Latest Reports

Events

No events
Insight - Kapronasia

Cambodia has been on the gray list of the international financial crime watchdog FATF for several years due to its inadequate money laundering and counterterrorism financing (CFT) controls. Gray list designation requires additional levels of compliance for international financial transactions with the kingdom, which while not a dealbreaker for foreign investment in Cambodia, makes it more troublesome than in countries not on the list. As Cambodia emerges from the pandemic, it is eager to be removed from the gray list to help boost its Covid-battered economy, which contracted 3.1% in 2020 and grew just 2.6% in 2021.

Since being placed on FATF’s grey list in 2020, Cambodia has moved to strengthen its money laundering controls. One key step has been to move towards stricter regulation of its crime-ridden casino gaming sector. Cambodia has nearly 200 casinos, but its National Assembly only approved a draft law on commercial gaming management in November 2020. The draft law implemented controls to stymie money laundering and terrorism financing as well as monitor casinos, establish gambling zones and set forth minimum investment thresholds for a new casino.

To supplement the law, in August 2021 two sub-decrees were issued by the government to establish a new regulatory body, the Cambodian Commercial Gaming Commission (CCGC), to deal with licensing issues, issue guidelines, propose new regulations and resolve disputes. The decrees also introduced new minimum capital requirements for casino operators. Thereafter, new regulations were added to the original text to ensure its effective implementation.

Further, in June 2022, Cambodia enacted the Law on the Prevention of Money Laundering and Combating the Financing of Terrorism. The law is a response to both rising incidence of money laundering and human trafficking, crimes which both surged following the transformation of Sihanoukville in Preah Sihanouk province into a casino-resort hub.

While the establishment of this legislation is indeed a step in the right direction, it is only the first step. For FATF inspectors, the devil will be in the details: To what degree has the legislation been effectively implemented?

This especially applies to the Cambodian financial sector. It is unclear to what degree banks and other financial institutions in the country have improved their ability to combat illicit money flows. Cambodia Financial Intelligence Unit (CAFIU), the National Bank unit responsible for combating money laundering, said in 2020 that it had been “working very hard” to delist the country from FATF’s grey list but did not offer many specifics.

FATF inspectors will visit Cambodia in early 2023 to assess how much progress has been made on implementing the watchdog’s recommendations. Cambodian officials say that based on primary reports received from the National Bank of Cambodia and others, the Kingdom has made substantial progress in strengthening its money laundering controls over the past two years.

One way that FATF inspectors determine if a country’s AML/CFT controls are adequate is by analyzing prosecution of related crimes. Even if a country has enacted comprehensive legislation targeting financial crime, if there are few incidences of prosecutions the financial crime watchdog may be unsatisfied with the country’s progress.

Given the fall in international travel during the pandemic, Cambodia has had fewer opportunities to catch people illegally bringing large amounts of money into the country. However, in 2019, it did make some related high-profile arrests. According to The Phnom Penh Post, in 2019, Cambodia confiscated more than US$10 million in cash illegally imported by foreigners. In one instance, three Chinese nationals who were US$900,000 in cash in their luggage without any clear source were arrested. In another case, two Koreans with more than US$2 million in cash were arrested.

Across the Asia-Pacific region, digital banks have sprung up at a rapid rate in recent years. Regulators have ostensibly encouraged the establishment of online-only banks to spur greater competition in the banking sector, which in most markets is dominated by incumbent lenders afflicted with complacency of varying severity.

Historically, Chinese companies seeking to go public overseas have listed in the United States, home to the world’s most liquid capital markets. Nothing can quite compare with listing on the New York Stock Exchange (NYSE) or Nasdaq. While that remains the case, the fraught U.S.-China relationship has caused Chinese firms to turn their focus to European stock exchanges, especially Switzerland’s SIX. In Europe, Chinese companies can mostly steer clear of geopolitical tensions while still being able to access global investors.

China’s fintech sector was never the same after November 3, 2020. That was the day Chinese regulators abruptly nixed Ant Group’s mega IPO, a dual Shanghai and Hong Kong listing that was expected to raise US$37 billion and value the Chinese fintech giant at a whopping US$315 billion. The cancellation of Ant’s IPO proved to be the beginning of an extended campaign to curb the dominance of Big Tech in China’s financial services industry.

BNPL, or buy now pay later, is a type of payment option that allows customers to purchase items now and pay for them later in installments. This type of payment option has been gaining popularity in recent years, especially among younger shoppers. In fact, a recent study showed that BNPL usage has increased by 400% among millennials in the past two years.

BNPL first emerged in Asia in 2014 and has since become extremely popular in countries like China, South Korea, and Singapore. In China, for example, the BNPL market is expected to grow from $30 billion in 2020 to $750 billion by 2025. It could be argued that Australia was the epicentre of BNPL in Asia with such previous market leaders including Afterpay and Zip. So, what is driving this massive growth? Let's take a closer look at BNPL in Asia and how it works.

The Hong Kong financial center lexicon is ever expanding. Depending whom you ask, Hong Kong is an international financial center, Asia’s most important financial center, China’s offshore financial center or some combination of all three. Historically, Hong Kong liked to stay out of politics and thrived on its combination of laissez-faire capitalism, strong, independent legal system and knack for acting as a bridge to the Chinese mainland. Going forward, those factors will remain integral to Hong Kong’s success, but important questions remain about how economic and financial policy choices on the mainland will affect the city’s fortunes.

The Philippines recently experienced a setback in its fight against financial crime: The Financial Action Task Force (FATF) declined to remove the Southeast Asian country from its grey list, on which it was placed in June 2021 for having inadequate money-laundering and counterterrorism financing controls. After a two-day plenary in October, Paris-based FATF decided to keep the Philippines on the list along with 22 other jurisdictions.

The newest digital bank in Singapore stealthily came into existence, flying below the radar in contrast to the high-profile race for digital banking licenses that ended with victories by Grab-Singtel, Sea, Ant Group and a consortium headed by China’s Greenland Holdings. Now competing with these four digital banks is Trust Bank, launched in September by Standard Chartered and NTUC FairPrice, Singapore’s largest supermarket chain.

Thailand has never been in a rush to introduce digital banks. After all, the kingdom is neither a financial center like Hong Kong or Singapore, nor does it have a huge unbanked population likes Indonesia and the Philippines. About 81% of Thais have a bank account. However, it is possible that introducing online banks could improve competition in Thailand’s financial sector – and that appears to be one of the key goals of the Bank of Thailand (BoT) as it moves forward on digital banks.

Being placed under increased monitoring by the Financial Action Task Force’s (FATF) is never welcome news for a country. Besides the reputational damage that comes along with such a designation, there are many practical problems caused by the restrictions that may be put on financial transactions as well as burdensome compliance requirements. Most countries are put on FATF’s gray list due to inadequate money laundering and counterterrorism financing controls. However, occasionally a country is added to the blacklist – reserved for the countries that pose the most serious financial crime risks – including North Korea and Iran – which is what happened to Myanmar last month.

Page 1 of 71