Financial Crime World

Cambodia’s Financial Sector: Vulnerability to Money Laundering and Terrorist Financing

High Vulnerability Expected, but Regulations Reduce Risk

Naturally, Cambodia’s financial sector is considered to have a high vulnerability to money laundering (ML) and terrorist financing (TF), due to the size, operation, and laws and regulations requirements of its money remittance services. However, strict regulations and restrictions in place have reduced this risk.

Other Financial Institutions: Medium-Low Vulnerability

Other financial institutions in Cambodia are assessed as having a medium-low vulnerability to ML/TF due to limited resources, particularly financial and human resources. This is because they lack the necessary expertise and capabilities to effectively prevent ML/TF.

Designated Non-Financial Businesses and Professions (DNFBPs)

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The National Reporting Authority (NRA) report also examines the DNFBPs sectors, including real estate, casino, financial trust, lawyer, and accounting and auditing services.

Real Estate Sector

  • Cambodia’s real estate sector has grown rapidly over the past decade.
  • There are currently 138 companies registered in 2015 compared to only 28 companies in 2007.
  • The sector plays a vital role in supporting the country’s financial infrastructure and contributes significantly to GDP growth.
  • However, due to its size and complexity, the real estate sector is rated as having medium ML/TF risk.

Casino Sector

  • The casino sector in Cambodia is mainly operated along the border with Vietnam and Thailand.
  • While it has attracted foreign investors, it also poses a moderate ML/TF risk due to its potential for money laundering and terrorist financing.

Financial Trust Sector

  • The financial trust sector in Cambodia has evolved through hard development stages from informal to formal sectors with appropriate regulations.
  • There are currently only 9 financial trust entities registered at the Ministry of Economy and Finance (MEF), which are mainly banks and microfinance institutions.
  • The funds registered as trust funds are used for investment capital expansion, loan disbursement for rural areas, and customer satisfaction.
  • Due to its strict regulatory framework, the financial trust sector is rated as having low ML vulnerabilities.

Combating Terrorism Financing

  • The Government of Cambodia has been providing training and showing determination in combating terrorism and terrorist financing throughout the country.
  • The harmonizing policy of the government has allowed for full integration of all minority groups (ethnic and religious).
  • However, more needs to be done to effectively prevent and detect ML/TF activities.

Conclusion

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While there are still vulnerabilities in Cambodia’s financial sector, strict regulations and restrictions have reduced the risk of ML/TF. Further efforts are needed to strengthen AML/CFT measures and combat terrorism financing.