Cash deposits over B5m to face mandatory disclosure

Bank of Thailand chief says rule to curb ‘grey economy’ will take effect in fourth quarter

Customers depositing more than 5 million baht in cash will be required to disclose the source of the funds from the fourth quarter as part of tighter measures to curb the grey economy and illicit financial activities, according to Bank of Thailand governor Vitai Ratanakorn.

The central bank places high priority on tackling Thailand’s structural problems, particularly the informal economy, grey capital and corruption, Mr Vitai said during a meeting with economic reporters on Saturday.

Consequently, the BoT does not want financial institutions under its supervision to be used as channels for illegal activities, prompting it to tighten oversight.

Mr Vitai said officials are now renewing the scope of the central bank’s legal authority before finalising the deposit disclosure requirements.

The measures would also cover large cash exchange transactions, requiring customers seeking to exchange 1,000-baht banknotes for 100- or 500-baht notes to explain the purpose of the transaction and why the smaller denominations are needed.

Under a separate measure introduced earlier this year, cash withdrawals exceeding 5 million baht are subject to enhanced due diligence.

Commercial banks and state-owned financial institutions are required to verify customers’ reasons for using cash and assess whether transactions could instead be conducted through electronic transfers or cheques.

Legitimate business transactions remain permitted, Mr Vitai said.

Since the measures took effect in April and May, large cash withdrawals have fallen by 35%, Mr Vitai said, adding that enforcement would be standardised across all banks to further reduce such transactions.

Structural reforms

The central bank governor also called for structural reforms, making an observation about the failure of successive governments to address the country’s long-term economic weaknesses.

Thailand over the years has relied primarily on short-term projects, promotion and public relations while making little progress on long-term structural reforms, he said.

The Thai economy has proved more resilient than expected during the Middle East conflict, prompting the BoT to project GDP growth of a modest 2.3% this year instead of the 1.5% contraction feared under the worst-case scenario.

However, the more pressing challenge remains deep-rooted structural problems, which continue to erode long-term growth potential, he said.

“We have structural problems because resources are concentrated in the hands of large businesses, and we also face issues relating to the grey economy,” he said.

“What we have seen over the years are mainly short-term projects. There has been very little effort to solve long-term problems.”

The structural weaknesses are evident in persistently low productivity caused by years of inadequate investment in innovation and modern infrastructure; an ageing society that is steadily shrinking the country’s workforce; and an increasingly unequal K-shaped recovery, in which large corporations continue to recover and access financing while low-income households and small businesses remain constrained and struggle to obtain formal credit.