The Bank of Thailand (BOT) has issued a warning regarding the government's plans to establish a new "Financial Hub," citing significant risks related to money laundering and terrorism financing.

This caution comes as the draft Financial Business Hub Act approaches its first parliamentary reading, following the Cabinet's approval on July 15, 2025.

In a letter dated June 13, 2025, BOT Governor Sethaput Suthiwartnarueput reiterated concerns over the regulatory environment, emphasizing that regulations in the proposed hub must uphold or exceed the standards of the nation’s primary financial system and comply with international norms.

The BOT indicated that relaxed regulations in some financial hubs have led to scrutiny, as they are often seen as avenues for illicit financial transactions, including money laundering and terrorism financing.

The central bank fears that, without stringent oversight and enforcement, Thailand's Financial Hub could unintentionally become a loophole for regulatory evasion, thereby jeopardizing the integrity of the country's core financial system and inflicting long-term damage.

To maintain domestic financial stability, the BOT outlined essential risk management principles that should be incorporated into the draft Act.

One key stipulation is that Financial Hub businesses should not serve domestic residents, as the hub's leniency could expose Thai consumers to increased risks and diminished protections.

This provision is also intended to prevent unfair competition for established businesses in the primary financial system that adhere to stricter regulations.

Consequently, Section 57 of the draft Act explicitly states that Financial Hub entities should exclusively serve non-residents.

Additionally, the BOT advocated for a clear demarcation between Financial Hub businesses and the main financial system in terms of legal entities and operational locations.

This separation, detailed in draft Section 38, is aimed at containing any potential adverse effects within the hub and preventing them from impacting the wider financial system.

The BOT referenced the Dubai International Financial Centre as a successful example of a clearly defined financial free zone.

The central bank also called for mechanisms enabling existing regulatory bodies—including the BOT, the Securities and Exchange Commission (SEC), and the Office of Insurance Commission (OIC)—to intervene and issue directives to Financial Hub businesses during emergencies, as stated in draft Sections 41 and 71.

This measure is deemed vital for sustaining overall financial stability while the hub’s primary regulator promotes agile and lenient regulations.

In addition to regulatory concerns, the BOT cautioned against expediting the establishment of the Financial Hub, stressing the importance of having a fully prepared regulatory body before commencing operations.

This body would need to amalgamate the supervisory functions of all principal regulators, reflecting the diverse types of financial businesses anticipated in the hub.

The BOT highlighted that licensing for businesses should begin only when regulatory readiness is confirmed, emphasizing the need to mitigate risks to the stability of the financial and economic systems and safeguard the country's credibility.

Furthermore, the BOT noted the necessity for a clear strategic vision for the hub, aiming to leverage Thailand's existing strengths to attract investment and gain a competitive advantage.

It cited Singapore's successful approach as a financial technology and wealth management hub as a pertinent model.

For the hub to flourish, a comprehensive supporting ecosystem must be established, inclusive of an efficient legal and justice system favorable to multinational enterprises, a highly skilled and English-speaking workforce, robust governance and law enforcement, solid financial infrastructure, and advanced technological and innovation support.