On November 23, 2021, Thailand’s cabinet approved in principle the amended Ministerial Regulation No. 13 issued under the Exchange Control Act, B.E. 2485 (1942), as amended (ECA).
The ECA is an integral instrument of the Bank of Thailand (BOT) for regulating businesses relating to foreign means of payment (i.e., foreign exchange business) and controlling inward and outward remittances as well as exchange and conversion between Thai baht and foreign currencies. Under the current ECA, no party may purchase, sell, lend, exchange, or transfer foreign currencies except for authorized juristic persons (bank and non-bank entities) or authorized individuals who are licensed by the Ministry of Finance.
The major amendments to Ministerial Regulation No. 13 of the ECA introduce a number of changes to the current regulations for foreign exchange business operations:
- Expansion of the scope of foreign exchange business
The scope of a foreign exchange business is currently limited to purchasing, selling, lending, and exchanging foreign currency in the form of banknotes, coins, and travelers’ cheques (i.e., banknotes-to-banknotes conversion only). The new amendments will expand the scope of foreign exchange business to include more foreign currency payment types. For instance, foreign travelers will be able to use credit or debit cards issued by a foreign commercial bank to exchange for cash (i.e., card-to-banknotes conversion).
- Additional modes of authorizing foreign exchange businesses
Licensing is currently the only mode of authorization for a foreign exchange business in Thailand. Under the amended regulations, there will be two options for authorization: licensing or registration. While the exact requirements and definition of “registration” will become clearer after the actual amended regulation and any subordinate legislation become available, this indication of an additional mode of authorization may imply varying requirements and burdens in the application process.
- Allowance of a foreign exchange business license to cover all branches and channels
A license is currently granted for a fixed location or channel (i.e., one-to-one), which means each additional branch of business operations requires a separate license. Under the amendments, licenses will no longer be tied to a specific location or channel but will cover all locations of business operations (i.e., one-to-many). However, the new registration mode is one-to-one, meaning that every business branch or service channel will have to apply for separate registration.
- Relaxation of foreign-source income rules
Current regulations require those who earn income in foreign currencies from foreign sources to either sell the currency to a commercial bank in Thailand or deposit it into a foreign-currency account. The amended regulations allow such foreign currencies to also be used for other transactions, such as payment of trade debts. In addition, it will be possible to use foreign-source income in foreign currencies for transactions (other than selling or depositing) with any authorized juristic person or authorized money exchange operator that has successfully applied for a foreign exchange business license or registration in Thailand.
- Removal of possibility for individuals to apply for a foreign exchange business license
Currently, both individuals and juristic persons (e.g., companies) can apply for a license to engage in a foreign exchange business—and as of October 19, 2021, BOT statistics indicated that 114 of the 2,326 authorized foreign money exchange operations in Thailand were individuals. Under the new regulations, however, individuals may no longer apply for a license. Only juristic persons will be able to apply for a license to engage in the foreign exchange business. Individuals who are currently holding a license will be allowed to continue their business operation for up to three years from the effective date of the amended ECA; beyond that they will no longer be allowed foreign exchange business operations in Thailand.
- New possible disqualification for directors, management, and majority shareholders
Under the current rules, individuals are disqualified from serving as directors, managers, and major shareholders of a license holder by bankruptcy, imprisonment for a foreign exchange violation, or a sentence for a money-laundering or counter-terrorist financing crime. The amended regulations add another offense to the list of possible disqualifications: conducting a foreign exchange business without a valid license or registration.
The expected modernizing effects of this draft amendment on the regulatory regime for foreign exchange businesses come in response to the fast development of the fintech industry and emerging innovative means of payment. The draft also adopts more stringent requirements and international standards in order to achieve good governance.
Following the cabinet approval, the draft amendment to Ministerial Regulation No. 13 under the ECA will undergo consideration by the Council of State, after which it will take effect. This process will likely be completed in the coming months.
For guidance on any aspect of exchange control or foreign investment regulations in Thailand, please contact Kobkit Thienpreecha at [email protected]illeke.com or +66 2056 5534, Nutavit Sirikan at [email protected] or +66 2056 5510, or Thammapas Chanpanich at [email protected] or +66 2056 5561.