Cambodia's relisting in the “grey list” of the Financial Action Task Force (FATF) on Friday is “unfair”, after the Kingdom met all requirements and was removed from it in 2015, said a source at the National Bank of Cambodia.
This is because the Kingdom was evaluated based on a new standard that came into force in 2013, the source said, even as it was undergoing a mutual evaluation process by representatives of the FATF’s Asia Pacific Group on Money Laundering (APG).
However, in 2016, a year after being removed from the list, the Kingdom again underwent a mutual evaluation based on the new 2013 standard, the report of which was adopted by the APG Plenary meeting in 2017.
“The government improved measures and met the previous standard, which is why Cambodia was removed from the list in 2015."
“But the report was just adopted in 2017, and it is impossible to meet the latest standard within only one year. This is the problem … it is a very long process and the government was busy liaising with the APG on all the requirements."
“It’s a lot of work and we just did not have enough time or manpower to meet the new standards. It’s not really a condemnation of the Kingdom but a technicality, which we have every intention to address,” the source said.
The FATF is an intergovernmental organisation founded in 1989 to tackle money laundering and financing of terrorism. The APG is made up of 41 member states, including Cambodia.
During the mutual evaluation process, representatives made up of two to three members of the APG Secretariat and some member countries met with all relevant government ministries and agencies, including officials from the Ministries of Finance, Justice, and Commerce, judicial officials and others.
On why the Kingdom was again placed on the grey list this month, the source said it was due mainly to the lack of time to meet the 2013 standard, which included 40 recommendations and 11 immediate outcomes. Of the outcomes, Cambodia scored “low” on seven items.
“We are committed to meeting every standard required by the FATF as we want to be removed from the list as soon as possible. While mutual evaluations are done once every 10 years or so, we can be removed from the list at any time so long as we meet the standard,” the source said.
The source stressed that the government is looking into 10 action plans, including on training, implementing risk-based supervision for real estate, casinos and banks, to demonstrate an increase in money laundering investigations and prosecutions, and a rise in the freezing and confiscation of the proceeds of crime, among others.
On allegations that money laundering cases have never been prosecuted in the Kingdom, the source said this was untrue.
“Several cases were prosecuted in 2017-2018,” the source said.
Clarifying allegations that Cambodia had made minimal use of financial intelligence to investigate money laundering or the financing of terrorism, the source said this was also untrue.
“The problem is that not all [relevant] cases have been prosecuted as money laundering."
“Money from illegal criminal activities can be prosecuted as money laundering, but in some cases, our courts have charged perpetrators under the drug, human trafficking and illegal logging laws, where the money trail, although important, was not the primary focus of the investigation."
“But as far as the FATF is concerned, the outcome is measured by money laundering court cases whether their intelligence is used or not. And that is the quandary we are in,” the source said.
The source stressed that the government had been strengthening the Law on Anti-Money Laundering and Combating the Financing of Terrorism 2007 and the subsequent May 2008 implementing regulation.
Reporting entities such as banks, real estate companies, casinos, money changers and companies dealing with money transfers have to adhere to the law.
Meanwhile, Dy Vichea, deputy national police chief in charge of central security and combating money laundering and terrorism financing, said on Sunday that he had seen the FATF report but could not comment further.
“We have seen [the report] and we will hold an internal meeting. I cannot make further comment,” he said.
'Impact the Kingdom'
But Ngeth Chou, a senior consultant at Emerging Markets Consulting (EMC), said it was difficult to comment on money that did not enter Cambodia through the banking system.
However, he said putting Cambodia on the ‘grey list’ would likely impact the Kingdom.
“When we have good supervision and no links to money laundering and the financing of terrorism, it helps attract investors."
“But when we are listed in a negative ranking, honest investors will likely hesitate to invest [in Cambodia] because they may think business is not done in a transparent manner,” he said.
Economic analyst Chan Sophal said most money laundering in Cambodia occurred in the real estate and gambling sectors and was usually done in cash.
“I think it will affect the reputation of Cambodia. It could affect some investors who comply strictly with the rules and make them think twice before investing here.”
However, he said some investors would not be overly concerned.
“[FATF] wants authorities in charge of monetary supervision to have clear measures to tackle money laundering. This work is carried out in cooperation with international groups and not Cambodia alone because it is linked to international [crime],” he said.
Government spokesperson Phay Siphan said the move to put Cambodia on the grey list came from discrimination against Chinese investors in the Kingdom.
“It is not fair on Cambodia that they are concerned so much with money laundering that they put the Kingdom on the grey list."
“Cambodia has laws and we are against money laundering. We have mechanisms at our central bank with the assistance of foreign officials to monitor irregular money flows."
“Putting Cambodia on this list has a political agenda. I say this because the West thinks negatively of Chinese investors who spend a lot of money in real estate and other sectors,” he said.
Siphan said it was the US who should be concerned over money laundering. He used the example of Malaysia’s Prime Minister Mahathir Mohamad requesting American authorities to return money laundered there in the 1MDB corruption scandal involving his predecessor Najib Razak.
“Money without clear origin can even reach the US. It was corrupt people who brought money to hide there. Therefore, the US should also be concerned with money laundering,” he said.
The FATF had identified Cambodia as a jurisdiction with strategic Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) deficiencies.
The Kingdom has developed an action plan with the FATF to address the most serious deficiencies.
The FATF said Cambodia had made a high-level political commitment to work with it and the APG to strengthen the effectiveness of its anti-money laundering and countering the financing of terrorism measures, and address any related technical deficiencies.
“The FATF welcomed the high-level political commitment of Cambodia to its action plan,” it said.