APG Mutual Evaluation Report of Cambodia - 2017

1. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Cambodia
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
September 2017
www.fatf-gafi.org/publications/mutualevaluations/documents/mer-cambodia-2017.html

2. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Cambodia
has achieved
this objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Moderate
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Moderate
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Low
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Low

3. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Cambodia
has achieved
this objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Low
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Low
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Low
8. Proceeds and instrumentalities of crime are confiscated. Low
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Cambodia
has achieved
this objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Substantial
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Moderate
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Low
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017 5
Ratings – Effectiveness
16
0 1
3
7
High
Substantial
Moderate
Low

6. 18-Sep-17
6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach Pa Pa Pa Pa Partially compliant
2. National cooperation and coordination Pa Pa Pa Pa Partially compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LarLarLarLar Largely compliant
4. Confiscation and provisional measures LarLarLarLar Largely compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence LarLarLarLar Largely compliant
6. Targeted financial sanctions related to terrorism & terrorist financing LarLarLarLar Largely compliant
7. Targeted financial sanctions related to proliferation No No No No Non compliant
8. Non-profit organisations Pa Pa Pa Pa Partially compliant

7. 18-Sep-17
7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws CoCoCoCo Compliant
Customer due diligence and record keeping
10. Customer due diligence LarLarLarLar Largely compliant
11. Record keeping LarLarLarLar Largely compliant
Additional measures for specific customers and activities
12. Politically exposed persons Pa Pa Pa Pa Partially compliant
13. Correspondent banking Pa Pa Pa Pa Partially compliant
14. Money or value transfer services LarLarLarLar Largely compliant
15. New technologies CoCoCoCo Compliant
16. Wire transfers Pa Pa Pa Pa Partially compliant

8. 18-Sep-17
8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties LarLarLarLar Largely compliant
18. Internal controls and foreign branches and subsidiaries Pa Pa Pa Pa Partially compliant
19. Higher-risk countries Pa Pa Pa Pa Partially compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions LarLarLarLar Largely compliant
21. Tipping-off and confidentiality LarLarLarLar Largely compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence Pa Pa Pa Pa Partially compliant
23. DNFBPs: Other measures LarLarLarLar Largely compliant
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons Pa Pa Pa Pa Partially compliant
25. Transparency and beneficial ownership of legal arrangements Pa Pa Pa Pa Partially compliant

9. 18-Sep-17
9
Ratings – technical compliance
(4/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND
OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions Pa Pa Pa Pa Partially compliant
27. Powers of supervisors LarLarLarLar Largely compliant
28. Regulation and supervision of DNFBPs No No No No Non compliant
Operational and Law Enforcement
29. Financial intelligence units Pa Pa Pa Pa Partially compliant
30. Responsibilities of law enforcement and investigative authorities CoCoCoCo Compliant
31. Powers of law enforcement and investigative authorities CoCoCoCo Compliant
32. Cash couriers Pa Pa Pa Pa Partially compliant

10. 18-Sep-17
10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND
OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics Pa Pa Pa Pa Partially compliant
34. Guidance and feedback Pa Pa Pa Pa Partially compliant
Sanctions
35. Sanctions Pa Pa Pa Pa Partially compliant
INTERNATIONAL COOPERATION
36. International instruments LarLarLarLar Largely compliant
37. Mutual legal assistance Pa Pa Pa Pa Partially compliant
38. Mutual legal assistance: freezing and confiscation Pa Pa Pa Pa Partially compliant
39. Extradition LarLarLarLar Largely compliant
40. Other forms of international cooperation Pa Pa Pa Pa Partially compliant

11. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017 11
Ratings – technical compliance
2
18
19
1
Compliant
Largely compliant
Partially compliant
Non compliant

12. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Key findings
 Cambodia has made significant improvements to its level of
technical compliance with the FATF Standards since its 2007
mutual evaluation, including in relation to important
‘building block’ FATF Recommendations (criminalisation of
money laundering and terrorist financing, customer due
diligence, record-keeping and suspicious transaction
reporting). However, further improvements in technical
compliance are necessary to make Cambodia’s regime
effective in the context of serious money laundering (ML)
threats and vulnerabilities.
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13. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Key findings
13
 Cambodia finalised its first national risk assessment (NRA) in November
2016, immediately before the assessment team’s on-site visit, and has
developed some understanding of its ML and terrorist financing (TF)
risks. The main risks faced by Cambodia include ML from fraud/scams,
corruption and bribery, drug trafficking, human trafficking, illegal
logging, wildlife crime and goods and cash smuggling. There are gaps in
the scope of the NRA with respect to risks posed by legal persons,
foreign trusts, the NPO sector and dealers in precious metals and
stones. The NRA also did not consider the risks associated with illicit
inflow and outflow of funds (both through movement of cash and
trade-based money laundering). In terms of ML vulnerabilities, there
are higher risks associated with the casino and real estate sectors, as
well as the banking sector. However, the ML risks associated with
banking, remittance and lawyers are higher than as assessed by
Cambodia. To be more comprehensive, future assessments of ML/TF
risks will require better data, case studies and feedback from
stakeholders, within and outside government.

14. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Key findings
 Cambodia has not yet sufficiently shared the results of its 2016
NRA with the private sector or within the public sector, nor has it
implemented a comprehensive, risk-based approach to allocating
resources and implementing measures to prevent or mitigate
ML/TF. However, agencies with responsibility for AML/CFT work
were generally aware of the risks identified in the NRA.
Cambodia has a good institutional basis for national co-operation
and co-ordination, but effectiveness needs to be improved,
particularly at the operational level. The planned review of
Cambodia’s national AML/CFT strategy informed by an
understanding of risk will assist in guiding policy and
effectiveness improvements.
1416

15. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Key findings
15
 Cambodia has made minimal use of financial intelligence in
investigating ML/TF or predicate offences, including in developing
evidence or tracing proceeds related to ML/TF. The limited ability
of Cambodia’s Financial Intelligence Unit (CAFIU) to produce
financial intelligence significantly undermines use of financial
intelligence by competent authorities and levels of dissemination
do not satisfy the operational needs of LEAs.
 The narrow scope of STR reporting (95% received from banks)
and low number of cross-border cash declarations limit the data
available to CAFIU for analysis and do not align with the assessed
ML/TF risks. The NRA rated casinos and real estate as areas of
higher risk but there are limited reports received from entities
outside the banking sector.

16. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Key findings
 While Cambodia’s legal system provides a broad set of powers and
responsibilities for law enforcement agencies (LEAs) to investigate
and prosecute ML offences, there is no policy or practice of
‘following the money’ to identify and investigate ML and only three
ML investigations have been conducted, none of which proceeded
to prosecution. Despite investigations of some predicate offences,
no prosecutions or convictions have occurred for ML.
 Cambodia’s legal framework for confiscation is generally sound.
However, despite some confiscation in relation to drug trafficking
and corruption, Cambodia does not demonstrate many of the
characteristics of an effective system for confiscating proceeds and
instrumentalities of crime. Confiscation is not pursued as a policy
objective and it is not clear that LEAs consider confiscation when
investigating predicate offences, or that the amount sought to be
confiscated fully represents the available proceeds.
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17. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
 Cambodia has a good legal framework to combat TF and has
allocated substantial resources to combating terrorism and its
financing. There have been no prosecutions or convictions for TF
activity in Cambodia, but this is not inconsistent with the TF risk
profile. Historically, however, Cambodia has demonstrated an ability
to identify and investigate potential and actual cases of terrorism and
TF and to cooperate domestically and internationally in the course of
an investigation.
 Cambodia has a reasonable legal framework to deprive terrorists,
terrorist organisations and terrorist financiers of assets and
instrumentalities related to TF activities, though some improvements
are required to the legal framework and to mechanisms to
disseminate updates to United Nations sanctions lists. Cambodia can
designate individuals and entities as terrorists under United Nations
Security Council Resolution (UNSCR) 1373 if the need arises. No
terrorist assets have been identified or frozen under relevant
UNSCRs.
17
Key findings

18. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
 Cambodia has a large NGO/NPO sector overseen by the Ministry of
Interior (MOI), for domestic NGOs, and the Ministry of Foreign Affairs
and International (MFA-IC) for foreign and international NGOs. No
review has been conducted of the TF risks and vulnerabilities within
the NPO sector, and no outreach has been delivered to the sector on
the threat of terrorist abuse.
 Cambodia does not have a legislative basis for, nor has it taken steps
to implement, targeted financial sanctions (TFS) relating to
combating proliferation of weapons of mass destruction. The
authorities do not systematically disseminate UN notices on
proliferation financing (PF) to financial institutions (FIs) or designated
non-financial businesses and professions (DNFBPs), despite there
being a good diplomatic and political relationship between Cambodia
and the Democratic People’s Republic of Korea (DPRK).
18
Key findings

19. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
 Regarding preventative measures, the understanding of ML/TF risks
and AML/CFT obligations varies within the financial sector.
Commercial banks, securities firms and insurance companies have a
more advanced understanding as compared to the specialised banks,
micro-finance institutions (MFIs), money remittance operators,
money changers and financial leasing companies.
 There has been limited interaction between supervisors and DNFBPs,
particularly real estate agents, small casinos, dealers in precious
metals and stones, lawyers, stand-alone accounting and auditing
firms. As a result, there is low understanding of ML/TF risks and
AML/CFT obligations among these entities. Implementation of
customer due diligence (CDD) obligations, including the collection of
beneficial ownership information, is low. The CDD threshold for
casinos is set at USD 10,000, which is higher than required under the
FATF standards.
19
Key findings

20. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
 AML/CFT supervision has focused on banks and deposit taking MFIs, with
few supervisory activities conducted on other FIs and no supervision of
DNFBPs. This is problematic given the inherent risk of some DNFBPs and the
vulnerabilities stemming from a lack of supervision. Risk-based AML/CFT
supervision is only applied to the banking sector. No sanctions have been
imposed on REs for breaches of AML/CFT obligations, however, CAFIU has
identified deficiencies during on-site inspections and required FIs to submit
remedial plans to rectify the deficiencies.
 The vast majority of legal persons in Cambodia are registered in the online
business register. Basic information held in the register is publicly available
online and competent authorities can gain timely access to shareholder
information held by the Ministry of Commerce (MOC). However, there are
some concerns regarding the accuracy and currency of this information. The
best source of beneficial ownership information is the information collected
by reporting entities (REs) pursuant to their CDD obligations. However, many
DNFBPs and some non-bank FIs fail to comply with their obligations. There
are no mechanisms in place to mitigate the, admittedly low, risks posed by
bearer shares, bearer share warrants, nominee shares or nominee directors.
20
Key findings

21. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
 While trusts cannot be created under Cambodian law, there is
no explicit prohibition on foreign trusts operating in Cambodia.
There are no mitigating measures in place to prevent the
misuse of foreign trusts for ML/TF purposes.
 Cambodia has a reasonable legal framework for international
cooperation. However, in the absence of a general mutual legal
assistance (MLA) law (currently in draft), there is no domestic
legal framework for the provision and receipt of MLA outside
of the ASEAN MLA Treaty and special laws relating to drugs,
corruption and terrorism. Broadly, while Cambodia is
responsive to incoming international requests for cooperation,
as permitted by limited capacity and resources, its use of
international cooperation is limited and does not match its ML
risk profile.
21
Key findings

22. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Priority Actions for Cambodia to
strengthen its AML/CFT System
22
The prioritised recommended actions for Cambodia, based on these findings,
are:
1. Update the National AML/CFT Strategies to reflect Cambodia’s current
understanding of ML/TF risks and implement a comprehensive, risk-
based approach to allocating resources and implementing measures to
prevent or mitigate ML/TF on the basis of assessed risks, and improve co-
ordination at strategic and operational levels.
2. Improve the capacity of CAFIU to produce significantly more high quality
intelligence products for LEAs, including prompt dissemination of
analysed STRs and strategic analysis.
3. Establish a consolidated AML strategy across LEAs which covers parallel
investigations and use of financial intelligence in ML and predicate
offence investigations. Clarify that all relevant agencies can conduct ML
investigations, and specify the circumstances in which they should do so.
Provide further training and direction to LEAs to increase investigation
and prosecution of ML, particularly (but not only) in relation to more
serious proceeds-generating offences. Increase penalties for ML, in
particular for legal persons to encourage the use of these sanctions.

23. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Priority Actions for Cambodia to
strengthen its AML/CFT System
4. Adopt clear policies and strategies to pursue confiscation, including
repatriation, sharing and restitution of criminal proceeds,
instrumentalities, and property of equivalent value, in particular for
areas identified to be high risk, such as cross-border goods and cash
smuggling.
5. Engage in substantially more risk-based AML/CFT supervisory activity,
including commencing supervision of higher-risk DNFBPs as a matter
of priority, conducting further outreach to smaller FIs and DNFBPs and
monitoring and enforcing compliance by REs with requirements to
identify the beneficial ownership.
6. Increase engagement and information sharing with FIs and DNFBPs to
promote a better understanding of their AML/CFT obligations and
ML/TF risks and trends facing Cambodia.
7. Implement TFS against proliferation, through the introduction of legal
instruments and a framework for monitoring compliance.
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24. Anti-money laundering and counter-terrorist financing measures in Cambodia – Mutual Evaluation Report – September 2017
Priority Actions for Cambodia to
strengthen its AML/CFT System
8. Update the relevant legislative instruments to reflect
revisions in the CDD requirements of the FATF standards, in
particular:
a. broaden the definition of PEPs to include domestic PEPs;
b. lower the CDD threshold for casinos to USD 3,000;
c. require REs to determine whether the beneficial owner is
a PEP;
d. allow REs to not pursue CDD if there is a risk of tipping-off
the customer.
9. Strengthen future assessments of ML/TF risks to address
gaps in coverage, such as legal persons and arrangements,
and through the use of better data and information