Cambodia and 11 other countries are likely to be added to the list of states that “pose significant threats” to the EU’s financial systems for failures to tackle money laundering and terrorism financing, according to draft documents seen by Reuters and expected to be published on Thursday.
Cambodia joined Panama, the Bahamas, Mauritius, Barbados, Botswana, Ghana, Jamaica, Mongolia, Myanmar, Nicaragua and Zimbabwe in the expanded list, which is due to take effect in October.
Countries that were already on the blacklist are Afghanistan, Iraq, Vanuatu, Pakistan, Syria, Yemen, Uganda, Trinidad and Tobago, Iran and North Korea.
Libya and four US territories including American Samoa, US Virgin Islands, Puerto Rico and Guam were left out following objections. Saudi Arabia, the current holder of the G20 presidency, was also spared from the list after “pressure” from the oil-producing powerhouse.
In February last year, Cambodia was re-listed in the “grey list” of the Financial Action Task Force (FATF), a decision Cambodia said was “unfair”.
In a bid to improve the Kingdom’s status, the Ministry of Interior has been working on two draft laws – one on anti-money laundering and terrorism financing, and the other on combating proliferation financing.
Last Tuesday, Minister of Interior Sar Kheng convened a meeting for a final review of the draft law before sending them to the Council of Ministers for approval.
Sar Kheng said putting Cambodia on the FATF grey list deters businesses from investing in the country. He said the laws were drafted in light of progress in society and in line with international standards, which required Cambodia to adopt specific anti-money laundering mechanisms.
“Cambodia needs to develop itself to get out of this grey list by adopting these two laws to restore investors’ trust,” he said.
Ministry secretary of state Ngy Chanphal confirmed to The Post on Thursday that the drafting of the laws was complete and the ministry was in the process of sending them to the Council of Ministers.
“We have been working on this within the UN framework. We have a clear action plan and a deadline, so we are not concerned about the news reports because we have been fulfilling all conditions,” he said.
Chanphal pointed out that Cambodia had followed the UN Security Council guidelines thoroughly.
Transparency International Cambodia executive director Pech Pisey said besides the FATF grey list, another money-laundering index based in Basel, Switzerland, also ranked Cambodia among seven countries at most risk in 2018.
“It will be a big blow if the EU Commission includes Cambodia in its list of states that pose financial risks. When Cambodia was placed in the grey list, it gave a signal that the country was highly vulnerable to money laundering.
“Money laundering and terrorism financing continue to cripple economies, distort international finances and harm citizens because it gives us a sign that state resources are being stolen for personal and certain group enrichment.
“Tax to the government is not paid or not paid fairly. The country’s resources for development is draining,” he said.
Pisey said the blacklist is most likely to spoil the country’s image and potentially affect financial, investment and trade flows to and from Cambodia. Countries and individuals based in Cambodia could find it tougher to use the international financial system, he said.
One of the draft documents seen by Reuters suggests giving the EU more powers to tackle financial malfeasance within the bloc.
The proposal, which is subject to changes, said the EU could set up a common supervisory body by 2023 to conduct inspections at banks, identify suspicious international transactions, and possibly impose sanctions.
If approved, banks and other financial and tax companies will be required to scrutinise more closely their clients that have dealings with countries included in the blacklist. Companies in these countries are also banned from receiving new EU funding.
Pisey commended the Cambodian government for adopting the anti-money laundering laws.
“I would encourage the government to fully enforce regulations that require non-financial businesses trading in high-value goods to comply with anti-money laundering obligations such as due diligence [proper check on customers or investments], record keeping and suspicious activities reporting,” he said.
Christian Wigand, EU Commission spokesperson on justice, equality and rule of law, did not respond to The Post’s request for comment as of press time.