Children at the Lenggeng detention center, south of Kuala Lumpur, Malaysia, face the possibility of being sold into slavery as a result of over-crowding. AP Photo/Mark Baker WASHINGTON (Reuters) - The U.S. State Department downgraded Thailand, Malaysia and Venezuela on Friday to its list of the world's worst centers of human trafficking, opening up the countries to possible sanctions and dumping them in the same category as North Korea and Syria.

The three countries were all downgraded to the lowest "Tier 3" status in the U.S. State Department's 2014 Trafficking in Persons Report as they did not fully comply with the minimum standards for the elimination of trafficking.

Thai officials repeatedly expressed confidence their country would be upgraded, submitting a 78-page report to the U.S. government in April to make its case.

The downgrades could cause some multinational companies to reconsider investments in industries accused of using trafficked labor such as fisheries, a lucrative business in Thailand, the world’s largest exporter of shrimp.

The countries could also lose U.S. non-humanitarian and non-trade-related aid, and they could face U.S. opposition to help from international institutions such as the International Monetary Fund and World Bank.

The report said the majority of trafficking victims in Thailand - "tens of thousands ... by conservative estimates" - were migrants from neighboring countries "forced, coerced, or defrauded into labor or exploited in the sex trade." A significant number were trafficked into the fishing industry, garment production and domestic work.

The State Department also cited media reports of “trafficking-related complicity by Thai civilian and navy personnel in crimes involving the exploitation” of Rohingya Muslims who have fled Myanmar by the tens of thousands over the past year.

Those reports included a Reuters story in December that documented a clandestine Thai policy to remove Rohingya from immigration detention centers and deliver them to traffickers and smugglers waiting at sea. Many Rohingya were then ferried back to brutal trafficking camps in Thailand, where some died.

The State Department said that not only had the government "systematically" failed to prosecute trafficking into the fishing industry, but the Thai navy had also filed defamation charges against two journalists who reprinted reports of complicity of civilian and naval personnel in exploitation of Rohingya asylum seekers from Myanmar.

That was a reference to criminal defamation charges filed by Thailand's navy against two journalists at Phuketwan, a small English-language news website based in Phuket, which published selected excerpts from a July Reuters report.

The Reuters report, based on interviews with people smugglers and more than two dozen survivors of boat voyages, revealed how some Thai naval security forces worked systematically with smugglers to profit from the surge in Rohingya fleeing Myanmar to escape religious persecution.

The Thai navy has also filed a criminal complaint against two Reuters journalists, alleging violations of the Computer Crimes Act. Reuters has not been charged and stands by its reporting, a Reuters spokesman said.

“We have seen interlocutors who we think are actually trying hard, but of course that gets dragged down by the widespread official complicity,” U.S. Ambassador at-Large Luis CdeBaca of the Office to Monitor and Combat Trafficking in Persons told Reuters.

“It’s kind of like an anchor that is holding the folks who seem to be wanting to make a difference back.”

"IMPUNITY"

Thailand, Malaysia and Venezuela promote themselves as modern, fast-developing countries, but their Tier 3 ranking puts them among the world’s most lawless, oppressive and dysfunctional.

A third of Tier 3 countries, among them Mauritania and Yemen, also appear on the United Nations list of least-developed nations. Many Tier 3 countries (Syria, Central African Republic) are at war; others (Zimbabwe, North Korea) are dictatorships.

In the year ended March 31, the period covered by the report, the Thai government said it had made "significant progress" in combating human trafficking. It cited data that showed it convicted 225 people for this crime in 2013, compared with 49 in 2012, among other measures.

But despite frequent media and non-governmental organization reports documenting forced labor among migrants, the State Department report said, the Thai government “demonstrated few efforts to address these trafficking crimes."

"Impunity for pervasive trafficking-related corruption continued to impede progress in combating trafficking," the report said.

The report found Malaysia had made "inadequate efforts to improve its flawed victim-protection regime" and had investigated fewer trafficking cases in 2013 than in 2012. The Malaysian downgrade had been largely expected.

The report said Venezuela was making insufficient efforts to combat sex trafficking and forced labor as it had failed to come up with a written plan to bring it into compliance with minimum standards for eliminating trafficking.

CdeBaca said the White House would make a decision on possible sanctions against Thailand, one of its oldest Asian treaty allies, within about 90 days.

Last month, Washington canceled some security cooperation projects with Thailand to protest against the country's military coup on May 22.

In April, U.S. lawmakers called on the Obama administration to punish countries that do too little to fight trafficking, including Thailand and Malaysia, and said Myanmar - another country Washington has been seeking to boost ties with - should not receive a waiver to avoid sanctions over its record.

Friday's State Department report said that while Myanmar did not fully comply with minimum standards for the elimination of trafficking, "it is making significant efforts to do so."

(Additional reporting by Andrew R.C. Marshall in Bangkok; Editing by Lisa Von Ahn)