FATF status

Cambodia is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies.

Latest FATF Statement  -  24 February 2023

The FATF welcomes Cambodia’s significant progress in improving its AML/CFT regime. Cambodia has strengthened the effectiveness of its AML/CFT regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2019 related to improvements in the legal framework for international cooperation and preventive measures, risk-based supervision of FIs and DNFBPs, improving the quality and quantity of FIU disseminations, increasing and improving investigation and prosecution of ML and asset confiscation and establishing and implementing a legal framework for PF TFS. Cambodia is therefore no longer subject to the FATF’s increased monitoring process.

Cambodia should continue to work with APG to sustain its improvements in its AML/CFT system.

EU Commission list of High Risk Countries

Cambodia is no longer on the EU Commission list of High Risk Countries although it has been removed from the FATF AML Deficiency list

Compliance with FATF Recommendations

The last follow-up Mutual Evaluation relating to the implementation of anti-money laundering and counter-terrorist financing standards in Cambodia was undertaken in 2023. According to that Evaluation, Cambodia was deemed Compliant for 2 and Largely Compliant for 31 of the FATF 40 Recommendations. It remains 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: -

OVERVIEW

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.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           22

World Governance Indicator – Control of Corruption             10

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

After reopening fully in late 2021, the Cambodian economy has continued to recover gradually, with a projected GDP growth of 5.2 percent in 2023, according to the World Bank. A rebound in tourism and Cambodia’s growing exports, led by the garment, footwear, and travel goods sector, are the drivers of the recovery. However, some external challenges remain, including global economic uncertainties and the impact of Russia’s invasion of Ukraine, which caused inflation to peak at 5.3 percent in 2022 from 2.9 percent in 2021. Inflation is projected to decrease to 2.5 percent in 2023, per the National Bank of Cambodia.

The Royal Government of Cambodia (RGC) has prioritized attracting investment from abroad, and in 2021 passed a new Law on Investment.  Foreign direct investment (FDI) incentives available to investors include 100 percent foreign ownership of companies, corporate tax holidays, reduced corporate tax rates, duty-free import of capital goods, and no restrictions on capital repatriation.  Despite these incentives, Cambodia has not attracted significant U.S. investment. Apart from the country’s relatively small market size, factors dissuading U.S. investors include: systemic corruption, a limited supply of skilled labor, inadequate infrastructure (including high energy costs), a lack of transparency in some government approval processes, and preferential treatment given to local or other foreign companies that engage in acts of corruption or tax evasion or take advantage of Cambodia’s weak regulatory environment. Foreign and local investors alike lament the government’s failure to adequately consult the business community on new economic policies and regulations.

In light of these concerns, on November 10, 2021, the U.S. Departments of State, Treasury, and Commerce issued a business advisory to caution U.S. businesses currently operating, or considering operating, in Cambodia to be mindful of interactions with entities involved in corrupt business practices, criminal activities, and human rights abuses. Despite these challenges, several large American companies maintain investments in the country, including Coca-Cola’s $100 million bottling plant and Ford’s $21 million vehicle assembly plant.  The Financial Action Task Force (FATF) removed Cambodia from its “grey list” of jurisdictions under increased monitoring in February 2023, after FATF assessed  that Cambodia had made progress in improving its anti-money laundering/countering the financing of terrorism (AML/CFT) regime. FATF called on Cambodia to continue to work to sustain its improvements in its AML/CFT system.

In recent years, Chinese FDI – largely from state-run or -associated firms – has surged and has become a significant driver of growth in Cambodia.  Chinese businesses, many of which are state-owned enterprises, are not subject to laws like the U.S. Foreign Corrupt Practices Act. In 2022, Cambodia recorded FDI inflows of $1.2 billion, with approximately 80 percent reportedly coming from the PRC, according to the Council for Development of Cambodia (CDC). Physical infrastructure projects continue to attract the bulk of FDI. The $2 billion Phnom Penh-Sihanoukville expressway, for example, was inaugurated for public use in October 2022. Planning for further similar infrastructure projects is underway. Additional sectors attracting foreign investment include manufacturing and agricultural processing.

In 2022, three bilateral and regional free trade agreements came into effect: the Cambodia-China Free Trade Agreement (CCFTA), the Cambodia-Korea Free Trade Agreement (CKFTA), and the Regional Comprehensive Economic Partnership (RCEP).

Climate change remains a critical issue in Cambodia due to its vulnerability to extreme weather occurrences, high rates of deforestation, and low environmental accountability.

Country Links

National Bank of Cambodia

Cambodia Financial Intelligence Unit (CAFIU)

Kingdom of Cambodia | Business Registration