11 September 2020
Cambodia’s new Anti-Money Laundering and Combating the Financing of Terrorism Law (the “2020 AML/CFT Law”) came into force in June 2020, abrogating the 2007 law of the same name and the accompanying sub-decree from 2013.
The 2020 AML/CFT Law differs in three major ways from the 2007 law: (1) more specific definitions, (2) a requirement for reporting entities to introduce enhanced due diligence measures, and (3) increased penalties for non-compliance.
Altered Definitions of Legal Terms
The 2020 version of the law has changed several definitions to lend further clarity and increase the scope of the law:
-
“Financing of Terrorism” is expanded by the addition of a list of examples of actions that could qualify as terrorism financing, including traveling or training with the intent to aid terrorists.
-
“Politically Exposed Persons” is broadened to include local officials (in addition to foreign officials) and “international politically exposed persons,” or prominent individuals in an international organization. In practice this means that reporting entities will now be required to monitor these persons’ transactions.
-
“Ultimate Beneficial Owner” is expanded to include any person who exercises ultimate effective control over a legal person through shares or voting rights.
Reporting Entities and Customer Due Diligence
Trustees have been added as a category of reporting entity, in keeping with the Law on Trusts which went into effect in early 2019. Otherwise, the comprehensive list of reporting entities is largely the same as in the 2007 law.
Reporting entities must deploy enhanced customer due diligence (CDD) measures, as more types of transactions and business relationships have been classified as high risk. This also applies retroactively, and must be conducted on existing customers who newly fall into the “high risk” category. Enhanced due diligence measures may include obtaining additional information on:
-
the customers’ identification;
-
the source of funds;
-
the purpose of the transaction; and
-
the intended nature of the business relationship.
Additional ongoing customer monitoring procedures may also be required.
If a reporting entity believes that carrying out these additional CDD measures will result in a particular customer becoming aware of the entity’s suspicions of them, the entity is allowed to cease conducting the measures and must report the customer and the activity that led to the initial suspicions to the Cambodia Financial Intelligence Unit (CAFIU).
The list of activities for which a reporting entity must apply enhanced CDD measures has been expanded to include:
-
business relations and transactions with institutions or persons in jurisdictions that have a high risk of money laundering or financing of terrorism;
-
business relations and transactions with foreign politically exposed persons and their family members and close associates;
-
business relations and transactions with international politically exposed persons, Cambodian politically exposed persons, and their family members and close associates, but only in response to a transaction that is identified as “high risk”; and,
-
all other business relations or transactions that could be identified as having a high risk of being associated with money laundering and/or financing of terrorism.
Penalties
Penalties for legal entities found to be in violation of the 2020 AML/CFT Law include warnings, fines, revocation of business licenses, and the removal of managers or officers from their positions, applied in addition to applicable sanctions under the Criminal Code. In general, the penalties outlined in the new law introduce higher fines and longer prison terms than were previously imposed under the 2007 Law and its subsequent amendments.
Previously, for example, legal entities deemed criminally responsible for money laundering were subject to a maximum fine of KHR 500 million (approx. USD 122,000), in addition to other sanctions under the Criminal Code. The maximum is doubled under the new law, to KHR 1 billion (approx. USD 244,000). Other offenses, such as money laundering by natural persons, various noncompliant activities, breach of confidentiality, and financing of terrorism are similarly expanded.
For further information, please contact:
Jay Cohen, Director, Tilleke & Gibbins
jay.c@tilleke.com
