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Financial Crime and Corruption Plague Cambodia’s Economy

Cambodia has been struggling to combat financial crime and corruption, despite its efforts to improve anti-money laundering (AML) controls. The country was placed on the Financial Action Task Force (FATF)’s grey list in February 2019 after failing to meet international standards.

Warning from the United States Department of State

The United States Department of State has recently cautioned businesses about the risks of operating in Cambodia, citing corruption and financial crime as significant concerns. In its Global Competitiveness Report 2019, the World Economic Forum ranked Cambodia 134 out of 141 countries for incidence of corruption. Transparency International’s Corruption Perceptions Index also placed Cambodia at a dismal 160 out of 180 countries globally.

Attracting Foreign Direct Investment

Despite these challenges, Cambodia remains motivated to attract foreign direct investment (FDI) to boost its economy. China has been the largest FDI contributor to the country, investing around $2 billion in the first half of 2021 alone. However, this influx of capital has also fueled concerns about corruption and financial crime.

Concerns over the Casino Industry

The rapid growth of Cambodia’s casino industry has raised red flags about money laundering and other illicit activities. Regulators have struggled to keep pace with the sector’s expansion, which has attracted organized crime elements. The Cambodian government banned online gambling in 2020, but more needs to be done to address the risks associated with this industry.

Prioritizing Financial Regulation

Instead of focusing on casinos, Cambodia should prioritize regulating its financial services sector and implementing anti-money laundering measures. New AML legislation came into effect in June 2020, providing a stronger framework for combating financial crime. However, training and capacity-building are also essential for Cambodian authorities to effectively identify and mitigate financial crime risks.

Strengthening the Financial Sector

The country’s financial sector must also strengthen its ability to combat illicit money flows. While some progress has been made, more needs to be done to delist Cambodia from FATF’s grey list. The Cambodia Financial Intelligence Unit (CAFIU) has acknowledged the need for improvement but has not provided specific details on its efforts.

Conclusion

Cambodia’s struggle with financial crime and corruption highlights the need for sustained efforts to address these issues. By implementing effective regulations, training authorities, and strengthening its financial sector, Cambodia can reduce its attractiveness to organized crime elements and create a more attractive environment for legitimate foreign investment.