Cambodia Removed from FATF Grey List

After four years, Cambodia has met FATF’s recommendations and now strives to remove itself from the US Tier 3 status for human trafficking
A market vendor in Phnom Penh. Kiripost/Siv Channa
A market vendor in Phnom Penh. Kiripost/Siv Channa

Cambodia will no longer be subject to increased monitoring by Paris-based Financial Action Task Force (FATF), having addressed its technical deficiencies to meet the commitments of its action plan on strategic deficiencies.

The decision, which results in its removal from the “grey list”, comes four years after being identified by FATF for its strategic deficiencies in February 2019.

Last week, FATF announced that Cambodia, along with Morocco, have improved their anti-money laundering and combating financial terrorism (AML/CFT) regimes as stipulated in their individual action plans.

“Each country has addressed its technical deficiencies to meet the commitments of its action plan on strategic deficiencies that the FATF identified in February 2019 and 2021 respectively,” FATF stated.

“Both countries are no longer subject to the FATF’s increased monitoring process, but will continue to work with the FATF-style regional body of which they are a member to further strengthen their AML/CFT regimes.”

Pending Cambodia’s sixth progress report due February 2023, which provides insights into its latest outcome on FATF’s 40 recommendations, FATF concluded last August that 32 recommendations were largely complied.

Overall, it stated, Cambodia has made good progress in a number of areas.

These include correspondent banking, wire transfers, internal controls, foreign branches, designated non-financial businesses and professions (DNFBPs), customer due diligence and sanctions for non-compliance with AML/CFT measures.

FATF identified DNFBPs as real estate agents, dealers in precious metals or precious stones, and dealers of any saleable item of a price equal to or greater than $15,000.

Meanwhile, South Africa and Nigeria are now subject to FATF’s increased monitoring, widely known as the grey list, while North Korea and Iran continue to be a “high risk” jurisdiction since February 2020, otherwise called the “black list”.

Interior Minister Sar Kheng said the government has been aware since 2019 that the level of the banking system has been set by FATF as “not yet good”, thereby placing it on a grey list.

“If it turns to black, that would be a very big risk for our financial system, in terms of money transfers, whether it’s state or private banks, it would be difficult,” he said at a university anniversary ceremony in Prey Veng province on Saturday.

Sharing the good news to an applauding crowd, he explained that the committee on anti-money laundering has worked hard to meet FATF’s recommendations, and finally on Friday, Cambodia was taken off the list.

“This is another success after the ASEAN Summit, related meetings and the ASEAN Inter-Parliamentary Assembly in Cambodia,” Kheng said.

He added that a summary will be conducted and the outcome will be used as an experience to issue measures to uphold the decision by FATF for the betterment in the future.

“This means that we are already successful and if we forget, we will be on the grey list again or [pushed] to black. This can’t happen,” he asserted.

Kheng stressed that Cambodia cannot be put back again in the grey list because it affects development and investments, especially foreign investment from overseas or within the country.

There would be difficulties for foreign investors and they would not be happy or warm up to investing in Cambodia if the situation does not improve, he said.

“So, we are all proud and we all will work hard together,” Kheng said, adding that the government will also work on fighting human trafficking and removing itself from the US State Department’s Tier 3 status.

The French Embassy said on Monday that it welcomes Cambodia’s removal from the grey list.

“France welcomes this positive development that follows the work carried out by the Cambodian authorities, in particular the Ministry of Economy and Finance and the National Bank of Cambodia,” the embassy said in a tweet.

Pech Pisey, executive director of Transparency International Cambodia, welcomed the news for Cambodia and relevant authorities, especially the Ministry of Interior, National Bank of Cambodia and the joint commission for their efforts to remove Cambodia from the grey list of AML/CFT.

While exiting the grey list means Cambodia is no longer under increased monitoring, there is still more work that needs to be done to sustain the progress and strengthen its implementation of AML/CFT measures.

Pisey said it is because Cambodia is still within the “enhanced follow up” stage, which requires the government to report back key progress to the Asia Pacific Group on Money Laundering.

“Having said that, it's absolutely vital that Cambodia address the country’s fundamental development challenges such as weak rule of law, widespread corruption in both grand and petty scales, which is an enabler, and tackle key barriers to doing business in Cambodia including fair business competition and level of playing field,” he added.