Cambodia is on FATF’s list of aml deficient countries.
FATF Statement re AML Strategic Deficiencies: 18 October 2019
Since February 2019, when Cambodia made a high-level political commitment to work with the FATF and APG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, Cambodia has taken steps towards improving its AML/CFT regime, including by initiating off-site and on-site supervision of the real estate and casino sectors. Cambodia should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) providing a broad legal basis for MLA and conducting relevant training to LEAs; (2) implementing risk-based supervision for real estate and casinos; (3) implementing the risk-based supervision to banks, including through prompt, proportionate and dissuasive enforcement actions, as appropriate; (4) amending the AML/CFT Law to address the remaining technical compliance deficiencies; (5) conducting sector-specific outreach to casinos, real-estate and MVTS providers; (6) increasing its FIU resources; enhancing its analysis of STRs; and increasing disseminations to LEAs; (7) increasing domestic coordination and cooperation to enhance ML investigations; (8) demonstrating an increase in ML investigations and prosecutions; and providing targeted proceeds of crime confiscation training to all LEAs; (9) demonstrating an increase in the freezing and confiscation of criminal proceeds, instrumentalities, and property of equivalent value; (10) establishing the legal framework to implement UN sanctions related to PF TFS, demonstrating that implementation is occurring and enhancing the understanding of sanctions evasion.
Compliance with FATF Recommendations
The last Mutual Evaluation follow-up Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Cambodia was undertaken in 2019. According to that Evaluation, Cambodia was deemed Compliant for 2 and Largely Compliant for 21 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.
US State Department Money Laundering Report
Cambodia was last deemed a Jurisdiction of Primary Concern in the US Department of State 2018 International Narcotics Control Strategy Report (INCSR). The Overview from that report was follows: -
Cambodia is neither a regional nor an offshore financial center. Cambodia’s money laundering vulnerabilities include a weak AML regime; a cash-based, largely dollarized economy; porous borders; loose oversight of casinos; and the National Bank of Cambodia’s limited capacity to oversee the fast-growing financial and banking industries. A weak, deeply politicized judicial system and corruption also constrain effective enforcement.
Cambodia has a significant black market for smuggled goods, including drugs and imported substances for local production of methamphetamine. Both legal and illicit transactions, regardless of size, are frequently conducted outside of formal financial institutions and are difficult to monitor. Cash proceeds from crime are readily channeled into land, housing, luxury goods and vehicles, and other forms of property, without passing through the formal banking sector. Casinos along the Thailand and Vietnam borders are other potential avenues to launder money.
Cambodia has not adopted any significant additional AML legislation since 2014. The government should continue its work to increase the volume and quality of STRs and CTRs from reporting entities of all types and increase the operational independence as well as capacity of the nascent and understaffed Cambodia Financial Intelligence Unit (CAFIU). Any steps taken by the government to increase the independence and capacity of the judiciary would likely positively impact AML effectiveness.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 20
World Governance Indicator – Control of Corruption 9
Corruption is rampant in Cambodia. Companies should expect to deal with extensive red tape to obtain the proper licenses and business permits. The judiciary is understaffed, lacks qualified resources and receives insufficient financing, leading to widespread corruption and deterring foreign investment. Cambodia's Anti-Corruption Law is in line with international standards but is poorly enforced and public officials continue to engage in corrupt practices with impunity. Corrupt acts are covered in the Criminal Code, which criminalizes corruption in the form of active and passive bribery, abuse of office for private gain and extortion. It also criminalizes accepting bribes in the form of donations or promises. There is no set limit on the value of gifts, but they are forbidden if given with a corrupt intent. Facilitation payments are prohibited in Cambodia. Nonetheless, businesses report that both gifts and facilitation payments are extremely prevalent. For further information - GAN Integrity Business Anti-Corruption Portal
Cambodia has experienced strong economic growth over the last decade; GDP grew at an average annual rate of over 8% between 2000 and 2010 and at least 7% since 2011. The tourism, garment, construction and real estate, and agriculture sectors accounted for the bulk of growth. Around 600,000 people, the majority of whom are women, are employed in the garment and footwear sector. An additional 500,000 Cambodians are employed in the tourism sector, and a further 50,000 people in construction. Tourism has continued to grow rapidly with foreign arrivals exceeding 2 million per year since 2007 and reaching around 4.5 million visitors in 2014. Mining also is attracting some investor interest and the government has touted opportunities for mining bauxite, gold, iron and gems.
Cambodia remains one of the poorest countries in Asia and long-term economic development remains a daunting challenge, inhibited by endemic corruption, limited human resources, high income inequality, and poor job prospects. As of 2012, approximately 2.66 million people live on less than $1.20 per day, and 37% of Cambodian children under the age of 5 suffer from chronic malnutrition. More than 50% of the population is less than 25 years old. The population lacks education and productive skills, particularly in the impoverished countryside, which also lacks basic infrastructure.
The Cambodian Government has been working with bilateral and multilateral donors, including the Asian Development Bank, the World Bank and IMF, to address the country's many pressing needs; more than 30% of the government budget comes from donor assistance. A major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance.
Agriculture - products:
rice, rubber, corn, vegetables, cashews, cassava (manioc, tapioca), silk
tourism, garments, construction, rice milling, fishing, wood and wood products, rubber, cement, gem mining, textiles
Exports - commodities:
clothing, timber, rubber, rice, fish, tobacco, footwear
Exports - partners:
US 23.1%, UK 8.8%, Germany 8.2%, Japan 7.4%, Canada 6.7%, China 5.1%, Vietnam 5%, Thailand 4.9%, Netherlands 4.1% (2015)
Imports - commodities:
petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles, pharmaceutical products
Imports - partners:
Thailand 28.7%, China 22.2%, Vietnam 16.4%, Hong Kong 6.1%, Singapore 5.7% (2015)
Investment Climate - US State Department
Cambodia has experienced rapid economic growth over the last decade. Cambodia’s gross domestic product (GDP) grew at an average annual rate of nearly eight percent during the past fifteen years. The tourism, garment, construction and real estate, and agriculture sectors accounted for the bulk of growth. The percentage of the population living in poverty also decreased to approximately 17.7 percent in 2012, the latest figures available. GDP per capita increased to an estimated USD 1,228 in 2015.
Cambodia has an open and liberal foreign investment regime with a relatively pro-investor legal and policy framework. Investment incentives available to foreign investors include 100 percent foreign ownership of companies, corporate tax holidays of up to eight years, a 20 percent corporate tax rate after the incentive period ends, duty-free import of capital goods, and no restrictions on capital repatriation.
Historically, these incentives have not been able to attract significant U.S. capital due to various factors including pervasive corruption, a limited supply of skilled labor, inadequate infrastructure (including high energy costs), and a lack of transparency in government approval processes. The political impasse and labor unrest that followed the 2013 national elections were additional deterrents to investment. Despite these challenges, the Phnom Penh Special Economic Zone has attracted more than USD 100 million in investments from several large American companies, including Coca Cola, Tiffany & Co., and American Licorice.
Following the 2013 national elections, the government announced a variety of economic and business reforms. In 2015, the government also issued an Industrial Development Plan identifying key challenges to economic growth in Cambodia.
According to International Monetary Fund (IMF) data, the total stock of foreign direct investment (FDI) in Cambodia in 2014, the most recent year available, jumped to USD 41 billion, largely due to a USD 38.7 billion investment from Thailand in 2014. Annual foreign direct investment inflow based on fixed assets decreased to USD 785 million in 2015.
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