The crime of money laundering is changing day by day with technology. Both local and global Anti-Money Laundering Laws can change in order to prevent these changing crimes. For this reason, countries have to constantly check, understand, and comply with regulations in order to keep up with the changing dynamics of Anti-Money Laundering laws.
Overview of The New AML Law in Cambodia
In this article, we will show an example of one of the changing money laundering laws and explain this law's features. This law we are talking about is Cambodia's new Anti-Money Laundering law. In 2020, Cambodia published the New Law on Anti-Money Laundering and Combating the Financing of Terrorism ('AML / CFT Law 2020'), repealing both the 2007 law of the same name and the 2013 clause. The 2020 AML / CFT Law consists of nine chapters and 47 articles. This law, combined with this law, Combodia aims to increase both the scope of the law and general deterrent measures, thereby further preventing money laundering and terrorist financing and combating them in the best possible way. Although the 2020 AML / CFT Act is similar to the 2007 law in many ways, it is fundamentally different in three ways; provide more specific definitions for terms used throughout the law, reporting organizations require advanced due diligence measures to maintain compliance, it ensures that the penalties are increased in case organizations do not comply with the law.
Definitions of Legal Terms Changing in Law
As we mentioned above, some 2020 AML / CFT Law elements were changed according to the 2007 law. With the 2020 AML / CFT Act, it changed various definitions to provide more clarity in anti-money laundering practices and increase the law's scope.
Political Exposed People (PEP)
Political Exposed People are customers who have far greater opportunities than ordinary citizens to acquire assets through illegal means such as bribery, and these customers are considered high risk. In Cambodia, in particular, the definition of "politically exposed persons" has been expanded to include both domestic and foreign officials. The definition of a person who has undertaken important public duties in a foreign country has been expanded to include those entrusted to important public duties with the new law in Cambodia.
In the 2020 AML / CFT Act, the third category of politically exposed persons has been added. This category is an internationally exposed person defined as any individual assigned to important public duties in an international organization. Also, it should be noted that as with most laws, there is no further clarity in this law on what qualifies as an international organization. This change allows reporting organizations, which previously did not have to monitor Cambodian officials' business activities or members of international organizations, now pay "special attention" to transactions carried out by those politically exposed.
Ultimate Beneficial Ownership (UBO)
The Ultimate Beneficial Owner (UBO) means the legal entity that is the beneficiary of the company. With the 2020 AML / CTF law, the UBO definition has also been expanded. The law refers to the person who ultimately owns or controls a customer with whom a transaction takes place, including those who exercise ultimate effective control over a legal entity or regulation. In addition, the 2020 AML / CFT Law stipulates that if the controlled clients are a legal entity, in addition to this statement, the ultimate beneficial owner also includes any person exercising ultimate effective control over the legal entity through stock or voting right.
It is the duty of the reporting organization to determine who is the ultimate beneficial owner according to the Cambodia Financial Intelligence Unit ('CAFIU') guidelines. States that CAFIU will use other tools (tools not defined) to determine who the ultimate beneficial owner is.
Financing of terrorism
Under the 2020 AML / CTF laws, the definition of financing terrorism has also been expanded. Terrorist acts or terrorist organizations may use such services to support terrorism. However, the 2020 AML / CFT Act requires a list of actions that could qualify as financing terrorism, including travel or training to assist terrorists in addition to participating in or carrying out a terrorist act.
Add to the reporting entities lists
The list of organizations with reporting obligations stipulated in the 2007 law remained largely the same in the 2020 AML / CFT Act. The liable institutions can be summarized as follows; financial institutions, banks, insurance companies, brokerage houses, credit cooperatives, exchange offices, microfinance institutions, leasing companies, real estate agents, mutual funds and companies, asset managers, money transfer services, jewelry dealers, post offices dealing with transactions, notaries, lawyers, accountants, auditors, investment advisors, casinos, etc.
In accordance with the Trusts Law, which entered into force on January 2, 2019, and provides the first legal instrument for the establishment of trusts in Cambodia, the 2020 AML / CFT Law has added a new board of trustees to the reporting organizations category.
Customer Due Diligence Meaning by New Law
In accordance with both the 2020 AML / CFT Law and the 2007 law, organizations that are obliged to report are required by law to take the necessary care, such as requesting certain information about customers and keeping this information within the required time. As more business relationships are classified as 'high risk' under the 2020 AML / CFT Law, the burden on reporting organizations is increasing. For this reason, incumbents should use Customer Due Diligence (CDD) measures in a wider range of situations than were previously required. The provisions set out in the 2020 AML / CFT Act apply to both new and existing customers, and organizations reporting suspicious transactions are expected to perform Enhanced Due Diligence (EDD) retrospectively for new customers in the high-risk category.
The 2020 AML / CFT law requires reporting organizations to report large cash transactions and other suspicious transactions that exceed the threshold set by the CAFIU. Suppose the reporting organization has reasonable grounds to believe that these major transactions are the proceeds of a crime or are linked to terrorist financing. In that case, the business must report the transaction within 24 hours.
What Are The CDD Measures in The New Law?
In cases where the risk of money laundering and financing terrorism is considered high, reporting organizations should take enhanced CDD measures in accordance with the CAFIU guidelines. These enhanced CDD measures can include: learn about the true source of funds, obtaining additional information about the identity of customers, conducting ongoing additional monitoring procedures regarding customers' activities, obtaining information about the true purpose of the transaction, obtaining information about the intended nature of the business relationship.
In addition, both under the 2020 Anti-Money Laundering and Counter-Terrörism Financing Act, reporting entities should implement advanced Customer Due Diligence (CDD) measures in the event of events that:
- transactions that follow unusual patterns or are not clearly directed for a legitimate purpose;
- all business relations and transactions with foreign policy survivors as well as family members and close partners of those exposed;
- business relationships with politically exposed persons
- unusual or large transactions
- bank transfers that do not contain sender information
- business relationships with institutions or individuals in jurisdictions that have inadequate systems to prevent or deter ML/TF
- business relationships conducted through cross-border correspondent banking or other similar relationships
- business relationships with entities or individuals in jurisdictions at high risk of money laundering and/or financing terrorism
- business relationships and transactions with internationally politically exposed persons and Cambodian Politically Exposed Persons, as well as family members and close partners of those exposed persons, but only in response to a transaction identified as high-risk
- business relationship or transaction that could be detected to be at high risk of being associated with money laundering
New Penalties Under The Law
Penalties for legal entities identified for violating the 2020 AML / CTF Act include warnings, fines, revocation of operating licenses, and manager-officers' dismissal. Penalties imposed in the 2020 AML / CTF law compared to the 2007 law bring higher fines and longer prison sentences. The scope of the penalties is as follows: persons committing money laundering two to five years of imprisonment or, they pay a fine of KHR 100,000,000 to KHR 500,000,000. Legal entities committing money laundering offenses are liable to pay a fine of KHR 500,000,000 to KHR 1,000,000,000. In addition, natural persons who refuse to provide the information required by the Law to CAFIU are subject to imprisonment from six days to one month or a fine between KHR 10,000,000 and KHR 100,000,000.
Suppose natural persons do not report suspicious cash transactions to CAFIU, in that case, they will pay imprisonment from one month to a year, or a fine between KHR 50,000,000 and KHR 200,000,000, whereas legal entities are subject to fines between KHR 200,000,000 and KHR 500,000,000. Besides, if the reports contain false information knowing that they are incomplete, natural persons pay a prison sentence from one month to a year or a fine between KHR 50,000,000 and KHR 200,000,000, while legal persons pay fines between KHR 200,000,000 and KHR 500,000,000. Besides these fines, there are some fines sanctions.
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