International Organisation Members Must “Pay Special Attention” to Transactions Conducted by Politically Exposed Persons
The Cambodian government has recently issued a new law requiring international organisation members to pay special attention to transactions conducted by politically exposed persons (PEPs). This law aims to strengthen Cambodia’s anti-money laundering and combating the financing of terrorism regime, and to prevent the misuse of the financial system for illicit activities.
What is Considered High-Risk?
The 2020 Anti-Money Laundering and Combating the Financing of Terrorism Law (AML/CFT) adds PEPs to the list of individuals who require enhanced customer due diligence measures. This group also includes:
- Complex, unusual or large transactions
- Business relations with institutions in jurisdictions with insufficient anti-money laundering systems
New Requirements for Reporting Entities
Reporting entities, including banks, financial institutions, and non-governmental organisations, are now required to exercise due diligence in their activities and request specific information about customers. The burden on reporting entities has been increased, with enhanced customer due diligence measures now required for a broader range of transactions and business relationships deemed high-risk.
Additional Steps for Transactions with PEPs
When conducting business with PEPs, reporting entities must:
- Obtain additional information on the source of funds
- Determine the transaction purpose
- Understand the intended nature of the business relationship
They must also carry out ongoing monitoring procedures to detect suspicious activity.
Penalties for Non-Compliance
The law introduces higher fines and longer prison terms for legal entities found to be in violation. Penalties include:
- Warnings and fines
- Revocation of business licenses
- Removal of managers or officers from their positions
Natural persons who commit money-laundering crimes will face increased penalties, including imprisonment from two to five years and a fine of between KHR 100,000,000 and KHR 500,000,000 (approx. $24,500 to $122,700).
Conclusion
The new law aims to prevent the misuse of the financial system for illicit activities by requiring reporting entities to pay special attention to transactions conducted by PEPs and other high-risk individuals and groups. By strengthening Cambodia’s anti-money laundering and combating the financing of terrorism regime, this law will help protect the country’s financial system from abuse.