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#Anti Money Laundering

Are Thai PEPs trying to smurf their cash out of the country?

International Compliance Association

cash , PEPs , smurf , Thailand

The military coup in Thailand is well publicized. As of May 31st, General Prayuth Chan-ocha, the junta chief has declared he will remain in charge of Thailand until the country is ready to elect a new civilian PM via democratic elections. He estimates this will mean at least 15 more months of army control for Thailand. So far, it does not appear to be making much of a difference totourism. I saw no changes on the small island I live on, nor in Bangkok where bars, cafes and street side massage chairs were open after ten and full of customers, nor on the Thai Burmese border where farang pubs are closing the doors at curfew, but keeping the customers inside. 

The coup has, however, unsettled a number of politically exposed persons (PEPs) from across the political spectrum. Days after announcing the coup, the Army arrested and detained more than 200 PEPs in military barracks for unpublicised reasons. Some of them, including the dismissed former PM Yingluck Shinawatra, the former leaders of the anti and pro Shinawatra camps, including Suthep Thaugsuban, (b. Jul 7 1949) and Jatuporn Prompan (b.  Oct 5 1965) and others have been released on condition that they do nothing to rally support for their respective movements either via actions or words. Yingluck was prohibited from leaving Thailand at the time of writing, and must inform the National Council for Peace and Order (NCPO) the ruling body, if she leaves Bangkok. The junta returned her nephew Panthongtae Shinawatra (b. Dec 2 1979)  to his home in the capital afterreaching an understanding with the NCPO.

So far, there has been no mention of steps taken to prevent PEPs from accessing or moving funds and there may never be. However, as anti-money laundering (AML) compliance professionals are aware, upheaval in governments and changes in power can leave unguarded financial systems open to misuse by anyone wishing to hide or move the proceeds of embezzlement, fraud or other financial crimes. The former PM Yingluck was dismissed from office in May after the Anti-Corruption Commission found her guilty of ignoring flaws in the rice subsidy program which led to USD9.2bn in losses, leaving rice farmers out of pocket and struggling to survive.

Smurf alert

One bizarrely obvious, yet not entirely unbelievable, comment appeared on a news feed which sparked some interest in Thai PEP funds. Any PEP with something to hide, say for example millions of baht in embezzled funds, would probably have placed them in the safety of an offshore secrecy haven. That is if he or she is smart; if not, they may still be trying to get them out of the country or to switch them into the name of a reliable and unconnected person or entity.

A Thai business owner friend of a friend – it always is a friend of a friend, isn't it? - took a call from someone they knew in the past week offering a lucrative business transaction.

Would he be prepared to accept 2mTHB (USD60,000) into his bank account and immediately transfer 1.5m (USD45,000) of the sum into another account, specified by the caller? A few short calls to his bank would earn him a cool USD15,000. 
This is a classic and well documented structuring and smurfingtechnique. It is used by drug traffickers, embezzlers and money launderers to split up a large amount of funds in a bid to avoid detection by bank surveillance systems. Two aspects immediately struck me as interesting about the offer. Firstly, it comes at a time when anyone with cash to hide will be looking to shift it so it could be a genuine offer. Secondly, the amount of commission offered, 25 per cent, is far higher than that usually offered in such deals. Somewhere between one and five per cent is standard for smurfing schemes. The sender must be pretty desperate to distance themselves from the funds.

A few years ago I wrote an AML training course for Asian financial services and during editing, I was asked why this specific typology was given emphasis over others. Perhaps because this rudimentary and obvious ML method is still used by less than savvy launderers.

Although it is a rather obvious method, it may still slip past less vigilant AML systems. Let's not forget that this is a country with a nascent AML regime and some banks still allow account opening with only one piece of identification. I opened an account here by showing only my passport as I didn’t have a document which showed my address. A member of staff was called in to verify whether I lived where I had told the account opening officer or not. She did not recognise me but the friendly staff opened the account for me anyway.

If, as Gen Prayuth has announced, Thailand will be under military control for 15 months, there could be some plans in the offing to clamp down on laxities in its financial sector too. It might be worth keeping an eye on the national Anti-Money Laundering Office to check for any planned changes to Thailand's financial system.


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