June 15, 2024

“The previously thriving Macau gambling junkets have been completely wiped out. In their stead, unauthorized gambling cartels are now leveraging poorly managed online gambling sites in Vietnam, coupled with clearing systems in Cambodia and other countries in Southeast Asia. The Philippines has become a prominent ground for such illicit online gambling activities.”

Over the past few years, the casino industry in Southeast Asia has witnessed significant growth. Early figures for 2022 show over 340 active licensed and unlicensed casinos, according to the January report from the United Nations Office on Drugs and Crime (UNODC). This growth comes as a result of several enforcement regulations implemented in Macau, primarily aimed at combating corruption, money laundering, and illicit capital outflows from mainland China.

From 2019 to 2023, implementation of these measures led to the apprehension and conviction of several prominent names in Macau’s junket industry, such as Alvin Chau and Levo Chan. The UNODC report identifies these two individuals as key players within the global junket operations.

Chau’s arrest took place in November 2021 and he was sentenced to 18 years in prison in Macau in January of the following year. Chan received a 14-year sentence, later reduced to 13 years, in April.

Southeast Asia’s Involvement

In response to these crackdowns, operators have shifted base from Macau to the special economic zones of Southeast Asia, as indicated by the UNODC report. This movement is reflected in the significant dip in the number of licensed junkets in Asia’s gambling capital, which plummeted from 235 in 2014 to a mere 36 last year, with only an estimated 12 believed to be operational.

“Several illegal online casinos in Southeast Asia expanded their operations to include cyberfraud activities, bolstered by considerable evidence of organized crime permeating casinos and SEZs [special economic zones] to aid in obfuscating diverse illicit pursuits,” according to the UNODC report.

Given the lax regulation, many extended their activities into countries like Cambodia, Laos, and the Philippines, as well as conflict-ridden untamed zones along Myanmar’s borders. The pandemic saw many of these operators diversifying into cyberfraud.

China’s Intervention

On April 13, China’s Ministry of Public Security reported that 130 Chinese citizens, suspected of involvement in cross-border gambling and online fraud, were extradited from Cambodia to Wuhan, the provincial capital of Hubei. As stated by the national broadcaster CCTV, these individuals form the first group of 670 Chinese suspects expected to be repatriated from the Southeast Asian country.

The ministry felicitated this collaboration between Chinese and Cambodian police, centring on the coastal city of Sihanoukville, as a significant achievement.

In Otres, a former village at the southernmost portion of Sihanoukville, an array of expansive casino complexes and enclosed compounds, complete with residential units, offices, supermarkets, and other facilities, are rapidly replacing the original seaside strip.

Within these compounds, captive workers, essentially abduction victims, are pushed into 12-hour workdays for six days a week, operating unlawful betting activities, engaging in cryptocurrency fraud, and pressuring people into “pig-butchering” scams.

The Implications

These scams, known as sha zhu pan in Chinese, involve defendants building long-term, often romantic, relationships with victims, convincing them to invest in fraudulent ventures. The insidious nature of these scams is analogous to fattening up a pig before slaughtering it.

Southern Cambodia’s Sihanoukville, thanks to its favorable tax situation and easy acquirement of casino licenses, transformed into a hotspot for illegitimate online gambling and cyber scams.

Until the latter part of 2022, when the authorities started to react, Cambodia had become the focal point for trafficking related to web-based gambling and cyber scams managed by criminal syndicates, states the Asian Racing Federation report. Sihanoukville’s special economic zone was essentially sought-after due to its favorable tax situation and effortlessly attainable casino licenses.

This resulted in a complete transformation of the tranquil beach town. By the start of 2019, nearly a hundred casinos had sprung up; Massive construction projects, most of them poorly regulated; and a huge influx of primarily Chinese residents, scaling to about 500,000 at its peak,” adds the report, pointing out that numerous casinos were being managed by criminals who had previously been charged with illegal gambling in China.

The scam syndicates amass between US$40 billion to US$100 billion annually from illegitimate betting and cyber fraud, operating mainly in Cambodia, the Philippines, Laos, and Myanmar. As per the report’s estimation, about 250,000 people might be involved in this underground sector across these four countries, often against their will.

The figures released by Beijing are even more staggering, with about 5 million individuals assumed to be involved in the sector by 2020, and a capital outflow from China of about US$157 billion, as reported by the Chinese government and stated in the UNODC report.

Clamping Down on Dirty Money

At present, Singapore presides over the Financial Action Task Force (FATF), the leading international body fighting against money laundering. The position has been held by Singaporean T. Raja Kumar since July 2022.

Under his leadership, which will last till the end of June this year, the FATF has prioritized depriving criminals of the proceeds of crime – In October, the organization agreed on amendments to its guidelines intending to “equip countries with a more potent toolbox” for seizing assets.

Additionally, it initiated a new scheme aimed at countering illicit financial flows arising from cyber-enabled fraud – including money laundering – in collaboration with Interpol and the Egmont Group, an international network of financial intelligence units working collectively to combat economic crimes.

In a November report, the FATF mentioned the new initiative stating that criminals are exploiting social media and messaging platforms to recruit money mules worldwide. It also added that virtual services such as remote online account opening enable criminals to effortlessly set up foreign accounts and launder proceeds abroad, carrying out financial transactions at incredibly high speeds.

The financial watchdog warned that organized crime has been swift in exploiting vulnerabilities in emerging sectors like fintech and e-commerce. It urged jurisdictions worldwide to collaborate in intercepting the proceeds of cyber fraud, which are laundered across borders.

In November, FATF also released a report on the “misuse of citizenship and residency.” It called on governments running golden passport or visa programmes to enforce safeguards.

A History of Money Laundering in Singapore

Singapore has had recent experiences with criminals using purchased passports to launder billions of US dollars through the city state. In August of the previous year, ten suspects born in China, who held various foreign citizenships – including from Cambodia and Vanuatu – were arrested in a massive crackdown on money laundering. The first conviction in the case, involving a suspect with links to illegal overseas gambling, occurred earlier this month.

According to FATF president T.Raja Kumar, granting citizenship and residency to wealthy investors through ‘golden’ passport and visa programmes can potentially lead to economic damage.Explaining the situation, Kumar, the president of FATF, exclaimed during a press release in November, “These wealth management tendencies may bolster economic growth. Nevertheless, they are deploying their resources for illicit activities such as money laundering and identity concealment.”

Steve Vickers and Associates, a leading risk mitigation consultant firm, is tirelessly working with top international financial institutions in the region to safeguard against criminal undertakings and untidy money originating from mainland China. Vickers, the CEO of the firm, addresses the current financial situation and Chinese government precautions as “severe.”

“Certainly, Singapore is escalating its anti-money-laundering practices, and the cases they’ve tackled have been formidable,” Vickers noted, stating that the city acknowledging their capabilities and actions to make “a rock-solid exhibition.”

“Negative economic repercussions in mainland China, along with an organized anti-corruption and anti-capital outflows enforcement, have also contributed,” he added.

Writing a response to a substantial money laundering case entangling a few of the city’s top-tier local and international banks, Singapore reinforced its scrutiny over family practices and regulations, thereby leading to a slower expansion in the sector and longer waiting durations for aspiring members.

Among those lending a hand to Chinese family offices in meeting regulatory standards and validating their wealth is Dentons Rodyk, one of the most prominent law firms in Singapore.

Loh Kia Meng, the chief operating officer and a senior partner of Dentons Rodyk, noted, “Intensified regulatory watch has been noticed, pertaining not only to the fund and wealth source but also on the applicants’ background, the investment professionals, and the family office structures.”

Money-laundering scandal engulfs Singapore’s banking titans

United Overseas Bank, a Singaporean bank leader caught in the money laundering scandal, released a statement emphasizing its dedication towards counteracting money laundering and continuously works towards maintaining “robust due diligence checks.”

The bank stated, “Being a conscientious financial institution, it is our sole duty to abide by supervisory and regulatory requisites.” This includes utilizing “data analytics and technological solutions in our battle against money laundering.”

However, this amplified scrutiny raises an alarming issue. It is feared that Singapore’s restrictive anti-money laundering endeavors may lead to the dispersion of illegal proceedings, similar to the crackdown on junkets in Macau, which subsequently led to illicit gambling operators spreading across Southeast Asia’s loosely regulated special economic zones.