In more detail
Recent investigations of construction companies that revealed a possible Thai "nominee" scheme have triggered widespread inspections to ensure full compliance with Thailand's Foreign Business Act (FBA). The Ministry of Commerce (MOC) has announced its plan to inspect the use of Thai nominees by foreign business operators, targeting six high-risk sectors: tourism-related businesses; real estate and land trading; e-commerce, logistics and warehouses; hotels and resorts; agriculture-related businesses; and general construction.
Under the announced plan, the MOC is expected to inspect nearly 50,000 business entities, with a particular focus on companies in which Thai nationals hold the majority shareholding and foreign entities hold up to 49% of the shares. The MOC aims to complete these inspections within the next three months.
In parallel, to ensure more stringent enforcement and deter non-compliance, the Anti-Money Laundering Office (AMLO) is drafting amendments to the Anti-Money Laundering Act (AMLA). One of the key amendments proposed by the AMLO is to include offences related to the use of nominees to circumvent the restrictions under the FBA as a fundamental offence under the AMLA. This amendment will allow the AMLO to investigate the nominee arrangement, including the possibility that their assets may be seized or frozen, or even for the assets to fall to the state, as provided under the AMLA. Certain actions undertaken in connection with the use of nominees may also be deemed money laundering offences under the AMLA and could therefore lead to heavier penalties for offenders. The amendment also establishes a reporting requirement for entities that have transactions with financial institutions to report the ultimate beneficiary to the AMLO. The AMLO has recently completed the public consultation process for the proposed amendments to the AMLA and is now in the process of reviewing the results from the consultation. It may take a further one to two months before the draft amendments are finalized and submitted to the Cabinet for approval. However, in view of the current attention given to this matter, it remains possible that these processes may be fast-tracked.
Efforts to remove restrictive regulations on the agenda
However, amidst this background of increased enforcement, the Thai government has signaled its intention to remove restrictive regulations and make Thailand more investor-friendly. Specifically, the Thai Cabinet recently instructed the MOC to draft amendments to remove regulations that hinder Thailand's economic development. This instruction has the backing of other ministries, such as the Ministry of Finance, the Ministry of Labour, and the Board of Investment. Although specific proposals are yet to be drawn up, the amendments could include the types of businesses allowed to be operated by foreigners and the proportion of shares required to be held by Thai nationals.
Compliance with foreign investment regulations remains important, particularly in the current environment of heightened enforcement, which includes the arrest of individuals alleged to be involved in nominee shareholding. However, keeping an eye on amendments that could liberalize the FBA is also worthwhile, as it could lead to opportunities for investors to bring in modern technologies and more funding – all of which would benefit Thailand.
