and identifying customers and beneficial owners, such as checking information against government agency databases and certifying accuracy. The guidelines come on the heels of a 14 December 2020 announcement from the Anti-Money Laundering Office on exemptions from beneficial ownership identification requirements. Financial institutions and other firms are exempt from conducting beneficial ownership identification when dealing with customers from foreign governments, state agencies and listed companies from jurisdictions that present low ML/TF risks. 

On 01 February 2021, the Anti-Money Laundering Office published another document further implementing provisions of the Ministerial Regulation on Customer Due Diligence. The Guidelines for Formulating ML/TF/PF Risk Management Measures Arising From the Release of New Products, Services and Technologies calls for obliged entities to conduct a risk assessment prior to the release of a new product.   

Bank of Thailand Publishes Annual Report 2020, January 2021 

The Bank of Thailand published its Annual Report 2020, which overviews the effects of the COVID-19 pandemic, its activities for 2020 and its future goals. Major focuses for 2020 included the alleviation of pandemic-related strain on the financial sector and Thai citizens, continued investigation into the development of a CBDC and the strengthening of the digital payments infrastructure. Going forward, the bank will focus on promoting innovation through the regulatory sandbox, integrating digital technology and data into operations, boosting monetary and fiscal transparency, reducing inequality and utilizing supervisory technology in overseeing financial stability and responding to new risks. The report also emphasizes the importance in securing Thailand’s cybersecurity resilience readiness in the financial sector, which will require improvements to IT risk management systems, developing and implementing monitoring tools to detect and deter risks, bolstering cybersecurity awareness and establishing cybersecurity partnerships within the sector.   

Guidelines for PromptPay Services for e-Money Services, 29 December 2020 

The Bank of Thailand published a circular on “Guidelines for PromptPay services for e-Money services,” which repeals and replaces a previous circular. The new circular takes into account the emergence of technological innovations in remote identification for the KYC process, particularly the use of biometrics for identity verification. The approval of biometrics in identity verification for PromptPay, a money transfer platform created by the Thai government, comes amidst a system-wide effort to modernize Thai banking services. In 2020, the Bank of Thailand published guidelines approving the use of biometric technology for KYC by financial services. The guidelines require financial institutions to adhere to certain security standards, accurately assess the customer and institute an operational risk management system. Facilitating remote onboarding and other digital banking services is key in promoting financial inclusion, especially amidst COVID-19 lockdowns and other safety-related measures. Indeed, PromptPay saw an 11.4% increase in usage in 2020 compared to 2019,10 and Kasikornbank (KBank) revealed that transactions on its K Plus mobile banking app grew by 71%.11 The Bank of Thailand is reportedly considering the implications of allowing for the establishment of virtual banks, which would facilitate increased access to financial services, boost efficiency and encourage competition and innovation.12


Reference:

1. “Overview.” The World Bank, May 2021. https://www.worldbank.org/en/country/thailand/overview.

2. Yuda, Masayuki. “Thailand GDP shrinks at fastest pace in over 2 decades.” Nikkei Asia, 15 February 2021. https://asia.nikkei.com/Economy/Thailand-GDP-shrinks-at-fastest-pace-in-over-2-decades.

3. “Thailand Q1 slump eases, outlook cut as Covid-19 woes linger.” Business Times, 18 May 2021. https://www.businesstimes.com.sg/government-economy/thailand-q1-slump-eases-outlook-cut-as-covid-19-woes-linger-0.

4. “Thai economic recovery slow but financial positions strong -central bank chief.” Reuters, 06 May 2021. https://www.reuters.com/article/thailand-economy-idUSL4N2MT40Y.

5. “Thai banks strong, can weather economic uncertainty- c.bank.” Reuters, 17 May 2021. https://www.reuters.com/article/thailand-banks-loans-idUSL3N2N41GA.

6. “Digital-savvy customers pushing Thai banks to embrace fintech: S&P.” The Business Times, 26 August 2020. https://www.businesstimes.com.sg/banking-finance/digital-savvy-customers-pushing-thai-banks-to-embrace-fintech-sp.

7. Lim, Tian Jiao. “Exclusive: Thailand’s vision for trusted digital ID.” GovInsider, 20 August 2020. https://govinsider.asia/transformation/thailands-vision-for-a-self-sovereign-digital-id/.

8. Young, Martin. “Thailand to introduce in-person KYC for crypto exchanges.” Cointelegraph, 03 May 2021. https://cointelegraph.com/news/thailand-to-introduce-in-person-kyc-for-crypto-exchanges.

9. Rujirawanichtep, Teelada and Napat Siri-armart. “Thailand: Anti-Money Laundering Law In Thailand Due To Be Updated.” Mondaq, 07 April 2021. https://www.mondaq.com/money-laundering/1055490/anti-money-laundering-law-in-thailand-due-to-be-updated.

10. “Pandemic speeds up digital drive.” Bangkok Post, 02 January 2021. https://www.bangkokpost.com/business/2044455/pandemic-speeds-up-digital-drive.

11. Khajangson, Wongsakrit et al. “Fintech 2021—Thailand.” Chambers and Partners, 18 March 2021. https://practiceguides.chambers.com/practice-guides/fintech-2021/thailand/trends-and-developments.

12. “Virtual banks aim to make real impact.” Bangkok Post, 24 May 2021. https://www.bangkokpost.com/business/2120607/virtual-banks-aim-to-make-real-impact.


*DISCLAIMER: This information is OneSpan's interpretation of the compliance requirements as of the date of publication. Please note that not all interpretations or requirements of the applicable laws are well-settled and its application is fact- and context-specific. The information contained in this document should not be relied upon as legal advice or to determine how the law applies to your business or organization. We encourage you to seek guidance from your legal counsel with regard to law applying specifically to your business or organization and how to ensure compliance. This information is provided “as-is” and may be updated or changed without notice. OneSpan does not accept liability for the contents of these materials.

Last updated: November 2021