Cambodia is still among the 10 most at-risk countries in the world for money laundering and terrorist financing, despite being one of two countries that saw the greatest improvements, according to an annual global index released Tuesday.
This year’s Anti-Money Laundering Index report, released since 2012 by the Switzerland-based Basel Institute on Governance, ranked Cambodia sixth worst out of 152 countries surveyed.
“Although Cambodia and Swaziland are still among the top 10 highest risk countries in the Basel AML Index 2015, they have seen the greatest improvement in their scores,” the report says.
The index gives countries a score of between 0 and 10—10 being the worst—using data from 14 sources, including the World Bank and Transparency International.
This year, Cambodia received a 7.93, a slight improvement over 2014, when it scored an 8.39 and was deemed the third-most vulnerable country for the third year in a row.
Say Sam Ath, head of the National Bank of Cambodia’s (NBC) Financial Intelligence Unit, which is tasked with combating money laundering and terrorist financing, could not be reached for comment Wednesday.
Ky Vandara, a CNRP lawmaker who is also the party’s treasurer, said that because Cambodia’s financial system did not meet international standards, it was an attractive destination for money launderers.
“Cambodia is a developing economy with the surprisingly high number of more than 30 commercial banks,” he said. “Some banks, I can say, they are just nominal; their operations and transactions are mysterious.”
Mr. Vandara said, however, that the government was actively working to prevent financial crimes.
“The Cambodian government, based on my observations, has also put in effort to block both commercial money laundering and terrorism financing by passing laws on financial management in the country,” he said.
In 2004, Cambodia joined the Asia/Pacific Group on Money Laundering, which requires it to meet international standards to combat financial crimes, and in 2007 the government passed its own law on money laundering and terrorist financing.
Last year, the Council of Ministers also approved a sub-decree that gives the government the power to freeze the assets of terrorist organizations and institutions linked to them.
However, Transparency International Cambodia director Preap Kol said the laws already in place to prevent money laundering and terrorist financing were sufficient, and that the country probably ranked poorly again because the banking sector was not transparent enough.
“Secondly, there is a need for the Financial Intelligence Unit to work more closely with the regional financial intelligence units,” he said, adding that lax regulation of casinos also likely played a role.
“To some extent, there is some ownership and shares among the political elite or families of the political elite, meaning that the casinos operate in their own ways and are often times not scrutinized enough,” he said.
Ros Phearun, spokesman for the Finance Ministry, which regulates the country’s 59 casinos, called Mr. Kol’s observation a “totally baseless argument.”
“He said it…without evidence to prove it, so such speech is useless,” he said.
Grant Knuckey, CEO of ANZ Royal, said Cambodia’s poor ranking on the index was not the fault of the banking industry, but was due to the widespread use of U.S. dollars and paper money.
“The USD is the primary currency involved in laundering activity globally, and this creates exposure for Cambodia to cross-border laundering,” he said in an email. “Adding to this risk is the cash-based nature of the economy, with a lot of activity taking place outside formal channels.”
Stephen Higgins, managing partner of financial consultancy firm Mekong Strategic Partners, said the Basel Institute’s index was deeply flawed.
“When you’re constructing a report like this, you can never have enough factors to adequately describe what’s going on,” Mr. Higgins said. “The objective measures they are using are simply not accurate measure of the situation in Cambodia.”
