The sanctions against Ly Yong Phat: milestone or mirage?

Cambodian People’s Party Senator Ly Yong Phat was sanctioned today under the Global Magnitsky Act by the US Office of Foreign Asset Control (OFAC). In many ways, this announcement seems like a significant moment in Cambodian history. But what does it really mean for the parties involved?

For labor and environmental rights activists and observers, this decision is long overdue. It will be seen as a small victory for justice in a country irreparably scarred by impunity.

Ly Yong Phat’s business empire includes: illegal sand extraction, illegal deforestation, tobacco smuggling, illegal online gambling, money laundering and cybercrime on an industrial scale operations. In committing these crimes – the evidence for which stretches back decades – the collateral damage is and remains substantial. Land grabbing, forced displacement, child labor, human trafficking, numerous wrongful deaths on his properties, and a comprehensive destruction of the environment are just a few examples.

Yet it is completely wrong to see this tycoon as a single bad actor causing chaos in a poor, weak state with “governance challenges,” as Cambodia is often portrayed in the West.

Since taking power after losing the 1993 UNTAC elections, the Cambodian People’s Party (CPP) has been closely associated with the worst excesses of criminal extractive authoritarianism. More specifically, the state and the party have been complicit in Ly Yong Phat’s abuses from the beginning.

His business empire grew out of government land concessions. His land grabbing from rural Cambodians was enforced by the militaryWhen groups marginalized by his crimes made their voices heard, Cambodian courts cooperated with extrajudicial threats to keep silent and intimidate. In his most recent business interest (online scams) he operates as leader of a state-sponsored protection racket – renting out his properties to criminal syndicates specializing in cybercrime fueled by human trafficking, offering them protection from potential law enforcement responses. He has enjoyed the full support of Cambodia’s elite, with propaganda channels go on high alert when his interests are threatened.

It is difficult to overstate Ly Yong Phat’s influence within the Cambodian political environment. He is a senator, a neak okhna (an honorary title given to the highest Cambodian oligarchs), a permanent member of the Central Committee of the CPPand a personal advisor at cabinet level to both former and current prime ministers.

Given this domestic eminence, sanctions against Ly Yong Phat seem to send a message about a shift in U.S. policy toward the kingdom. In recent years, the U.S. government has taken a much softer approach, despite the ruling party’s increasing political repression, labor exploitation, and environmental destruction. A lighter touch has ruled the day, as U.S. foreign policy prioritizes removing Phnom Penh from Beijing’s orbit—with minimal proven progress.

As Cambodia’s state-run criminal industries increasingly influence American citizens, an approach that prioritizes engagement becomes more problematic. According to the US Embassy’s own estimate in August, American taxpayers lost more than $100 million in the hands of Cambodia’s largest industry: human trafficking-fueled cybercrime.

Ly Yong Phat’s sanctions may signal growing frustration in Washington with this status quo. While far from an outlier, he is one of the most prominent and visible state-linked leaders of Cambodia’s thriving fraud industry and continues to demonstrate his considerable power over Cambodian institutions.

Despite years of reporting and testimonies from victims about human trafficking, violent abuse and cybercrime Ly Yong Phat continues to advertise his ownership of the property at his O’Smach Resort and Casino. his company website. O’Smach has so far evaded law enforcement action; victims rescued from the complex are routinely threatened by police to be sent backPerhaps most scandalously of all, the government was recently caught shamelessly trying to organize a United Nations-funded workshop on human trafficking from another hotel of Ly Yong Phat.

Behind the scenes, Ly Yong Phat acts as a important business partner of the ruling family and an important source of income for a regime which has neither a popular mandate nor much in the way of a formal economy. Moreover, the CPP relies heavily on the facade of legitimacy provided by tycoons like Ly Yong Phat and their vast holdings to effectively manage the global economy.

It is certain, then, that these sanctions will destabilize the bilateral relationship between Cambodia and the US. Such an outcome will have been anticipated by diplomats in Washington and at the US embassy in Phnom Penh. Yet it remains unclear how or whether this move fits into a broader US strategy to curtail Cambodia’s criminal elite. While historic and bold, an isolated sanction against a powerful bad actor is unlikely to materially change the incentives that drive Cambodia’s state-affiliated transnational crime industries. There are a lot of, a lot of more actors who also deserve sanctions.

Perhaps today’s announcement is a welcome sign of more to come, but even a more robust sanctions program against Cambodia’s criminal oligarchs is unlikely to be enough. The state is directly involved in transnational and ecological crime, and the CPP can probably attribute much of its political dominance and longevity to the dynamism of its criminal elite.

The CPP will probably react as they usually do. The sanctions will be publicly criticized as an example of Western neocolonialism and/or as part of the “color revolution” constantly expected (And proactively responded to) by the party. This response will cause consternation in Washington, reinforcing concerns about declining American influence and the potential impact on the U.S. embassy’s perceived “window of opportunity” in the dynastic succession of the West Point-educated Hun Manet.

But how much does the United States really have to lose in its relationship with a regime that already has effectively ceded much of its sovereignty to criminals with ties to Beijing and embedded within the state? And how is it possible to go to the Their Manet government after one year and see the ‘window of opportunity’ as something other than a dangerous mirage – either of a rights perspective or a geopolitics lens? These are some of the key questions Washington will face as it tightens its grip on a mafia state firmly entrenched in “the most powerful criminal network of the modern era.”

For Ly Yong Phat and his family empire, the move has the potential to complicate matters. While sanctions will have no effect on his assets or legal position in Cambodia, they could change the nature of his extensive business relations in Thailandas partners now have to be more careful in their dealings with the “King of Koh Kong.” Sanctions also jeopardize his investments in the West and any linkable assets he has in the global financial system. And, perhaps most importantly, the Global Magnitsky label is a devastating blow to any illusion of legitimacy Ly Yong Phat may have lent to the state or party.

Kleptocrats are notoriously difficult to rein in, and sanctions are no panacea. Ly Yong Phat is a shrewd businessman with effectively unlimited resources and will surely have seen the handwriting on the wall. The modern global and American financial system is full of loopholes and detours accessible to actors like him. Shell companies, anonymous real estate holdings, and an outdated, reactive anti-money laundering system have little chance of meaningfully deterring the money movements of the world’s worst. Ultimately, Ly Yong Phat is more than capable of dodging the most serious potential consequences of his new designation as a Magnitsky recipient.

So for the rights activists and capable Washington technocrats who helped bring about this policy milestone—and, more importantly, for the countless victims of his crimes—today is not an unmitigated victory. In many ways, it is more a symbol of the shortcomings of the current system for holding the powerful to account, and a reminder that real justice in Cambodia and elsewhere remains elusive.

Yet it is also undoubtedly a step in the right direction, a demonstration of the potential effects of sustained grassroots advocacy, and a reminder to the Cambodian people that there are others standing with them – an imperfect and inadequate, but absolutely necessary, glimpse of hope in a place that has been marked for decades by its absence.

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