Cambodia placed on money laundering grey list

May Kunmakara / Khmer Times No Comments Share:
A recent report showed that cash proceeds from illegal activities in Cambodia are often channelled into the real estate sector without passing through the formal banking sector. KT/Chor Sokunthea

Cambodia has been included on a list of countries “highly vulnerable to money laundering” following reports that show its judicial system has high levels of corruption and that it lacks the will to investigate financial crimes.

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Global money-laundering watchdog Financial Action Task Force (FAFT) placed the Kingdom in its ‘grey list’ on Friday.

In an article published Friday, Reuters said the inclusion on the list will curtail international financial, investment and trade flows to and from Cambodia.

Companies and individuals based in Cambodia could find it “tougher” to use the international financial system after FATF’s move, Reuters said.

The move follows an FATF ‘mutual evaluation report’ on the country’s policies to counter money laundering and terrorism financing conducted in 2017. The report contained several damning findings and observations, including that no money-laundering case had ever been prosecuted in Cambodia.

Cambodia’s judicial system had “high levels of corruption”, FATF said in the report, adding: “Cambodia has made minimal use of financial intelligence in investigating money laundering and terrorism financing.”

The report also showed that the Cambodian Financial Intelligence Unit (CAFIU) did not supervise the country’s booming casino and real estate sectors, long identified by the United Nations Office on Drugs and Crime as highly exposed to money laundering by organised crime groups.

Chea Serey, director general of the National Bank of Cambodia (NBC), did not immediately reply to a request for comment.

Stephen Higgins, managing partner at Mekong Strategic Partners, said NBC must focus on implementing the necessary reforms to get the country off the list.

“It is not a list that anyone would want to be on,” he said. “It is clearly a major negative for Cambodia, and in some ways worse than the threat of losing Everything-but-arms (EBA) privileges.

“Most banks here actually have pretty strong anti-money laundering and sanctions controls, mainly because most banks here are part of larger regional banks who enforce such controls.

“The controls on the casino and property sectors are more problematic,” he added.

“The NBC is very capable, and I’m sure they would recognise the need to take some strong action to get off FATF’s grey list.”

Mr Higgins added that a lot of what needs to be done – particularly with respect to casinos, the property sector, and law enforcement – is outside the control of NBC and will require a lot of support from across the government.

A 2017 report by the United States’ Department of State deemed Cambodia’s anti-money laundering regime “weak and ineffective”, saying that this – together with a cash-based, dollarized economy, porous borders, loose oversight of casinos, and the limited capacity of officials – makes the country more vulnerable to money laundering activities.

“Both legal and illicit transactions, regardless of size, are frequently conducted outside of formal financial institutions and are difficult to monitor,” the report said, adding that, “Cash proceeds from crime are readily channeled into land, housing, luxury goods, and other forms of property without passing through the formal banking sector.”

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