Almost $500 million a year was taken out of Cambodia in “illicit
financial flows” between 2001 and 2010, a report released yesterday in
the U.S. claims.
People in the Cambodian finance sector, however, expressed doubts
about the accuracy of the figure, which appears in a report by the
Washington-based research organization Global Financial Integrity.
The report, titled Illicit financial flows from developing countries,
analyzes World Bank and International Monetary Fund data on 143
countries’ balance of payments.
The organization looked at the discrepancy between trade recorded in
Cambodia and trade with Cambodia recorded by the rest of the world.
It concludes that during the decade, a total of $4.99 billion has
been taken out of the country through illicit financial flows—“funds
that are illegally earned, transferred, or utilized and cover all
unrecorded private financial outflows that drive the accumulation of
foreign assets by residents in contravention of applicable laws and
regulatory frameworks.”
The report says the method of calculation does not take into account
smuggling, cash being taken across borders and other forms of capital
flight that might also account for money leaving a country.
The authors acknowledge that some legal flows of capital may go
unrecorded, and the report says total estimates have been reduced to
take this into account.
However, former ANZ Royal chief executive Stephen Higgins said by
email that the group’s nearly $500 million a year figure “simply doesn’t
match the reality on the ground here, which is that there seems to be
more money sloshing around here than can be accounted for by the
official statistics.”
“That is, it seems to be flowing into the country rather than out of it,” Mr. Higgins said.
He explained that in other countries—including China, the country to
which the report attributes the most illicit financial flows—there are
strict controls on capital, which means people manipulate declared trade
prices to extract capital from the country.
“Cambodia is different to most of the countries identified in the
report, in that Cambodia has such an open capital account, which means
it’s very easy to legally move money in and out of the country,” Mr.
Higgins said.
“It is not necessary to make illegal transfers to get money out of the country.”
Nuon Sokha, director-general of the National Bank of Cambodia, said
the $500 million discrepancy, if correct, was “minimal” in comparison
with total trade in Cambodia, which reached $12.31 billion in the first
11 months of this year.
“The recording system is still emerging so that is a very good
report,” she said, adding that steps had been taken to ensure that banks
keep an eye on suspicious transactions, including the establishment in
2008 of the Financial Intelligence Unit.
Acleda bank president In Channy also expressed doubts about the
report, saying that the informal nature of many agricultural
transactions along Cambodia’s borders meant trade figures were not
reliable. Of the report’s figures on Cambodia, he said, “It’s an
estimate only.”
Preap Kol, executive director of Transparency International’s
Cambodia office, said by email that countries with weak laws and
financial controls attract illicit funds.
“In any country where the laws and regulations of financial control
are weak or not effectively enforced and where transparency in financial
and banking sector is limited, it is often a destination of illicit
financial flow and money laundering,” Mr. Kol said.
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