The Obama administration has removed Cuba and Malaysia from the list of worst offenders when it comes to human trafficking and forced labor.

The State Department upgraded both countries to the so-called Tier 2 Watch List in the State Department's annual Trafficking in Persons (TIP) report, which was released Monday. Both had been listed as Tier 3 countries, a designation indicating more significant problems.

The Cuba move, which leaked to the press last week, is giving critics new ammunition to accuse the Obama administration of allowing politics to influence the rankings.

The downgrade for Cuba further outraged opponents of President Obama's efforts to normalize relations with the island nation, who argue that child prostitution and child sex tourism runs rampant in Cuba.

The improved status for Malaysia has critics charging that the change is related to the country's participation in the U.S.-led trade agreement with Pacific Rim countries. Thailand was downgraded along with Malaysia just last year because of widespread abuses in their fishing industries.

The new report keeps Thailand, which is not participating in the massive trade agreement, in a downgraded status.

Reacting to the news, human rights groups said Malaysia's improved ranking undermines the report's overall effectiveness in holding foreign governments accountable in their efforts to combat human trafficking.

"Giving into political pressure to upgrade Malaysia's TIP Report ranking was a bad move," said Human Rights First's Annick Febrey. "Being lenient with U.S. allies and trade partners when they are failing to meet minimum standards to fight modern slavery undermines the credibility of the TIP report's rankings and will negatively impact the ability of the U.S. government to use the report as an effective diplomatic tool."

Meanwhile, Cuba received its first upgrade in 12 years after languishing among the worst offenders. The Castro regime in Cuba has long regarded the designation as an irritant and argues that it is inaccurate.

The move follows the State Department's decision in late May to remove Cuba from the U.S. list of countries that sponsor terrorism, a major hurdle in setting the two nations up for a full renewal of diplomatic ties.

In its new report, the State Department warned that Cuba "is a source country for adults and children subjected to sex trafficking and forced labor," but acknowledged that information on the "scope" of the trafficking is "limited."

"Child sex trafficking and child sex tourism occur within Cuba," the report said, and "Cuban authorities report people from ages 13 to 20 are most vulnerable."

When it comes to forced labor, the report acknowledged that "some participants in foreign medical missions as well as other sources" allege that Cuban officials "force or coerce" participation in the program, and noted that the "Cuban government denies these allegations."

"Some Cubans participating in these work missions have stated the postings are voluntary and well paid compared to jobs within Cuba," the report stated.

"There have also been claims that Cuban authorizes coerced participants to remain in the program, including by allegedly withholding their passports, restricting their movement, or threatening to remove their medical licenses or retaliate against their family members in Cuba if participants leave the program," the report states.

But the report justified the decision to upgrade Cuba's status by saying the Cuban government "does not fully comply with the minimum standards for the elimination of trafficking; however, it is making significant efforts to do so."

"For the second consecutive year, the government reported efforts to address sex trafficking, including the prosecution and conviction of 13 sex traffickers in 2013 and the provision of services to victims in those cases," the report stated.

Though Cuba's penal code does not criminalize all forms of human trafficking, the report said "the government reported continuing efforts to amend its criminal code, including bringing it into conformity with the requirements of the 2000 UN TIP Protocol."

When it comes to forced labor, "the government did not recognize it as a problem within Cuba and did not report efforts to prevent forced labor," the report states.

Anticipating the upgrade, opponents last week blasted the move. Rep. Ileana Ros-Lehtinen, R-Fla., a prominent member of the House Foreign Affairs Committee, charged that the Castro regime not only fails to prevent sex trafficking of adults and children, but actively "supports and sponsors" the sex tourism industry "in order to reap the financial benefits."

"This upgrade in Cuba's status in the annual report is nothing short of appeasement and it is a disgrace unbecoming of an administration that claims to hold human rights as one of its top priorities," Ros-Lehtinen said. "The Obama administration has chosen to once again discard the hard facts to continue the president's legacy shopping."

Sen. Bob Menendez, who has opposed many of the Obama administration's foreign policy moves, said he was "disappointed" with the latest report.

"The administration has turned its back on the victims of trafficking, turned a blind eye to the facts, and ignored the calls from Congress, leading human rights advocates, and Malaysian government officials to preserve the integrity of this important report," he said. "They have elevated politics over the most basic principles of human rights."

The Cuban government earlier this month told reporters in Havana that State Department's past reports were based on "falsehoods."

"Every time this report is published, it has been harshly criticized in Cuba," Gustavo Machin, deputy director of U.S. affairs in the Cuban Foreign Ministry, according to Reuters. "It is based on falsehoods. We think we have exemplary conduct in the care of boys and girls, the youth and adolescents."

Obama now has 90 days to decide whether to apply sanctions against the governments who remain at the worst Tier 3 level. There are 23 nations at that level, including Libya, North Korea, Russia, Syria and Zimbabwe.