Money Laundering Fuels CyberFrauds, says the New UNODC Report

On April 21st, the United Nations Office on Drugs and Crime (UNODC) released a report titled “Inflection Point: Global Implications of Scam Centres, Underground Banking and Illicit Online Marketplaces in Southeast Asia”.

According to the report, numerous transnational organized criminal groups that operate in East and Southeast Asia are increasingly expanding their illicit operations on a never-before-seen scale, occasionally into more remote, inaccessible areas that are extremely underprepared to overcome cyber fraud.

The recent report is part of a series of policy briefs and regional threat analyses previously published by UNODC for governments and organizations to strategize their policy implementation.

Countries like Japan, Brunei, South Korea, Cambodia, Myanmar, Timor-Leste, Indonesia, Philippines, and Malaysia have suffered the loss of $37 billion  (€32.5 billion) in cyber fraud.

The world’s biggest economy, the United States, has also suffered the loss of $5.6 billion  (€4.9 billion) as per the report.

What Is Driving The Growth Of Such A Transnational Crime Syndicate?

Money laundering is the answer. Criminals employ underground banking and cryptocurrencies to insinuate their ill-gotten gains into the international banking system.

Unfortunately, the detrimental impacts of cyber-enabled crimes are no longer restricted to the local level. The increased proficiency of criminals in money laundering and unofficial money transfer networks has enabled illicit actors to expand.

The report revealed that these scams run their criminal operations in big centers which are typically and purposefully situated in special economic zones (SEZs) to take advantage of more favorable economic regulations (e.g., low taxes).

Most of these scam centers are located along the border, especially in Cambodia, Myanmar, Laos, the Philippines, and the PDR, typically known for having loosely enforced laws.

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However, these scam compounds are now compelled to relocate to other areas due to the ramped-up crackdowns by law enforcement authorities, which have resulted in a massive spillover of criminal activity in other areas.

Apparently, these crackdowns may slow down their operations, but in reality, they end up helping the scam industry to expand its criminal activities in a subtle, organized way.

Low taxation and lax financial laws attract not only investments but also highly experienced criminal actors who bribe local officials to exploit corruption, hence facilitating the growth and organization of the scam industry.

According to estimates from the United Nations Office on Drugs and Crime (UNODC), every cent of this adds to the $40 billion that the scam industry makes each year.

South America, Africa, the Middle East, Europe, and a few Pacific islands are among the regions where such networks are growing their operations, says the UNODC.

The report suggests how governments in Southeast Asia and elsewhere should formulate their response plans.

It shared that policymakers and government agencies must focus on improving financial intelligence coordination, increasing financial disruption measures, and scaling financial investigations and asset recovery through regional and global cooperation.

The UNODC has been conducting threat studies on transnational organized crime in Southeast Asia for a number of years, including this most recent report.

Their findings have given legislators, law enforcement organizations, international partners, scholars, and other specialists new insights into how to tackle organized crime more effectively.