UNODC Report: Cryptocurrencies and Organized Crime in East and Southeast Asia

Key Findings

The United Nations Office on Drugs and Crime (UNODC) recently released a report titled “Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden and Accelerating Threat.” The report, issued in January 2024, sheds light on the concerning misuse of cryptocurrencies and technological innovations in illicit economies, particularly in East and Southeast Asia.

The report highlights several key findings:

Transformation of Organized Crime

There has been a significant evolution in transnational organized crime in Southeast Asia, especially with the growth in cross-border trafficking of synthetic drugs and other commodities. Organized crime groups have embraced technology, leading to a revolutionized crime environment in the region.

Rise of Online Casinos and Cyberfraud

The COVID-19 pandemic has fueled the proliferation of online casinos and cyberfraud across Southeast Asia, particularly in the Mekong region. Organized crime groups running these operations have utilized data mining, blockchain technology, and generative artificial intelligence (AI), making law enforcement efforts more challenging.

Underground Banking and Money Laundering

The report emphasizes the integral role of casinos and junkets in the underground banking and money laundering infrastructure. Various methods, such as cash-in cash-out, collusion between gamblers, junket financing, and misuse of casino VIP cash accounts, contribute to the problem.

Infiltration of Cryptocurrency in Illegal Activities

Organized crime groups are increasingly integrating cryptocurrencies into their illegal betting operations. They employ sophisticated high-speed money laundering “motorcade” teams that specialize in underground USDT-fiat currency exchanges.

Challenges in Monitoring and Regulation

The rise of cryptocurrency-integrated operations, running syndicates, and the complex nature of online gambling platforms pose significant challenges to authorities. The anonymous nature of transactions and the lack of adequate compliance staff in the online gambling sector make it difficult to track and verify the source of funds.

Generative AI and Deepfake Fraud

There is growing concern about the use of advanced technologies like generative AI and deepfake for cyber fraud schemes. Scammers can create highly realistic images and voices, leading to sophisticated investment fraud and other malicious activities.

Policy and Enforcement Recommendations

The report suggests several policy and enforcement recommendations to address these challenges:

• Develop national action plans and a regional strategy to tackle organized crime
• Revise legislation related to money laundering, asset forfeiture, and casino management
• Establish a regional inter-agency forum to share information and intelligence
• Improve digital forensic capabilities
• Mandate the filing of suspicious transaction reports (STRs) by casinos

Conclusion

The UNODC report highlights the increasing complexity of organized crime in the digital age, particularly in East and Southeast Asia. It underscores the need for stronger regulatory frameworks and international cooperation to effectively address these evolving threats.