The United Nations Office on Drugs and Crime (UNODC) has urged Southeast Asian nations to criminalize the operation of money service businesses or virtual asset service providers (VASPs) without a proper license.
The recommendation comes amid concerns that some VASPs, including those linked to criminal networks, are facilitating transactions for illicit activities like fraud and high-risk gambling operations, according to a recent report released by the agency.
Unlicensed Exchanges Are Tied to Drug Trafficking, Cybercrime
The report highlighted that one unnamed entity had conducted transactions worth “at least hundreds of millions of dollars” with criminal organizations.
These organizations include groups involved in large-scale drug and human trafficking, cybercrime, and child sexual exploitation, as well as entities under sanctions by the U.S. Office of Foreign Assets Control (OFAC).
Additionally, the report mentions wallets tied to North Korea’s Lazarus Group, a notorious hacking syndicate.
“It is more critical than ever for governments to recognize the severity, scale, and reach of this truly global threat, and to prioritize solutions that address the rapidly evolving criminal ecosystem in the region,” Masood Karimipour, UNODC’s regional representative, said.
High-risk virtual asset service providers across #SoutheastAsia have now emerged as a new vehicle through which criminal industries can expand their activities without accountability.
The solution? Increased awareness and information sharing among law enforcement.#crypto pic.twitter.com/gAyGefsKBk
— UNODC Southeast Asia-Pacific (@UNODC_SEAP) October 4, 2024
The UNODC’s recommendations go beyond criminalizing unlicensed VASPs.
The agency also suggests enhanced surveillance of organized crime involvement in various sectors such as casinos, cyber fraud operations, and other businesses that may be linked to scam activities.
It further calls for improved training for law enforcement on handling online gambling schemes and money laundering techniques that are increasingly being facilitated by advanced technologies like cryptocurrencies.
While not all scams in the region are linked to cryptocurrency, the report noted that digital currencies are frequently used by scammers.
This preference is driven by the ease of conducting rapid cross-border transactions, widespread misinformation about how cryptocurrencies work, and low levels of understanding among users.
In some instances, the breakdown of international law enforcement cooperation and asset recovery processes has exacerbated the problem.
Online Fraud Grows in Southeast Asia
Online fraud has grown significantly in Southeast Asia, often operated from inconspicuous office buildings or within casino complexes.
A previous UN report estimated that about 220,000 individuals are employed in scam operations in Cambodia and Myanmar, with many reportedly being deceived into such roles under false job promises.
One prominent scam method in the region is “pig butchering,” a type of romance scam where fraudsters build trust with victims online before convincing them to invest in fraudulent platforms.
The report also identified a rise in other scam techniques, including impersonation, job scams, asset recovery schemes, and phishing attacks.
The scammers are also increasingly utilizing emerging technologies like artificial intelligence and deepfakes to enhance the effectiveness of their schemes.
Furthermore, phishing attacks remain a major issue for crypto users, resulting in substantial losses.
In September alone, more than 10,000 individuals lost over $46 million to such scams, as reported by Scam Sniffer, a Web3 anti-scam platform.
The platform revealed that 10,805 victims suffered losses amounting to $46.7 million from various crypto phishing scams last month.
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