Criminal organisations in Southeast Asia are increasingly exploiting cryptocurrency and emerging technologies to perpetrate large-scale, hard-to-detect scams, money laundering, and underground banking operations. This is according to a recent report from the United Nations Office on Drugs and Crime (UNODC).
Billions in Financial Losses Estimated
In 2023, the financial losses from scams targeting East and Southeast Asia are estimated between $18 billion and $37 billion, with organised crime groups playing a significant role. These criminals are leveraging underregulated virtual asset service providers and online gambling platforms to launder illicit funds, thereby integrating them into the global financial system with minimal oversight.
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Cryptocrime in Southeast Asia is growing beyond government control
Slava Demchuk, a consultant for the UNODC and CEO of crypto compliance firm AMLBot, remains optimistic that these crimes can be addressed. He explained that “the nature of crypto assets is that it is possible to identify their source, e.g., where they come from, by using blockchain analytics tools.” These tools, he adds, can flag addresses associated with sanctions or illicit activities.
However, Masood Karimipour, UNODC’s Regional Representative for Southeast Asia and the Pacific, expressed concern that governments are struggling to keep up with the rapidly evolving tactics of organised crime groups. He noted, “The evolving situation is outpacing governments’ capacity to contain it.”
Insufficient supervision and AI lead to frequent encryption crimes
The report further details how criminals exploit the underregulation of virtual assets. Many countries do not enforce stringent regulations on cryptocurrency, which allows unscrupulous actors to provide unregulated crypto services. These services are particularly appealing to criminals due to the lack of Know Your Customer (KYC) processes or crypto screening, allowing them to exchange cryptocurrencies with ease.
The rise of generative AI is also contributing to the problem, with a surge in the use of deepfakes for fraud. Criminal groups have been leveraging AI to create convincing deepfakes, enhancing their ability to deceive victims and engage in cyber fraud. According to John Wojcik, a UNODC Regional Analyst, this trend is expanding the scope of cyber-enabled crime.
UN report reveals current status of crypto-crimes in Southeast Asia
The report draws parallels with a June 2023 United Nations report that highlighted concerns over the potential misuse of AI-generated deepfakes in conflict zones. While AI holds vast potential for addressing global challenges, its misuse poses significant risks.
Furthermore, organised crime groups have also been linked to human trafficking, with victims often coerced into scam operations through deceptive job advertisements. Many victims are forced into cyber fraud and money laundering activities.
The UNODC report presents a concerning picture of how organised crime groups in Southeast Asia are using cryptocurrencies, AI, and other technologies to enhance their operations. Despite the potential for blockchain analytics to trace illicit activity, underregulated markets and rapid technological advancements continue to offer significant opportunities for exploitation.
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