Wednesday, March 13, 2013

Risk of Money Laundering Grows With Economy

March 13, 2013
By Simon Lewis
The Cambodia Daily

With Cambodia currently seen as a country where the laundering of illicit cash may be going undetected, an international expert on Monday warned that economic growth and more international trade could leave the country even more open to financial crime.

This month the U.S. government depicted Cambodia as vulnerable to money laundering, and on Monday, the National Bank of Cambodia’s Financial Intelligence Unit (FIU), law enforcement officials and private banks began a weeklong training program to address the problem.

The training—provided by the U.K.-based International Governance and Risk Institute, or GovRisk, and paid for by the British Embassy—is aimed at arming Cambodian authorities with the knowledge needed to stop the ex­ploitation of the country’s light regulations on financial crime.

Gert Demmink, a former head of supervision at the Netherlands’ central bank and a consultant on financial crime for GovRisk, said it was impossible to reliably say how much money was laundered in any country. But, counter-intuitively, he said, Cambodia might not be a particularly attractive jurisdiction for criminals looking to launder money.


Money launderers “seek out new economies where they can safely hide their money, conceal their money…make sure that they will not lose due to high levels of corruption and make sure that they can utilize the formal financial [system],” Mr. Demmink said, speaking on the sidelines of the workshop.

He explained that money launderers are, in effect, investors, and may have in the past been put off Cambodia because of high corruption and political instability, which threaten the security of their money.

“Money launderers never take chances,” he said, adding that money launderers also looked to economies with higher gross domestic product where it is easier for unexplained amounts of cash to go unnoticed.

Still, with economic growth in Cambodia having reached more than 7 percent over the past two years, and the value of the country’s imports and exports rising fast, the risk of money laundering will increase, Mr. Demmink said.

“That will also attract attention by any criminals, money launderers, because, like I said, they are investors,” he said.

Mr. Demmink said that China—the source of more than a quarter of the total foreign direct investment in Cambodia—was one of the largest sources of money that criminals seek to launder.

Thus, with trade between China and Cambodia set to increase—the two governments have targeted annual trade between the two countries to reach $5 billion by 2017—there will be a greater need to monitor transactions for irregularities, he said.

“The question is: Can Cambodia cater for that, or is there going to be…unsupervised, unattended business?” he asked.

This week’s training follows findings last month by the Financial Action Task Force (FATF), an intergovernmental body that promotes policies to combat money laundering, that there are “deficiencies” in Cambodia’s approach to tackling money laundering. The FATF urged Cambodia to redouble efforts to criminalize money laundering and monitor financial flows.

Despite having passed a 2007 law on money laundering and terrorist financing, and in 2008 established the FIU, which is housed within the National Bank of Cambodia, few people have been prosecuted for laundering cash in Cambodia.

Neav Chanthana, deputy governor of the National Bank of Cam­bodia, said she hoped that the training would help Cambodia to comply with FATF’s recommendations, and said it was important the issue was addressed.

“Some people have a view that [money laundering] contributes to the economic development by attracting investors and thereby creating employment for the poor,” she said.

“But if we go deeply to its source, we will see that money laundered in the economy has its source from proceeds of offenses, especially proceeds from drug trading, corruption, human trafficking and so on.”

The U.S. State Department’s annual International Narcotics Control Strategy Report, published on March 1, in its section on financial crime in Cambodia, says the country had “significant money laundering vulnerability,” citing the cash-based dollarized economy, informal financial systems, porous borders and limited regulation.

“A weak judicial system and en­demic corruption are additional factors negatively impacting en­forcement,” the State Department said in the report. “Given the high level of corruption, [the government of Cambodia] also should require enhanced due diligence for domestic politically exposed persons,” the report adds, referring to high-ranking officials.

“Cash proceeds from crime are readily channeled into land, housing, luxury goods, and other forms of property without passing through the formal banking sector,” the report says, recommending that the government “increase the capability of the nascent and understaffed FIU.”

The State Department also said, “Casinos along the borders with Thailand and Vietnam also are another potential avenue to convert ill-gotten cash.”

While NagaWorld holds an exclusive license to operate as a casino in Phnom Penh, gaming venues catering to gamblers from neighboring countries increasingly populate border towns.

“Casinos indeed can be perfect money laundering havens. For the casino owners themselves, but also for the customers,” said Mr. Demmink.

“If I wanted to provide proof of my recent wealth I might say, ‘I set up a casino and it’s thriving.”

“The question is: Are there any customers?” he said, adding that strict oversight was needed on casino operations to ensure that they were not being used to launder the proceeds of crime.,

2 comments:

Anonymous said...

What do the US and UK expect?
This govt can’t even fix the street stop lights to work properly to reduce the accidents.

Anonymous said...

This is a good begin. I can't wait to see how much wealth Hun Sen himself has accumulated over the years? For over 30 years of Hun Sen rule and it will be in billions of dollars.