Phuket’s Foreign Investment Crackdown: Over 200 Arrested in Nominee Scheme

Over 200 people, including 98 foreign nationals (mostly Russians), were arrested in a recent crackdown on nominee businesses in Phuket, Thailand. The operation, dubbed “Operation Nominee,” targeted individuals using Thai nominees to illegally operate businesses reserved for Thai citizens.

Key Takeaways

• The suspects, comprising 98 foreign nationals, mostly from Russia, and 37 Thais, were charged with running businesses in violation of Thai law.
• During the raids, police seized assets worth over 1.5 billion baht, including 225 bank accounts with 319 million baht in circulation, 245 land documents.
• At the beginning of the year, Phuket International Airport reported that the number of Russians visiting the city increased by 100% compared to the same period in 2023.

The operation, led by the Economic Crime Suppression Division (ECSD) of the Central Investigation Bureau (CIB), was initiated after complaints were lodged with Prime Minister Srettha Thavisin about foreign nationals, mainly Russians, engaging in business activities and real estate transactions at unusually high prices.

This raised concerns among residents about the potential impact on the economy and job market.

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During the raids, police seized assets worth over 1.5 billion baht, including 225 bank accounts with 319 million baht in circulation, 245 land documents, 96 condominium units, 43 title deeds covering 24 rai of land, 196 passports, 108 work permits, documents related to the setting up of 800 companies, 1,601 company stamps, four electronic devices, and other items.

The suspects, comprising 98 foreign nationals, mostly from Russia, and 37 Thais, were charged with running businesses in violation of Thai law, which stipulates that foreigners can only own up to 49% of a company to protect local competitiveness. The Thai individuals were accused of acting as nominees for these foreign companies.

The crackdown has highlighted the challenges faced by Thailand in regulating foreign investment and maintaining control over its economic sectors. 

According to reports, the individuals arrested during the crackdown in Phuket were violating the following Thai laws:

1. Foreign Business Act:

   – This law restricts certain business activities in Thailand to Thai nationals. Using a Thai nominee to operate a business that is reserved for Thais is considered a violation.

2. Immigration Act:

   – Some of the foreign nationals arrested were staying in Thailand on improper or expired visas, which is against immigration laws.

3. Land Code Act:

   – There were cases where foreigners had acquired land or property through nominee arrangements, which is not permitted under Thai land ownership laws.

The crackdown, known as “Operation Nominee,” was aimed at enforcing these laws and preventing the use of Thai nominees to circumvent restrictions on foreign business ownership and land ownership in Thailand.

For foreign investors and businesses, this development is a cautionary tale. It emphasizes the necessity of understanding and complying with the legalities of operating businesses in foreign territories. As the situation unfolds, it will be crucial to monitor the legal proceedings and the impact this crackdown will have on the foreign investment climate in Phuket and Thailand at large.

The Phuket case may set a precedent for other regions grappling with similar issues, signaling a possible shift towards more rigorous enforcement of investment laws. It is a clear message that the Thai government is vigilant and proactive in safeguarding its economic landscape against unlawful foreign interference.

Russians have become predominant in the Phuket real estate market

Since the beginning of the war between Ukraine and Russia in early 2022, the number of Russians who have chosen Thailand as a destination to live has grown exponentially.

Some of the main reasons behind the Russians’ choice have been the country’s tropical climate, the low cost of living, and the favorable conditions to enter the country within the visa policies.

Phuket has been chosen as one of the main destinations for Russian visitors. At the beginning of the year, Phuket International Airport reported that the number of Russians visiting the locality increased by 100% compared to the same period in 2023.

Real estate agents in Phuket report that Russians are now the number one foreign buyers on the island, accounting for a significant percentage of condominium sales to foreigners. Areas like Bangtao Beach on the western side of Phuket have seen a surge in Russian-owned properties and businesses catering to the Russian community.