The Financial Action Task Force (FATF), an intergovernmental organization tasked to combat global money laundering and terrorism financing, has removed Cambodia from its “grey list” after the Southeast Asian country completed an action plan to address “strategic deficiencies” identified three years ago.

The Philippines is now the only Asean country on the list of more than 20 grey-listed jurisdictions and thus still subject to increased monitoring.

A second Asean member, Myanmar, has been blacklisted since October, joining Iran and North Korea in being subject to a “call to action” by other jurisdictions to apply enhanced due diligence and, in most serious cases, apply counter-measures to protect the international financial system from the risks emanating from the country.

Among other outcomes at a three-day meeting of more than 200 jurisdictions at the watchdog’s headquarters in Paris last week was the suspension of Russia’s membership a year after its invasion of Ukraine.

In a statement released at the end of the gathering last Friday, the task force said Russia still “remains accountable for its obligation to implement the FATF Standards” and must continue to meet its financial obligations.

During the meeting – chaired by FATF president T. Raja Kumar, a former deputy police commissioner from Singapore – the task force also assessed a request by Indonesia for full-fledged membership. 

The assessment found that Indonesia, the group’s sole observer, had achieved “good results” in fighting terrorist financing “but needs to focus more on pursuing larger-scale money launderers and enhancing asset confiscation”.

Qatar was also assessed. The Gulf Cooperation Council member “needs to make important improvements in certain areas, including in its law enforcement response to money laundering and terrorism financing in particular and its use of financial intelligence”, the task force said, adding that it will publish reports on the two jurisdictions by May after a “quality and consistency review” is completed.

Cambodia cited for ‘significant progress’

As for Cambodia, the task force praised the country’s “significant progress”, noting that it had “strengthened the effectiveness” of its system for countering money laundering and terrorist financing.

“Cambodia is therefore no longer subject to the FATF’s increased monitoring process,” it said.

The deficiencies identified in February 2019 included its legal framework for cooperation and prevention as well as risk-based supervision of financial institutions and designated non-financial businesses or professions.

Other shortcomings included the quality and quantity of work by the National Bank of Cambodia’s financial intelligence unit, investigation and prosecution of money laundering, asset confiscation and a legal framework for “proliferation financing” related to weapons of mass destruction.   The task force said Cambodia made a “high-level political commitment” to work with the FATF and the Sydney-based Asia-Pacific Group on Money Laundering to strengthen its system.

At a meeting in October last year, it was found that Cambodia had “substantially completed its action plan and warrants an on-site visit” to verify that reforms had begun and were being sustained, “and that the necessary political commitment remains in place to sustain implementation and improvement in the future.”

Key reforms since 2019 have included training prosecutors and judges, financial supervision and preventive measures in the casino, real estate and money or value-transfer sectors.

The task force said Cambodia had also increased money laundering investigations, improved asset confiscation, and developed a framework for UN sanctions related to proliferation financing.

Interior Minister Sar Kheng welcomed the removal from the grey list as the designation was adversely affecting foreign investment. “It was really difficult,” he was quoted as saying on Saturday, adding that investors “seemed unhappy and not warm to putting their investment capital into Cambodia. So, the situation wasn’t good.”

The Cambodian government would “summarize, experiment and put in place some measures to better protect the FATF’s ruling in the future. It doesn’t mean that we have now succeeded so we will become careless and possibly backslide onto the grey or black list,” the minister said.

Philippines vows more action

In reference to the Philippines, which remains on the grey list, the watchdog said the country had also made a high-level political commitment to strengthen the effectiveness of its system.

“The Philippines should continue to work on implementing its action plan to address its strategic deficiencies,” FATF said.

Areas for improvement include risk-based supervision of designated non-financial businesses and professions, risks associated with casino junkets and the access of law enforcers to beneficial ownership information.

The task force also called for greater use of financial intelligence and money laundering investigations and prosecutions in line with risk, better processing of terrorist financing cases and making the targeted financial sanctions framework for both terrorist and proliferation financing more effective.

“All deadlines have now expired and work remains,” the watchdog said. “The FATF encourages the Philippines to continue to implement its action plan to address the above-mentioned strategic deficiencies as soon as possible.”

Felipe Medalla, governor of Bangko Sentral ng Pilipinas, the country’s central bank, and chairman of the Anti-Money Laundering Council (AMLC), pledged to ramp up enforcement action, adding that he hopes the country could exit the grey list by January 2024, when the next review will be conducted.

In other developments, the task force said it planned to publish guidelines on tougher standards for beneficial ownership in March. The aim is “to improve the transparency of beneficial ownership, and to prevent criminals, the corrupt and sanctions evaders from hiding their illegal activities and assets behind anonymous shell companies, other businesses or legal arrangements”.

Also expected to be published next month is a report on the laundering of payments related to ransomware, including indicators that can “help public and private sector entities identify suspicious activities”.

Crypto assets are another emerging area. In the first half of next year, the watchdog plans to report on steps taken by jurisdictions with “materially important virtual asset activity” to regulate and supervise service providers.

The task force strengthened requirements in the sector in 2018, including a “travel rule” on originators and beneficiaries. But “many countries have failed to implement these revised requirements”, it said.

With the removal of Morocco as well as Cambodia from the grey list and the addition of Nigeria and South Africa last week, the number of jurisdictions subject to increased monitoring is unchanged at 23, mostly from Africa and the Caribbean.

Founded in 1989, the FATF currently comprises two regional organizations and 37 jurisdictions including eight in the Asia-Pacific region – Australia, China, Hong Kong, Japan, South Korea, Malaysia, New Zealand and Singapore.