FATF is Behind the Curve on Cambodia's Cyber-scam Compounds

The Diplomat

3 days ago

According to the U.N. Office on Drugs and Crime, Cambodia-based scamming operations are generating billions of dollars in illicit profits each year.
The global Financial Action Task Force (FATF) watchdog has yet to publicly grasp the dangers posed by the growth of cyber-scam compounds, including converted casinos, in Cambodia since the COVID-19 pandemic.
Financial controls at Cambodian casinos were identified as an area of concern by the Paris-based FATF in a mutual evaluation report as far back as 2017. The report found that the Cambodian sectors most vulnerable to money laundering were casinos, along with the real estate, legal, and remittance and banking sectors, due to a lack of regulatory supervision.
The FATF added Cambodia to its 'grey list' in February 2019, but removed the country from the list in February 2023. Yet a further mutual evaluation report in August 2023 found that: 'Weaknesses remain with fit and proper tests of casinos, lawyers, and accountants.'
This was no simple loophole. The U.N. Office on Drugs and Crime (UNODC) estimates that cyber-enabled fraud caused financial losses of between $18 billion and $37 billion in 2023, most of it due to scams by organized crime groups in Southeast Asia.
Cambodia, along with Myanmar, is a major scamming hub. UNODC in January 2024 reported that COVID-19 led to the repurposing of Cambodian casinos into cyber-scam compounds as regular business dried up.
Yet Cambodia and other countries in the region, according to UNODC, 'pay virtually no attention' to casino junket operators, despite 'widespread misuse of these businesses for large-scale money laundering and underground banking by transnational organized crime groups.'
I recently interviewed FATF president Elisa de Anda Madrazo for the Financial Times publication 'Banking Risk and Regulation.' She pointed to cases of the authorities in Cambodia and Malaysia cooperating to make arrests of members of organized crime gangs suspected of human trafficking.
Such arrests have not been enough to dent the capacity of the compounds. In April 2025, the UNODC found periods of increased law enforcement activity in Cambodia have 'dampened the expansion of these industries in some more visible and accessible locations' but have also prompted 'significant expansion in more remote locations.'
De Anda Madrazo said that Cambodia's next assessment will start 'in the next few years' and will assess how it is dealing with 'emerging threats.' Cyber-scam compounds in Cambodia and the region could fairly be classified as an established, rather than an emerging, danger. De Anda Madrazo herself said that 'cyber-enabled fraud is a major transnational organized crime that has grown exponentially in recent years.'
Nigel Morris-Cotterill, a financial crime risk strategist based in Malaysia, argues that routine corruption needs to move up the agenda. Financial crime, he says, 'happens in large part because of corruption. And it persists because of lack of resources, especially in countries which have poorly paid law enforcement.'
The basic police salary in Cambodia in 2024 stood at 1,306,550 riel ($326) per month. As in many other poor countries, bribes of all kinds are routinely taken to increase income.
Police corruption in Cambodia is part of the much broader issue of the rule of law. The 2024 World Justice Project Rule of Law Index puts Cambodia at 141 out of 142 countries globally.
The existence of industrial-scale cyber-scamming increases the possibilities for police on low pay.
Amnesty International last month documented 20 cases of compounds in Cambodia which were the subject of one or more police and/or military interventions, but found that human rights abuses continued at the compounds even after the visits.
When the police or military intervened, they would rescue only a small number of individuals in response to specific requests for help. The 'rescues' were largely controlled by scamming compound bosses, and were nothing like a 'raid.' The police would typically meet a boss at the gate, who would hand over the pre-requested individual.
Amnesty also found evidence of collusion between police and compound bosses prior to the raids. In one case, two trafficked victims were moved immediately before a government 'crackdown' in Sihanoukville.
There was no rush by the police to help the 'rescued' victims. Most survivors of scamming compounds interviewed by Amnesty spent two to three months in police detention centers, without being questioned in detail about their experiences. Some victims have reported that the police were willing to sell them back to the compounds for the right price.
Low-level corruption, Morris-Cotterill says, receives little attention from the FATF. The reason, he says, is that 'there's no money in pursuing it: the entire counter-money laundering approach changed in the early 2000s from being a crime reduction measure to being about confiscation.'
'If policing is all about expenditure and revenue, which is what confiscation has come to be about, then policing has become a business, not a public service. This, as much as corruption, is a reason that crime is not deterred or detected.'
De Anda Madrazo argued that being taken off the grey list doesn't make a country immune to financial crime. Morris-Cotterill sees a need for the FATF to rethink how it approaches the problem. 'The little stuff doesn't matter in the big policy-making forums,' he said. 'I find that disturbing.'