Scam centres fuel human trafficking and money laundering, experts warn, urging banks and crypto firms to enhance AML efforts.

Banks, cryptocurrency exchanges and other AML reporting entities have a critical role to play in the fight against human trafficking through scam centres, delegates at Regulation Asia’s Fraud and Financial Crime conference in Singapore heard.

Speaking to financial crime compliance and risk professionals, experts detailed how human trafficking fuels cyber-enabled fraud and money laundering, generating billions of dollars each year in illicit profits. The conference highlighted the need to adjust AML/CFT red flags, transaction monitoring tools and typologies to better detect the scourge of international scam centres.

Rebecca Miller, Regional Coordinator for Countering Human Trafficking and Migrant Smuggling at the United Nations Office on Drugs and Crime (UNODC), told the conference that blockchain analysis firms and banks can help in the fight against scam centres.

“We all have a role to play … from the NGOs, who are working directly with the victims, to political influence on governments, to the financial sector, to the regulators,” she said.

Miller said the proliferation of scam operations across the Golden Triangle was tied to its historical links to organised crime. “Part of that is the fact that Southeast Asia is a very diverse and dynamic region that has shown remarkable rates of economic development and growth in recent years, but is also facing unprecedented challenges in relation to transnational organised crime.”

The special economic zones (SEZs) are a factor in the growth of scam centres, along with the political unrest in the region. The SEZs aim to promote economic development but they are also linked to casino developments and money laundering activity. In some cases, SEZs are enabling organised crime groups to vertically integrate and grow alongside illicit economies in the region.

“There really is a long history here in the region of organised crime groups, particularly in the Mekong… A lot of the casinos and special economic zones are also in areas that are controlled by non state armed groups — looking at Myanmar, for example — which basically exert de facto control over these territories and make it very complex,” Miller said.

“They’ve also invested heavily in casinos, where money laundering and other illicit activities are notably concentrated. So this isn’t an issue that happened overnight. It had been growing for many, many years, and then there was a confluence of factors that really escalated what we’re seeing now in relation to the scam operations.”

Uncovering the hotspots

At present there are a number of different hotspots across Cambodia, Laos and Myanmar. In Cambodia, the most concerning areas include Sihanoukville on the coast and Poipet near the Thai border. Laos also hosts a number of major scam centres while Myanmar features a large number of operations that have taken advantage of the civil unrest in the country.

Hotspots include Myawaddy on the Thai-Myanmar border, Laukkai on the China-Myanmar border, and remote areas of Shan State and Kachin State, where ongoing conflicts provide an opportunity for lawlessness to thrive. The Philippines also had a high concentration of scam centres until the Philippine Offshore Gaming Operators (POGOs) were closed down.

BC Tan, a financial crime expert with Kroll, told the conference that reporting entities needed to factor in geography and political risk within their AML/CFT models. He said the scale of human trafficking across the ASEAN region was continuing to grow, despite efforts to release victims of modern slavery.

“Just to let the numbers sink in, we’re looking at 200,000 men, women, boys and girls across the world who have been misled and kidnapped to be there. They are trapped in prison.

These are huge compounds,” Tan said. “They are tortured routinely, and many have actually died from these tortures or have mentally broken down and decided to end their lives. So it’s an absolute tragedy.”

Tan said the total losses from fraud and scams around the world are estimated to have reached around USD 1 trillion over the past year.

One of the most worrying trends is that the transnational organised crime landscape in Southeast Asia is growing and evolving faster than it ever has at any point in history, according to the UNODC’s Miller.

“We’re extremely concerned about this, and we’re seeing various forms of poly-criminality. So we’re not just seeing human trafficking for forced criminality. We’re seeing cyber-enabled fraud, we’re seeing money laundering, we’re seeing corruption. All of this is being facilitated by not just one organised crime group, but multiple organised crime groups, and also a growing number of other service providers and facilitators.”

Victims from around the world

Miller said the human trafficking victims inside scam centres have been drawn from around 60 different countries. This has upended the existing understanding about the flow of human trafficking victims, as Southeast Asian countries were traditionally origin countries rather than destination countries for trafficked victims.

“These [victims] are people from South Asia, South America, parts of Africa. So many African citizens have been trafficked to this region, and it really has turned everything upside down,” Miller said. “We’ve had Americans, we’ve had Europeans. It just challenges what we have traditionally been focused on in relation to trafficking in persons.”

“The mechanisms are not set up to identify a victim from Kenya who has been trafficked to Myanmar or to Laos. And so no one’s really known how to deal with this, and has not been been able to deal with this, including the diplomatic community, who are now trying to get their citizens returned home.”

Miller said the scam centres were also upending existing understanding about money laundering tradecraft. “These profits have reached unprecedented levels, and illicit money is not just moving through the regional casino industry and other large cash flow businesses, including cryptocurrencies, but also through underground banking systems. It’s moving globally,” she said.

In one Southeast Asian country, the scam industry was generating USD 7.5 to 12.5 billion a year in illicit proceeds, or half of that country’s GDP. “That gives you an idea of the type of profits that are being made by these organised crime groups,” Miller said.

“The money, of course, is not necessarily staying in this region. Cryptocurrency exchanges have been traced globally. Luxury goods criminal networks have a presence in many countries, in Europe and Australia. The money is basically going all around the globe,” she added.

One of the challenges with targeting scam centres is that the criminal threat is splintered into smaller operations. In the Philippines, for instance, the closure of the POGOs has shifted scam operations into apartment complexes and areas that are less visible to law enforcement.

“So rather than having compounds and scam operations of 2,000 people, we now have a floor in an apartment dwelling in the Philippines with maybe 80 people. Again, this is making it extremely challenging for law enforcement to investigate and shut these compounds down.”

Call to action

Asked how financial crime fighters can help, Miller said, “Please go and learn more. Read our reports, talk to us. There are a lot of people who have built a lot of knowledge. Knowledge is your first stage.”

“We all have a role to play in this. We have to work together. That is the only way we are really going to get it on top of this,” she stressed, advocating a “whole-of-society approach” involving NGOs, governments, financial institutions, and regulators.

UNODC published a report in April warning that transnational organised crime groups in Asia are expanding their scam operations internationally. Read the full report here.

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Regulation Asia’s Fraud & Financial Crime conference is held each year, bringing together industry professionals to discuss collaboration across borders and between public and private institutions in the fight against financial crime.