Financial Crime World

Cambodia’s Struggle to Combat Financial Crime Amid Corruption and Chinese Investment

Background

In February 2019, Cambodia was placed on the Financial Action Task Force (FATF) grey list due to its inadequate anti-money laundering (AML) controls. Despite this, the country is eager to increase its attractiveness as a destination for foreign direct investment.

Challenges in Combating Financial Crime

  • China has been the largest foreign investor in Cambodia, pouring in over $2 billion in the first half of 2021 alone.
  • However, China’s investment in the country’s casino gaming sector has raised concerns about money laundering and organized crime.
  • The surge in casino licenses between 2014 and 2019 has increased the risk of financial crime, with regulators struggling to keep up with the rapid growth.

Priorities for the Cambodian Government

Instead of focusing solely on casino gaming, which creates jobs but also poses significant risks, Phnom Penh should focus on stamping out illicit activity in its growing financial services sector. The new AML/CFT legislation that came into effect in June 2020 is a step in the right direction, with more specific definitions and higher penalties for non-compliance.

Training for Authorities

  • Law enforcement officials benefited from a recent workshop held by the United Nations Office on Drugs and Crime, the Australian Embassy in Phnom Penh, and the Central Security Department.
  • Training is crucial for Cambodian authorities to better understand how to identify and mitigate financial crime risk.

Strengthening the Financial Sector

The Cambodia Financial Intelligence Unit (CAFIU) has been working to delist the country from FATF’s grey list but has not provided many specifics about its progress. The Cambodian financial sector must also strengthen its ability to combat illicit money flows.

Complications due to Corruption

  • Cambodia’s struggle to combat financial crime is further complicated by deep-seated systemic corruption.
  • According to the World Economic Forum’s Global Competitiveness Report 2019 and Transparency International’s Corruption Perceptions Index 2020, the country ranked:
    • 134 out of 141 countries for incidence of corruption
    • 160 out of 180 countries globally

Recommendations

As a developing country with limited capabilities to manage financial crime risks, Cambodia must prioritize:

  • Implementing regulations to curb illicit activity in its financial services sector.
  • Strengthening its AML/CFT framework.
  • Training law enforcement officials to effectively combat money laundering and other financial crimes.