The latest embezzlement case to hit the headlines regarding a savings cooperative is just the tip of a financial-wrongdoing iceberg.
Managers and officials at the Cooperative Promotion Department, which is under the Agriculture and Agricultural Cooperative Ministry, were found to be involved in a crime in which almost 500 million baht was stolen from members' savings accounts.
In light of this and similar occurrences, Mananya Thaiseth, deputy agriculture minister in charge of cooperative affairs, has asked the Department of Special Investigation and Anti-Money Laundering Office to look into the matter more closely.
Cooperatives and credit unions are major financial institutions in large part because their higher interest rates attract many savers. As of last year, there were some 1,400 active cooperatives, with more than 1.3 trillion baht in circulation.
Yet in recent years the sector has been hit by numerous scandals. While some cases have been adjudicated with fraudulent officials jailed, many customers have never been compensated.
The sheer number of embezzlement cases suggests various organisations have operated under lax regulations and exploited loopholes allowing unscrupulous people to profit. Among high-profile cases are Klongchan Credit Union Cooperative (KCUC) which was once recognised for its excellent performance; the Chulalongkorn University cooperative; and the State Railway of Thailand union cooperative.
KCUC was connected to Wat Dhamakaya, a controversial Buddhist sect in Pathum Thani's Klong Luang district where financial dealings resulted in heavy losses for members -- more than 10 billion baht -- during the period 2010-2013; here again, several members still await compensation.
Indeed, the Monetary Policy Committee has raised concerns over lax regulations among cooperatives and credit unions that, if not properly addressed, could lead to system collapse.
Among irregularities is inter-borrowing between cooperatives with a total value exceeding 400 billion baht. Here it should be noted that cooperative and credit unions are the third-largest type of financial institution, after commercial and state-run banks. However, most cooperative and credit union members are grassroots-level people who have few savings.
So, without stringent auditing and control measures, dubious transactions among cooperatives can have serious ripple effects if one institution experiences a loss. Without proper control, there is a risk of a crisis developing that will affect not only individual cooperatives but also the country's economic system.
There have been attempts to fix problems in this financial sector. In 2018, the now-defunct National Legislative Assembly enacted the Cooperative Act aimed at strengthening control measures regarding loans, transaction processes as well as the qualifications of management and committee members.
The law required the Cooperative Promotion Department to revise the rules and regulations, and ensure good governance and transparent operations within two years. It would seem insufficient progress has been made.
The preponderance of fraud indicates a need for the Cooperative Promotion Department to be revamped -- so its officials are fully equipped with the necessary knowledge and skills to oversee the sector. Until that's a reality, the Bank of Thailand should find ways to ensure problems can be quickly dealt with quickly, and not snowball into an economic crisis.
