Anti-Money Laundering and Countering of Financing of Terrorism Act of Bhutan, 2018

The Anti-Money Laundering and Countering of Financing of Terrorism Act of Bhutan, 2018 is the principal statute regulating the prevention, detection and prosecution of money laundering and terrorist financing in the Kingdom. The Act provides the legal foundation for the Financial Intelligence Unit (FIU) at the Royal Monetary Authority, prescribes obligations on reporting entities for customer due diligence and suspicious-transaction reporting, and aligns Bhutan's regime with international standards set by the Financial Action Task Force (FATF) and reviewed by the Asia/Pacific Group on Money Laundering (APG).^[1][2]

The Act replaced earlier piecemeal provisions that the FIU had operated under since its establishment in 2011 and reflected commitments Bhutan had made on becoming the 41st member of the APG that year.^[3]

It interacts with the Penal Code of Bhutan, the Anti-Corruption Act, the Royal Monetary Authority Act of 2010 and the Financial Services Act of 2011 to form Bhutan's combined AML/CFT framework.^[1][3]

Background

Bhutan joined the Asia/Pacific Group on Money Laundering as its 41st member in 2011. APG membership requires adherence to FATF's forty Recommendations and submission to periodic mutual evaluations. The First Mutual Evaluation Report on Bhutan, conducted by the APG in 2016, identified significant gaps — among them the absence of a dedicated AML/CFT statute, limited customer-due-diligence rules, weak supervisory authority and a narrow predicate-offence base under the Penal Code.^[2][3]

The 2018 Act was drafted by the Royal Monetary Authority and the Office of the Attorney General to address those findings. It was passed by Parliament in 2018, and the FIU was upgraded to a full department of the RMA on 1 July 2018 to operate under the new statute.^[2]

Key provisions

The Act establishes the Financial Intelligence Unit at the Royal Monetary Authority as the national centre for receiving, analysing and disseminating suspicious-transaction reports and other financial intelligence. The FIU is the supervisor for reporting entities for which no other supervisor is identified under the Act.^[1][2]

Reporting entities include commercial banks, non-bank financial institutions, insurance companies and brokers, securities intermediaries, money-changers and remitters, and designated non-financial businesses and professions, including dealers in precious metals and stones, lawyers, notaries, accountants and trust and company service providers. Reporting entities must conduct customer due diligence, identify beneficial ownership, monitor transactions and file suspicious-transaction reports with the FIU on identified or suspected money-laundering or terrorist-financing activity.^[1][4]

The Act prescribes risk-based customer-due-diligence requirements with enhanced measures for politically exposed persons, correspondent banking and high-risk jurisdictions. Records must be maintained for prescribed periods. Reporting entities are required to implement internal AML/CFT programmes, designate compliance officers and train staff.^[4]

The Act criminalises money laundering and terrorist financing as standalone offences and links predicate offences to the Penal Code. Chapter VII establishes a forfeiture regime that the APG's 2020 Follow-Up Report described as comprehensive in covering both conviction-based and non-conviction-based (civil) forfeiture. Penalties include imprisonment, fines and confiscation of assets.^[2]

The Act provides for sanctions implementation under United Nations Security Council Resolutions on terrorism and proliferation financing, including targeted financial sanctions and asset-freezing obligations. It establishes mechanisms for international cooperation, mutual legal assistance and information exchange, including direct cooperation between the FIU and foreign counterparts under the Egmont Group framework.^[2][4]

Implementing institutions

The Financial Intelligence Unit at the Royal Monetary Authority is the principal implementing body, supervised by the Royal Monetary Authority Board and operating with day-to-day independence under the AML/CFT Rules and Regulations of 2022. The RMA itself supervises licensed financial institutions for AML/CFT compliance. The Office of the Attorney General prosecutes AML/CFT offences, and the courts adjudicate cases. The Royal Bhutan Police investigate money-laundering and terrorist-financing cases. The Anti-Corruption Commission handles cases linked to corruption-derived proceeds. The Department of Revenue and Customs implements cross-border currency-declaration controls.^[2][4]

Amendments and reform

The 2018 Act has been amended to further empower the FIU to share information and cooperate with foreign counterparts. The AML/CFT Rules and Regulations of 2022 elaborated supervisory and reporting-entity obligations and provided the FIU with an explicit legal basis for international cooperation. The Penal Code of Bhutan was amended in 2021 to add the offences of racketeering and serious organised crime (Sections 284C and 294D) and market abuse (Sections 284A and 284B), broadening the predicate-offence base under the Act.^[1][2]

Implementation and impact

The Act has been the legal foundation for Bhutan's progress through successive APG follow-up reports. The 2nd Enhanced Follow-Up Report (2018), the 4th (2020) and the 6th (June 2023) tracked Bhutan's improvement in technical compliance with FATF Recommendations. By 2023 Bhutan was rated as compliant or largely compliant on most Recommendations and had exited enhanced follow-up.^[2][3]

Implementation has been criticised on several grounds. Independent reviewers and APG assessments have flagged limited supervisory capacity for designated non-financial businesses and professions, particularly outside major centres; uneven beneficial-ownership recording; and the small absolute number of money-laundering prosecutions. Civil society has limited access to FIU data, and there is limited public reporting on cross-border financial flows. The integration of the AML/CFT framework with the Gelephu Mindfulness City Special Administrative Region — which has its own application-of-laws regime under the 2024 Act — has been identified by independent commentators as an open question for FATF compliance going forward.^[2][3]

References

1. Legislation page — Royal Monetary Authority of Bhutan (AML/CFT Act and rules)
2. 6th Follow-Up Report: Mutual Evaluation of Bhutan, June 2023 — APG/FATF
3. Bhutan member page — Asia/Pacific Group on Money Laundering
4. AML and CFT Guidelines on Customer Due Diligence, 2018 — Royal Monetary Authority
5. About the Financial Intelligence Unit — Royal Monetary Authority