Non-resident foreigners’ bank accounts in country is money laundering: RMA Governor

He added that closing the accounts was always a priority

 

Earlier this week, the RoyalMonetary Authority(RMA) Governor, duringa meeting with about 150 representatives from the private sector, made it clear that Indian businessmen across the border holding bank accounts in Bhutan was not legal and closing these accounts had remained a priority ever since the central bank learnt about it more than seven years ago.

Governor Daw Tenzin said a foreigner who holds an account in another country, even if it is for business is subject to taxation but the Indian businessmen were not imposed any kind of taxes by Bhutan therefore their business was “not legal” and fell under “money laundering”.

“The problem arising from trade at the border town was foreseen but we couldn’t just take actions at once. We had waited some eight years to close these accounts as we needed to prepare,” he said. The central bank, Daw Tenzin said, focused on improving payment systems in the country by introducing debit cards, credit cards, electronic fund transfers and prepaid cards which took years.

Last month, following RMA’s directive, commercial banks in the country closed all types of accounts held in the name of Indians which drew complaints from businessmen especially in Jaigon, India who had accounts with Bhutanese banks for years.

Daw Tenzin said, while the government-initiated task force delayed its report, traders along the border started playing with the Bhutanese Ngultrum (BTN) leading to informal currency exchange, distorting the value of the BTN.

On 8 March, RMA issued a circular to close all non-resident foreigners’ savings, current, recurrent and fixed deposit accounts by 9 March except for fixed deposit accounts.

However, for those depositers opting for full maturity, payments would be made only in BTN. The directive was issued as part of the austerity measures taken by RMA to curb the Indian Rupee(INR) shortage.

The Governor, during the meeting said, this has caused businessmen in Jaigon to complain to such an extent that an Indian MP (Lok Sabha) wrote to the economic affairs minister, Lyonpo Khandu Wangchuk through the Indian Ambassador claiming that the Indian businessmen earned money through trade and not through illegal business. The matter was discussed by the Cabinet and Lyonchen instructed the Governor to hold a meeting with the Indian Ambassador.

The Governor said he made a presentation to the Ambassador who was “shocked” on learning the details of the banking activities that businessmen across the border engaged in Bhutan.

“They have understood that there is a problem but had no idea of how the problem arose”, he said.

The Governor was notified by the Indian businessmen that they had more BTN which was not a legal tender in India. The RMA made another announcement instructing all the businessmen to deposit their remaining BTN with banks in Bhutan, so that the exchange payment could be made on availability of INR. The surplus BTN thus collected by banks from Indian businessmen amounted to Nu 355 mn.

The Governor said his main intention was to close all bank accounts in the name of Indians when he adopted the overdraft facility (ODF).

He said Bhutan has no intention of disrupting trade between the two nations but choose to comply with policies while conducting trade and do it through proper banking channel.

“To ensure good friendship, the game needs to be played according to the rule”, he said.

RMA agreed to continue trade with the Indian traders at the border but through improved payment systems. However, traders said they had no accounts in Jaigaon and opted for cash payments. The governor replied, questioning the possibility for them to have an account in Bhutan when they did not have an account on their own soil. He said, the same question was asked to the Indian ambassador.

Daw Tenzin said he has informed a Deputy Governor of Reserve Bank of India and other leaders who opposed the RMA circular that a clear presentation on the issue will be made to them in a meeting.

State Bank of India (SBI) and Government of India (GoI) is currently examining the possibilities of considering the government’s request to enhance the ODF and increasing the limit on the standby credit line fromINR 3bn to INR 10 bn.The Governor has requested the Indian Ambassador to speed up the process so that RMA can pay off the existing accounts.

The existence of these accounts actually drained major amount of the INR injected into commercial banks by RMA which actually is borrowed money SBI.

The borrowings at an interest rate of 10% by RMA were actually going back to India through the accounts of Indian businessmen.

Governor Daw Tenzin said, a Bhutanese citizen withdrawing say more than USD 10,000 in any foreign country could be questioned out of suspicion but people use sacks in Bhutan to carry money from bank counters.