In its February report, FATF explained its decision. The watchdog emphasized that Cambodia had strengthened the effectiveness of its AML/CFT regime in the following ways: the legal framework for international cooperation and preventive measures, risk-based supervision of financial institutions and non-financial institutions, boosting the quality and quantity of financial intelligence unit disseminations, increasing and improving investigation and prosecution of money laundering and asset confiscation and establishing and implementing a legal framework of proliferation financing targeted financial sanctions.
It would seem that Cambodia used the opportunity provided by the pandemic to clamp down on its formerly crime-ridden casino gaming sector. Pre-pandemic, gamblers from China visited Cambodia in huge numbers, and several Chinese nationals were arrested on money-laundering charges in 2019. These included three men at Phnom Penh International Airport who arrived from Hong Kong with US$3.52 million in US$100 bank notes in their bags.
On March 29, 2020, Cambodian Prime Minister Hun Sen ordered all casinos to close down to stymie the spread of the coronavirus. By October 2020, around 30 casinos in Sihanoukville had either closed their doors completely or suspended all staff for the year. Since then, the legal casino gaming industry in the country has atrophied to some degree as there simply hasn’t been the flow of gamblers from China to drive it.
At the same time, Cambodian authorities appear to have had some success with their crackdown on illegal gambling, which began in September 2022. As of January, Cambodian authorities had shut down 231 illegal gambling businesses and arrested 606 people since Prime Minister Hun Sen said.
Additionally, new AML/CFT legislation that came into effect in June 2020 is an important step. Compared to a similar 2007 law, this more recent one has more specific definitions, a requirement for reporting entities to introduce enhanced due diligence measures, and higher penalties for non-compliance.
Looking ahead, the fintech sector will have an easier time investing in Cambodia now that the country is no longer on FATF’s grey list. Grey-listed countries are subject to burdensome additional compliance requirements.