Dorji Choden

The Royal Monetary Authority (RMA) has rolled out a series of stringent reforms to combat financial fraud and bolster cybersecurity within the country’s financial sector, following a rise in embezzlement and digital security breaches in recent years.

This was highlighted in the Anti-Corruption (ACC) Report for 2022-23. 

The ACC report revealed that 13 complaints were lodged against financial institutions during the period, second only to the 21 complaints against various ministries.

The Bank of Bhutan and the Royal Insurance Corporation of Bhutan each accounted for four complaints. Druk PNB had two complaints while Bhutan National Bank, Bhutan Development Bank Ltd. and T Bank recorded one complaint each. Bhutan Insurance Ltd. did not receive any complaints.

These complaints, mainly involving bribery and abuse of power, were reported across Chukha, Thimphu, Dagana, and Samtse Dzongkhags. 

The ACC report also pointed to a concerning rise in embezzlement cases within financial institutions since 2015, with several banking employees being arrested for crimes such as fraud, deception, and embezzlement. Six employees were implicated for fraudulent disbursement of loans.

The report also flagged growing cybersecurity concerns, with frequent hacking and phishing attacks, that have raised alarms about the security of digital systems in the financial sector.

The ACC’s findings highlighted weaknesses in oversight and governance, including ineffective audits and a lack of robust digital security frameworks.

In 2023, the ACC reported embezzlement cases of Nu 9.2 million in the financial institutions.

Addressing the National Council yesterday, Finance Minister Lekey Dorji emphasised the importance of strengthening governance to prevent such incidents. “Corruption in financial institutions erodes trust and poses a risk to the economy. Transparent reporting and robust oversight are essential to maintaining confidence in the financial system.” 

As part of its reforms, the RMA introduced the Prudential Regulations 2024 and Corporate Governance Rules and Regulations 2024, which mandate financial institutions to report fraud incidents within 24 hours.

The Liability for Key Responsible Persons of Regulated Entities 2022 holds senior executives, including CEOs and board members, directly accountable for compliance failures.

The RMA also increased the frequency of on-site inspections and off-site monitoring to identify potential risks early.

In addition, new cybersecurity protocols require financial institutions to adopt secure network management, implement user access controls, and appoint dedicated Information Security Officers.

To address capacity gaps, the RMA has implemented internal transfers, recruited specialists, and partnered with international organisations like the International Monetary Fund to conduct training workshops.

The Ministry of Finance is also prioritising financial ecosystem reforms in the 13th Plan, with measures to promote capital markets, incentivise small businesses, and revise regulations to foster collaboration between the government, RMA, and financial institutions.

The RMA, in collaboration with financial institutions, is working to educate customers on safe banking practices, such as safeguarding sensitive information like ATM PINs and internet banking credentials.