Malaysia will fall to ‘Tier 3’ after spending three years on the ‘Tier 2 Watchlist’ in this year’s Trafficking in Persons (TIP) report, said the sources, who did not want to be identified as they were not authorised to talk to media.

The US embassy in Kuala Lumpur declined to comment ahead of the report launch later Thursday and the State Department could not be reached outside of regular business hours.

Malaysia’s home ministry did not have an immediate comment.

The State Department ranks countries in Tier 3 for failing to comply with the minimum standards for eliminating trafficking or make significant efforts to comply.

A Tier 3 ranking could possibly affect Malaysia’s access to some US aid.

Malaysia is a known destination for trafficking victims.

The Southeast Asian nation depends on millions of migrant workers to work in factories and plantations. It is also home to over 170,000 registered refugees and asylum seekers, most of them Rohingya from Myanmar.

The 2020 TIP report said that while Malaysia was taking steps to eliminate trafficking, official complicity undermined anti-trafficking efforts.

The number of labour trafficking investigations was also low compared to the scale of the problem, it said.

In the past year, the US Customs and Border Protection (CBP) imposed import bans on three Malaysian companies over allegations of forced labour used in their operations.

Labour rights activists have petitioned the CBP to investigate more Malaysian firms over labour concerns.

A senior police official told Reuters on Wednesday that forced labour in Malaysia was not a widespread problem or “out of control”.