Summary
- Part 5 of the Financial Services Act 2025 (ss. 43–49) requires that no person performs a Controlled Function in a Licensed Firm unless GFSO has approved that person (s. 43). An approved individual is an "Approved Person".
- GEN 5.3 names eight Controlled Functions: Senior Executive Officer, Licensed Director, Licensed Partner, Finance Officer, Compliance Officer, Senior Manager, Money Laundering Reporting Officer and Responsible Officer.
- GEN 5.5.1 makes four appointments mandatory: Senior Executive Officer, Compliance Officer, Money Laundering Reporting Officer and, for banks and insurers only, Finance Officer. The SEO, Compliance Officer and MLRO must be resident in GMC/Bhutan (GEN 5.5.2).
- GFSO may approve only a "fit and proper person" (s. 45(1)); GEN 5.6.4 lists integrity, competence and capability, financial soundness and the proposed role.
- Temporary cover by a non-approved individual is limited to twelve weeks in any twelve months (GEN 8.6.1). Withdrawal must be requested within seven days of an Approved Person leaving, and a replacement appointed within three months (GEN 8.7.1, 8.7.4).
What an Approved Person is
The Financial Services Act 2025 regulates individuals as well as firms. A "Controlled Function" is, in relation to a Licensed Firm's Regulated Activities, "a function of a description specified in the Rules made by the Regulator" (s. 258). An "Approved Person" is "an individual in relation to whom an Approval is given under section 43" (s. 258). A Licensed Firm is a firm holding a Financial Services Licence from GFSO, the Gelephu Financial Services Office.
Section 43 imposes two parallel duties. The firm "must take reasonable care to ensure that no person performs a Controlled Function in the business" unless that person is an Approved Person acting within their Approval (s. 43(1)). The individual "must not perform a Controlled Function" without Approval (s. 43(2)). Both are exposed if an unapproved person takes on a controlled role.
The eight Controlled Functions in GEN 5.3
GEN 5.3.1(1) provides that "the functions specified in Rules 5.3.2 to 5.3.9 are Controlled Functions", and their performance is "subject to approval by the Regulator" (GEN 5.3.1(2)).
| Controlled Function | GEN Rule | Who performs it |
|---|---|---|
| Senior Executive Officer | 5.3.2 | An individual with, alone or jointly with other Approved Persons, "ultimate responsibility for the day-to-day management, supervision and control" of some or all of the firm's Regulated Activities in or from GMC, who is a Director, Partner or Senior Manager. |
| Licensed Director | 5.3.3 | A Director of a Licensed Firm which is a Body Corporate (subject to GEN 5.5.4). |
| Licensed Partner | 5.3.4 | For a Licensed Firm which is a Partnership, the individuals specified in GEN 5.5.5. |
| Finance Officer | 5.3.5 | A Director, Partner or Senior Manager "who has responsibility for the Licensed Firm's compliance with the applicable Rules in PRU or PIN". |
| Compliance Officer | 5.3.6 | A Director, Partner or Senior Manager "who has responsibility for compliance matters in relation to the Licensed Firm's Regulated Activities". |
| Senior Manager | 5.3.7 | An Employee (not a Director or Partner) responsible, alone or jointly, for the management, supervision or control of one or more parts of the firm's Regulated Activities. |
| Money Laundering Reporting Officer | 5.3.8 | A Director, Partner or Senior Manager responsible for implementing AML policies, systems and controls and for "day to day oversight of its compliance with the Rules in AML". |
| Responsible Officer | 5.3.9 | An individual who is not an Employee of the firm but has significant responsibility for, and exercises significant influence over, the management of one or more aspects of its affairs. |
The Responsible Officer function is the one international groups most often overlook. GEN's Guidance applies it to "an individual employed by a Controller or other Group company who is not an Employee of the Licensed Firm", such as "a regional manager to whom a Senior Executive Officer reports and from whom he takes direction". A hub executive who directs the GMC subsidiary should expect to need Approval.
Functions performed by an appointed insolvency practitioner or a manager of the firm's business are not Controlled Functions (GEN 5.3.1(4)–(5)). An Approved Person "may perform one or more Controlled Functions for one or more Licensed Firms" (GEN 5.3.10).
The mandatory appointments in GEN 5.5
GEN 5.5.1(1) requires every Licensed Firm to make the following appointments "and ensure that they are held by one or more Approved Persons at all times":
- (a) Senior Executive Officer;
- (b) Finance Officer ("for banks and insurers only");
- (c) Compliance Officer; and
- (d) Money Laundering Reporting Officer.
A Credit Rating Agency need not appoint a Finance Officer or MLRO but must keep its SEO and Compliance Officer as "separate persons at all times" (GEN 5.5.1(2)). A Fund Manager of a Venture Capital Fund need not appoint a Finance Officer (GEN 5.5.1(3)).
Combining roles
GEN 5.5.1 contemplates one individual holding more than one function, but its Guidance sets the expectation: a firm "would generally be expected to separate the roles of Compliance Officer and Senior Executive Officer", and the Compliance Officer, Finance Officer and MLRO roles "would not be expected to be combined with any other Controlled Functions unless appropriate monitoring and control arrangements independent of the individual concerned will be implemented" (Guidance 4). A large firm may, exceptionally, register more than one Compliance Officer for different divisions (Guidance 5), and more than one firm may share the same Compliance Officer (Guidance 6).
Residency
GEN 5.5.2 provides that the individuals holding the SEO, Compliance Officer and MLRO functions "must be resident in the GMC/Bhutan". GFSO "may waive the requirement for a Compliance Officer or Money Laundering Reporting Officer to be resident", weighing the nature, scale and complexity of the firm, time zones, the resourcing of a remote compliance function and the officer's ability to liaise with GFSO (Guidance 1). No waiver is mentioned for the SEO. A separate MLRO residency requirement exists in AML 12.1.1(2).
The Companies Act 2025, s. 145(1) separately requires at least one director ordinarily resident in GMC, resident, or holding a valid work visa or work pass (s. 145(1A)). A firm planning its GMC headcount should count at least the SEO, Compliance Officer and MLRO as local roles (see our guide to work passes in GMC).
Directors, partners and trust service providers
A GMC-headquartered Body Corporate "must register with the Regulator all of its Directors as Licensed Directors" (GEN 5.5.4); a partnership registers each partner, or a corporate partner's nominee, as a Licensed Partner (GEN 5.5.5). A Branch need do neither (GEN 5.5, Guidance). In a Trust Service Provider, the Compliance Officer and MLRO "must not act also as trustees" (GEN 5.5.3).
The fit and proper test
GFSO "may grant the Application only if it is satisfied that the person ... is a fit and proper person to perform the Controlled Function" (s. 45(1)). GEN 5.6.4 lists what GFSO considers: integrity; competence and capability; financial soundness; the proposed role; and any other relevant matters. An individual "may not be considered as fit and proper" where he is bankrupt, has been convicted of a serious criminal offence, or is incapable of managing his affairs (GEN 5.6.5). GFSO may make independent enquiries (GEN 5.6.6) and refers to the GPM, which "sets out the Regulator's general regulatory policy and processes" (GEN 5.1, Guidance 3).
For the SEO, MLRO and Compliance Officer, the firm must ensure the individuals "are able to demonstrate sufficient knowledge of relevant anti-money laundering requirements" (GEN 5.6.14).
The application
The Licensed Firm, or a licence applicant (s. 44(2)), applies in the form GFSO prescribes (s. 44(3); GEN 5.6.1). The individual must "countersign or otherwise consent" (GEN 5.6.2) and satisfy both GFSO and the firm that he is fit and proper (GEN 5.6.3). Approval may be conditional or time-limited (s. 45(2)).
The firm's own due diligence is a regulatory duty. Before lodging an application it "must make reasonable enquiries as to an individual's fitness and propriety" (GEN 5.6.11) and must not lodge one if it "has reasonable grounds to believe that the individual is not fit and proper" (GEN 5.6.12). GEN 5.6.8 requires it to verify knowledge, skills, qualifications and experience, and records must be kept for at least six years (GEN 5.6.16).
Ongoing obligations
The firm "is responsible for the conduct of its Approved Persons and for ensuring that they remain fit and proper" (GEN 5.6.10), must be satisfied they remain competent and keep abreast of developments (GEN 5.6.9), and must have arrangements to maintain competence (GEN 5.6.13).
Approved Persons are bound by six Principles of their own (GEN 2.4.1–2.4.6): integrity; due skill, care and diligence; market conduct; relations with the Regulator; and, for those with significant responsibility, management, systems and control, and compliance. Breach "may indicate that an Approved Person is no longer fit and proper" (GEN 2.3, Guidance 2).
The firm must give GFSO "reasonable advance notice" of "any material matters relating to his fitness and propriety" (GEN 8.10.2(6)), advise GFSO immediately if it believes an Approved Person "is no longer fit and proper" (GEN 8.10.6(10)), and notify in writing within 10 days where a Controlled Function is withdrawn or varied (GEN 5.3.1(3)).
GFSO's powers over an Approval
GFSO may withdraw an Approval if it considers the person not fit and proper (s. 46), may vary it by imposing, varying or removing conditions or limiting its duration (s. 48(1)–(2)), and may suspend it "for a period not exceeding 12 months" (s. 48(4)). Immediate effect requires GFSO to consider it "necessary" (s. 49(3)); otherwise the Interested Parties receive written notice, reasons and a period for representations (s. 49(4)–(6)). Part 19 adds censure, penalties, suspension and prohibition orders (ss. 231–234).
Changes, temporary cover and withdrawal (GEN 8.5–8.7)
Extending or varying an Approval. Extensions to other Controlled Functions are applied for by the firm with the individual's consent (GEN 8.5.1); requests to vary conditions or withdraw status are made in writing or in the prescribed form (GEN 8.5.2).
Temporary cover. GEN 8.6.1 lets a firm appoint a non-Approved individual to carry out an Approved Person's functions where the absence "is temporary or reasonably unforeseen", the functions are carried out "for a maximum of twelve weeks in any consecutive twelve months", and the firm has assessed the individual as having the relevant skills and experience. Temporary cover is not available for the Licensed Director or Licensed Partner functions (GEN 8.6.1(2)). The firm must notify GFSO in writing of the stand-in's name and contact details (GEN 8.6.1(4)), and GFSO may exercise its powers over the stand-in as if he were an Approved Person (GEN 8.6.2).
Withdrawal. A firm "must request the withdrawal of an Approved Person status within seven days of the Approved Person ceasing to be employed" to perform the function (GEN 8.7.1), including details of any circumstances in which it considers the individual no longer fit and proper (GEN 8.7.2). If the individual was dismissed or asked to resign, "a statement of the reason, or reasons" must be given to GFSO (GEN 8.7.5). The vacated function must be reassigned on an interim basis to a suitably qualified individual (GEN 8.7.3), and the firm "must complete the appointment of a replacement ... within three (3) months from the date of cessation" (GEN 8.7.4). Since GEN 5.5.1 requires the mandatory functions to be held "at all times", line up successors early.
Practical checklist: staffing a GMC Licensed Firm
- Identify who will hold each mandatory function under GEN 5.5.1 and confirm they are Directors, Partners or Senior Managers as the definitions require.
- Confirm GMC/Bhutan residency for the SEO, Compliance Officer and MLRO (GEN 5.5.2), or prepare a waiver case for the latter two.
- Map every director to the Licensed Director function (GEN 5.5.4) and every group executive with real influence to the Responsible Officer function (GEN 5.3.9).
- Run the firm's own fit and proper and competence assessment under GEN 5.6.8 and 5.6.11 before filing; keep records for six years.
- Ensure the SEO, Compliance Officer and MLRO can evidence AML knowledge (GEN 5.6.14).
- File the Approved Person applications with the licence application (s. 44(2)), countersigned by each individual.
- Build a succession plan around the twelve-week temporary cover limit and the three-month replacement deadline.
Frequently asked questions
Which roles must be filled before a GMC financial licence is granted?
GEN 5.5.1 requires a Senior Executive Officer, a Compliance Officer and a Money Laundering Reporting Officer for every Licensed Firm, plus a Finance Officer for banks and insurers. GFSO's published process lists "key personnel" among the In-Principle Approval conditions, so file their applications with the licence application.
Can the CEO also be the Compliance Officer?
GEN 5.5.1 does not prohibit combining functions, but its Guidance says a firm "would generally be expected to separate the roles of Compliance Officer and Senior Executive Officer", and that the Compliance, Finance and MLRO roles should not be combined with other functions without independent monitoring. A Credit Rating Agency must keep SEO and Compliance Officer separate.
Do the Approved Persons have to live in GMC?
The SEO, Compliance Officer and MLRO must be resident in GMC/Bhutan (GEN 5.5.2), with case-by-case waivers possible for the latter two. GEN sets no residency rule for the Finance Officer, Licensed Directors or Senior Managers.
What if my Compliance Officer resigns suddenly?
Reassign the function on an interim basis (GEN 8.7.3), request withdrawal of the leaver's status within seven days (GEN 8.7.1), give GFSO the reasons if the leaver was dismissed or asked to resign (GEN 8.7.5), and appoint an Approved replacement within three months (GEN 8.7.4). A non-Approved stand-in may cover for up to twelve weeks in any twelve months (GEN 8.6.1).
Key takeaways
- No one may perform a Controlled Function without GFSO Approval; both firm and individual are bound (s. 43).
- GEN 5.3 names eight Controlled Functions; GEN 5.5.1 makes four of them mandatory appointments.
- The SEO, Compliance Officer and MLRO must be resident in GMC/Bhutan, subject to limited waivers (GEN 5.5.2).
- Fitness and propriety is assessed on integrity, competence, financial soundness and role (GEN 5.6.4); the firm must do its own due diligence first (GEN 5.6.11).
- Temporary cover is capped at twelve weeks; withdrawal must be requested within seven days; replacements within three months (GEN 8.6–8.7).
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Financial Services Act 2025 (Law No. 5 of 2025), ss. 43, 44, 45, 46, 47, 48, 49, 231, 232, 233, 234, 258
- Companies Act 2025 (Law No. 1 of 2025), s. 145(1), (1A)
- GEN Rulebook 2026 (Version 1.0), Rules 2.3.1, 2.4.1–2.4.6, 3.3.6, 5.1 (Guidance), 5.3.1–5.3.10, 5.5.1–5.5.5, 5.6.1–5.6.16, 8.5.1–8.5.2, 8.6.1–8.6.2, 8.7.1–8.7.5, 8.10.2, 8.10.6
