Scam syndicates target millions of victims globally

Over the past decade, Southeast Asia has become a major breeding ground for transnational criminal networks emanating predominantly from China.

These organizations target millions of victims around the world with illegal and unregulated online gambling and sophisticated scamming operations.

As of the end of 2023, a conservative estimate of the annual value of funds stolen worldwide by these syndicates approached $64 billion, states a new report from the U.S. Institute of Peace.

Here are some key takeaways from the report;

The scamming operations proliferating in the region today have their roots in a regional network of loosely regulated casinos and online gambling that, beginning in the 1990s and accelerating in the 2000s, some governments promoted as a legitimate contribution to economic development. Chinese nationals were the main target of the overseas gambling business due to a complete ban on gambling in China, where the annual market for gaming is estimated at $40 billion to $80 billion.

· The scamming operations are powered by hundreds of thousands of people, many duped by fraudulent online ads for lucrative high-tech jobs and trafficked illegally into scam compounds, where they are held by armed gangs in prisonlike conditions and forced to run online scams. These victims of forced labour (along with a small number of workers who willingly participate) come from more than 60 countries around the world. The scam compounds in Myanmar have an additional perimeter of armed protection provided by border guard forces under the authority of the Myanmar military or its proxies. In Cambodia, speculative real estate investments—casinos and hotels left empty by the COVID pandemic’s suppression of tourism—have been fortified and repurposed for online scamming in a vast web of elite-protected criminality spread across the country. In Laos, SEZs such as Zhao Wei’s notorious Golden Triangle SEZ are the dominant mode of criminal operation. A move by China’s law enforcement in late 2023 to close down the scam compounds on Myanmar’s border with China led many of them to relocate to the south in Myanmar’s Karen State, on the border with Thailand, as well as to Cambodia and Laos.

Ample evidence suggests that protection of the scamming industry is now of strategic interest to the ruling elites in Myanmar, Cambodia, and other countries in the region due to the industry’s profitability and the nature of state involvement. In Cambodia, the return on cyber scamming is estimated to exceed $12.5 billion annually—half the country’s formal GDP—with many compounds owned by local elites. More broadly, the study group calculates that the funds stolen by these criminal syndicates based in Mekong countries likely exceeds $43.8 billion a year—nearly 40 percent of the combined formal GDP of Laos, Cambodia, and Myanmar. A significant share of these profits is reported to flow to the Myanmar military and to ruling elites in Cambodia and Laos.

· The criminal groups masterminding these scams have set up complex money-laundering operations to move funds into the formal economy, risking corruption of major international financial institutions. The criminal networks’ methods have evolved over the past decade as they have sought to launder deposits made to online gambling accounts from China. Such industrial-scale laundering is prolific throughout Cambodia, Laos, Malaysia, Thailand, and Vietnam and in financial hubs such as Singapore, Hong Kong, and Dubai, where criminal groups take advantage of strategic vulnerabilities in financial systems and invest heavily in cutting-edge financial technologies that are not well understood by law enforcement. Investigative reporting has also exposed many examples of how laundered funds move into real estate across the globe, including in the United Kingdom and other parts of Europe, in Canada, and in the United States.

The U.S.-based body observed: “As the criminal networks have become more powerful, the Chinese state, recognising that it can no longer control them, has become more concerned about the threat their activity poses to its citizens, who are major victims of the criminal scamming and the capture of forced labour through fraudulent trafficking.”

Some of the illegal activity in Southeast Asia was “hidden by a veneer of apparent legitimacy, such as casinos, resorts, hotels, and special economic zones,” with the “dispersal of these networks into the region… strongly correlated with the areas of weakest governance,” said the U.S. Institute of Peace.

While China had some success with enforcement against online gambling aimed at its people, as well as against general fraud and scam operations – via cooperation with other countries – there had also seen some displacement of the problem, rather than outright eradication, suggested the institute.

“The networks are able to evade occasional crackdowns by law enforcement by transferring their scamming operations between compounds within a country or between countries, depending on the circumstances,” stated the report.

It added: “A move by China’s law enforcement in late 2023 to close down the scam compounds on Myanmar’s border with China led many of them to relocate to the south in Myanmar’s Karen State, on the border with Thailand, as well as to Cambodia and Laos.”

The United Nations also recently warned that criminal networks in Southeast Asia are growing their illegal operations in through the innovative use of technology.

The trafficking of people and drugs as well as money laundering and fraudulent scam activities are being boosted by the use of cryptocurrencies, the dark web, artificial intelligence and social media platforms, as criminals continue to base their operations in parts of the region where the rule of law is weak or non-existent.