The U.S. Institute of Peace (USIP) recently published a study on the cyber scamming industry in Southeast Asia finds that a decision in 2022 by the Financial Action Task Force (FATF) to delist Cambodia from its "gray list" of countries with deficient money-laundering controls has contributed to facilitating industrial-scale money laundering and strengthening the scamming industry there. According to the USIP's estimates, in Cambodia alone, return on cyber scamming is estimated to exceed $12.5 billion annually – half the country's formal GDP; and funds stolen by 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. Speaking to RFA Khmer, Priscilla Clapp , a USIP senior advisor and who co-chaired the study, suggests that FATF should blacklist Cambodia in order to curb money-laundering and cyber-scamming.
RFA: Your report states that Cambodia, Laos and Myanmar are the epicenter of the cyber scamming industry in Southeast Asia. Can you give us a brief summary of the cyber-scamming industry in these three countries, in particular Cambodia?
Clapp: Myanmar, Cambodia and Laos are the epicenter of the scamming. But the scamming itself is a combination of investment schemes, fraudulent investment schemes and fraudulent dating schemes. They try to draw people into a relationship through which they get them to begin handing over money, transferring it into crypto coins, crypto currency. And once they do that, it's gone. They just move it, they bundle it and move it into other places so people never see it again. This is part of a network that extends throughout the region. It's not individual states so much as it is the network. And that's the key point here.
What we were trying to bring out in this study was that Cambodia, Laos and Myanmar happen to be the epicenter because they are the most easily corrupted right now because of weak governance, and, in the case of Myanmar, because of extensive conflict that really creates a lot of instability in the country. These networks take advantage of unstable conditions, where they can capture the elite, either government, business or society. They are run by Chinese. They have grown out of the ancient Chinese triads, which came with the Chinese population that migrated into Southeast Asia. So there is, of course, a large Chinese population throughout Southeast Asia, including in Cambodia. And that's the population that these scams were originally focused on.
But during the COVID period, because China closed its borders and its own people were called home and not allowed to leave the country, they lost their access to labor. It's a very labor intensive industry, and they needed the Chinese to run the scams before. So they began to transform themselves into a more global phenomenon, meaning that they began enticing people from around the world into these scam centers with the promise of high-tech, high-paid jobs, which, of course, wasn't the reality. And they began using them to scam their own countrymen. So it's now become a global problem. And the United States is one of the large victims of this. I would say the two largest victims are the U.S. and China. So we have a common interest here in doing something about it.
RFA: Globally, more than 60 countries have become victims of the cyber-scamming industry originating in Southeast Asia. Your report mentions that as of May 2024, Cambodia is host to large-scale, sophisticated cyber-scamming operations spread widely across the country. How did it happen?
Clapp: It started with illegal online gambling. You may recall that in 2016 or 2017, gambling operations started appearing in Sihanoukville. And they were run by Chinese. And they drew a lot of Chinese gangs to enforce the payment for gamblers that had lost money. Some of it was in-person gambling, but a lot of it was online and that was focused on China. But the gangs got out of control and started shooting up people on the streets, including police, and Prime Minister Hun Sen started to close it down, and he invited Chinese police to come in and round up these gangs. And so it was suppressed in Cambodia at that time – the online gambling. And then what happened is it started moving out into more local areas, smaller operations. So it wasn't concentrated in Sihanoukville the way it had been. And at that time the gambling operations moved to Myanmar from Cambodia where they found a welcome home in Karen state. They were also on the China border, and they were being protected by Myanmar Army Border Guard Forces, the Karen Border Guard Force and the Kokang Border Guard Force. They were not only protecting, but they were also making money off it. They were profiting from them. But the operators were Chinese, actually the Kokang are Chinese. So, they were playing a dual role. That's when it started in Myanmar.
And then COVID hit in 2020, and that started changing the whole dynamic. It came back in Cambodia in a different form, the scamming form that's now focused on investment and dating sites, that sort of thing. There's still probably some online gambling going on, but it's not the central focus of them anymore. And this happened with the Philippines as well, because a lot of the online gambling actually started in the Philippines. And when the Philippines started cracking down on it, it moved to Cambodia. The Cambodian government cracked down on it and it moved to Myanmar. But it never really left those other places. It's more and more under control in the Philippines now since (Ferdindand Marcos, Jr.) has become the president.
RFA: In Cambodia alone, your report estimates that the cyber scamming industry generates $12.5 billion annually. It is stated that a significant part of the proceeds from these stolen funds have gone into the pockets of the ruling elites because they have connections to cyber scamming syndicates. Can you elaborate on how these connections arise?
Clapp: Well, the connections are, let's say, the Chinese bosses who set these scams up, who sponsored them, are very well connected. And they operate in both licit and illicit business areas. And so they make connections with the ruling elite through what appear to be legitimate business operations. But then they start running these illegitimate operations underneath. So it's not clear that the ruling elite understands what they're getting into, but they do know that they're profiting from it. And so they let it go on. I'm not sure that they fully understand the illegal parts of it and the victimization that's happening.
RFA: In terms of governments’ responses to cyber scamming, do you think they have done enough?
Clapp: It keeps taking different forms. The thing is that these networks are very, very sophisticated, very advanced. The technology is extremely advanced, and they keep finding new ways of using the technology that get way out ahead of even law enforcement's ability to deal with it. But in Cambodia, what they've done is when the government moves in on, let say Sihanoukville or some of these large compounds where they have the scamming, they move out into the rural areas, particularly towards the Vietnam border. And it starts becoming much smaller operations. But most of them still have ownership among Cambodian businesses. Whether they know what's going on or not, I don't know. But they need to have a Cambodian sponsor. So yes, definitely it gets all mixed in. And the same thing happens in Laos and Myanmar.
RFA: So if the issue of cyber-scamming is not curbed properly, what do you foresee will happen to Cambodia in the future?
Clapp: The government and law enforcement and civil society – the whole population – has to be aware of what's going on and try to seize back control of their country. And that would take a large understanding within the population. But the government needs to be in the lead. The government can do a lot about it, but they have to be tough. And it's going to cost financially because there is a lot of money coming from these scams. It's filtering into the economy there. There's no question about it. A lot of it's going into the international financial system. It's laundered through big banks and all over the place – probably here as well as Singapore, and Hong Kong. So the bulk of it goes there, but enough of it stays in Cambodia that it makes a difference to the Cambodian economy. As resources begin to disappear, they have to find other ways. But what they should be doing is finding better ways of investing in industry or tourism or whatever. But this scamming is basically in many places, getting out of control, and there is a lot of violence that goes along with it with these Chinese gangs that come in and force conditions inside, and they corrupt the local police force, certain people in the police force, not the whole thing, but certain people, so that they have protection. And, it's very hard to crack into that.
RFA: Your report mentions that part of the issue that allowed the money laundering to reach industrial-scale in Cambodia is because in 2022, the international organization, the Financial Action Task Force, delisted Cambodia from its “gray list,” and as such also contributes to strengthening the cyber-scamming industry there. Was that the right decision?
Clapp: We think they should be listed back onto the "gray list." I think they should be on the black list, actually. It will certainly send a message. It will help. But the Financial Action Task Force does not necessarily have the power to do it on its own. The government would have to be a higher power, and the government would have to step in and be behind it. And that may not be happening. But I'll tell you that with money laundering, when these scams collect money, they immediately move it out. They move it out into other networks and it winds up in China, Singapore, Hong Kong and other places. Not necessarily in Cambodia. Very little of it stays behind there. So it's not likely that Cambodia will become a significant banking system for them.