Cambodia’s foreign ministry has expressed “deep regret over the unjust decision” by the US treasury department to sanction leading local businessman Ly Yong Phat over unconfirmed reports of forced labour linked to online investment scams.
“The imposition of such unilateral sanctions,” the ministry says, “undermines the respect for international law and basic norms governing interstate relations, in particular, the principles of sovereign equality and non-interference.”
The sanctions, announced on September 12, are “politically motivated”, it adds. Moreover, they “run counter to the spirit of reinforcing our bilateral cooperation and mutual trust” expressed by US defence secretary Lloyd Austin during a visit to Phnom Penh in June.
During the visit, Austin met with Prime Minister Hun Manet and defence minister Tea Seiha as well as Hun Sen, the former prime minister who retired in favour of his son last year and who now serves as president of the Senate.
“The officials discussed opportunities to strengthen the US-Cambodia bilateral defence relationship in support of regional peace and security,” according to the Pentagon. “They also welcomed continued discussions about these issues between their respective defence establishments.”
‘Misleading’ report
Within three weeks, however, the US state department released a report on human trafficking in Cambodia.
The treasury department says the report notes that “corruption and official complicity in trafficking crimes remain widespread and endemic”, identifying Ly Yong Phat as subject to sanctions along with his LYP Group.
Also targeted are the company’s O Smach and Koh Kong resorts in the southwest coastal province of Koh Kong bordering Thailand, the Phnom Penh Hotel and the Garden City Hotel, a sprawling property with a golf course and water park near a new sports stadium just outside the capital of Phnom Penh.
The treasury department’s announcement particularly focuses on O Smach Resort, noting police investigations of reported human rights abuses over the past two years and “rescue missions” by local authorities in October 2022 and March this year.
Those rescued included Chinese, Indians, Indonesians, Malaysians, Singaporeans, Thais and Vietnamese, it says, without mentioning Cambodians.
In its statement released on September 13, Cambodia’s foreign ministry describes the US state department report as “misleading” given Cambodia’s “significant strides in addressing these issues in collaboration with international partners, including the United States.”
“The report fails to provide a balanced and accurate representation of Cambodia's steadfast commitment to human rights, law enforcement,” it adds, “and its determined efforts to combat human trafficking and forced labour.
“Our government’s proactive measures in combating sophisticated cross-border criminal activities demonstrate a resolute commitment to upholding human dignity and the rule of law.
“To claim that Cambodia has been indifferent or negligent in enforcing the law is a gross misrepresentation of our efforts and achievements in tackling these complex, transnational challenges.”
The ruling Cambodian People’s Party and the National Assembly, the lower house of parliament, released similar statements.
‘Much larger regional criminal network’
Neither the US treasury department’s announcement, nor an accompanying statement from the state department, mentioned other countries reportedly involved in online scams in Southeast Asia.
But the US Congress-funded United States Institute for Peace in Washington highlighted the complexity of regional online scams in a study published in May, estimating the annual value of funds stolen worldwide at almost US$64 billion.
Their research began in 2020, the study’s authors say, amid reports on illicit gambling operations in Myanmar’s Karen state on the border with Thailand.
“It quickly became apparent that the criminal activity in Myanmar … was part of a much larger regional criminal network that was rapidly adapting to the new opportunities for online scamming,” the study notes, referring to the favourable environment created by the recent military coup in Myanmar and the Covid pandemic.
“We discovered,” it states, “that the China-origin crime groups involved had deep ties to and involvement in criminal activity in at least seven other countries: Cambodia, Laos, Thailand, Vietnam, the Philippines, Malaysia and Singapore.”
If true, that means eight members of the Association of Southeast Asian Nations (Asean) – all except Brunei and Indonesia – are involved in online scams.
Asean recognizes need for action
It’s not yet clear if the regional issue will be on the agenda when Asean leaders meet for a summit in Vientiane in October. Leaders from partner countries, including the US, are also scheduled to attend.
But the annual meeting of foreign ministers in the Lao capital in July acknowledged the problem. “We recognize the importance of enhancing cooperation and collaboration,” a joint statement reads, “to prevent and combat online scams and scams across digital and telecommunication channels”.
The ministers also recognized the need for “continued coordinated responses in addressing irregular movement of persons” across borders. Such movements can involve scams that go beyond regular online fraud.
In one such case reported in Bangkok and Phnom Penh in August, a 17-year-old Thai boy was reportedly found to have illegally entered Cambodia and faked his own kidnapping to seek ransom money from his parents. He was reportedly repatriated in a joint operation by Cambodian and Thai police.
“There are cases where they faked their own kidnapping to get the money for themselves or someone else who had tricked them into entering our country to do so,” Cambodia’s immigration director-general Sok Veasna told the Khmer Times. “For faking their own kidnapping, they can face a lifetime ban from entering Cambodia.”
Impacts of sanctions
The sanctions against the Cambodian entities target property interests, either located in the US or in the possession or control of US persons. These are now blocked and must be reported to the US treasury department’s Office of Foreign Asset Control.
“Any entities that are owned, directly or indirectly, individually or in the aggregate, 50% or more by one or more blocked persons are also blocked,” the treasury department says. “Financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action.
“The prohibitions include the making of any contribution or provision of funds, goods or services by, to, or for the benefit of any designated person, or the receipt of any contribution or provision of funds, goods or services from any such person.”
The sanctions underscore Washington’s commitment, says Bradley Smith, the US treasury department’s acting undersecretary for terrorism and financial intelligence, “to hold accountable those involved in human trafficking and other abuses, while also disrupting their ability to operate investment fraud schemes that target countless unsuspecting individuals, including Americans.”
The US state department, in its separate statement on September 13, urges Cambodia to “secure the safe release, repatriation and protection of all persons currently held in online scam centres and hold those responsible for these horrendous acts to account.”
In its reply, the Cambodian foreign ministry says: “Cambodia remains open to cooperation and committed to working with all international partners, including the United States, to tackle global challenges, but we insist that such efforts be grounded in dialogue, mutual interest, respect for sovereignty and a genuine spirit of partnership.”
As for Ly Yong Phat – who also serves as a senator and heads a local association of prominent business leaders – the ministry notes the broad recognition of his role in advancing Cambodia’s development over the decades. “His contributions to infrastructure development, job creation and poverty alleviation,” it states, “have positively impacted the lives of thousands of Cambodian people.”
