A growing number of Commsrisk articles describe raids on compounds where scammers use voice calls, messages and social media to connect with potential victims in other countries, then attempt to trick them into transferring their money. The scammers may pretend to be a police officer, or to work for a bank, or to be the CEO of a company that needs an underling to settle a supplier invoice immediately, or to be a handsome man who has fallen madly in love with their target. Looking at individual crimes helps us to understand the methods used by scammers and how they may be counteracted, but it does not give us a sense of the enormous scale of networked crimes being committed, or how the scammers may also be victims too. Much of the global scam problem we now face paradoxically stems from the success of a crackdown on telecoms scams that the Chinese authorities began in 2016.
The criminals modified their business model to shift from near-exclusive reliance on China and to appeal in addition to a global market (thus also eluding the capital restrictions and ban on cryptocurrency China introduced in 2021). For workers, they turned to criminal trafficking networks able to lure a new multinational labor force into scamming enclaves in Cambodia, Myanmar, Laos, and elsewhere with promises of well-paid, high-tech jobs. Today, there are an estimated 300,000 cyber scammers in the Mekong region, many of whom are held captive in prisonlike conditions and forced to spend long hours scamming unsuspecting targets, often victimizing people from their own countries. The labor force inside the compounds is controlled by armed Chinese gangs, while external security is typically in the hands of local militias or police.
These words were taken from a recent report by the United States Institute of Peace (USIP), a nonpartisan body that researches the causes of conflict and methods of avoiding it, and whose work is funded by the US government. Drawing on previous research by the United Nations, USIP calculates there are half-a-million scammers working in scam compounds worldwide, with the majority in the top three countries.
- Cambodia: 120,000 scammers
- Myanmar: 100,000 scammers
- Laos: 85,000 scammers
In contrast, the number of scammers working in mainland China is now thought to be 30,000. There is a theory amongst some fraud managers that the best way to tackle fraud is to push fraudsters away from your organization so they will attack somewhere else instead. That theory does not work when applied to nations, as the Chinese authorities now appreciate. Chinese law enforcement find themselves needing to increasingly collaborate with foreign police in order to execute raids on scam compounds across Southeast Asia. This can even escalate to literal warfare; armies that oppose the central government of Myanmar have been encouraged to attack and defeat scam compounds in border regions, sometimes leading to more than a thousand Chinese being repatriated at the same time. But even that is not enough to turn the tide, with criminal gangs compensating by establishing scam compounds in Cambodia or by moving to different parts of Myanmar. Their operations may be placed somewhere new but the lucrative scams continue. This has devastating consequences for people forced to work in scam compounds, and for regions which have fallen under the sway of crime lords.
The human toll is undoubtedly the negative effect felt most acutely in countries hosting this activity. As the case studies below make clear, an influx of crime groups predominantly from China has pushed local communities out of cities and towns such as Sihanoukville, where prices have skyrocketed, criminals have taken control of land, and the rights of local communities have been undercut by corrupt elites partnering with criminal networks…
The hundreds of thousands of people from around the world who are tricked, trafficked, or pushed, often unwittingly, into Southeast Asia’s criminal compounds are among the scamming industry’s most egregiously abused victims. They are forced against their will to work on the scams, held at gunpoint, and tortured if they resist or fail to meet quotas. If they try to escape, they are usually captured and returned, sold to another scamming operator, or ransomed back to their families for exorbitant sums. Very few make successful escapes, and some are killed trying. Unfortunately, many of those freed from scam compounds in Cambodia or Myanmar face further abuse and extortion by endemically corrupt law enforcement while awaiting repatriation, and many are treated as criminals when they return home.
Last month, a riot in the Cambodian city of Sihanoukville was described as a revolt by 300 trafficked Indians against their Chinese handlers. The Indian Embassy in Cambodia subsequently announced that 60 Indian nationals had been rescued from scam operations in Sihanoukville and would be helped to return to India.
Count 60 scammers here, a few hundred scammers there, and a thousand in another location… keep adding numbers like these and it becomes possible to understand how 300,000 human beings in Cambodia, Myanmar and Laos have been turned into slaves whose sole function is to use telecom and internet connections to defraud victims around the world. This criminal endeavor now absorbs so many lives because it is so lucrative.
…the study group calculates that the funds stolen by these 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. A significant share of these profits is reported to flow to the Myanmar military and to ruling elites in Cambodia and Laos.
Unlearn what you have previously been told about the extent of fraud because it is wrong. There is an unfixable skew to supposedly global surveys that are mostly based on the figures that managers in Western telcos report to their bosses in order to justify expenditure on fraud detection and prevention. These figures place all the emphasis on the losses suffered by telcos, without any serious attempt to gauge the far greater losses suffered by customers. The true cost of fraudulent communications is much more than the cost suffered directly by telcos. Using the latter number to decide the level of telco expenditure on controls results in severe underinvestment in fraud detection and prevention.
Imagine the entire population of Iceland was enslaved by pirates and then forced to do nothing but run scams to steal from victims worldwide. What would be the international response? Iceland would certainly be disconnected from networks. It would very likely be invaded by a coalition of military powers. The number of scammers working in Cambodia, Myanmar and Laos is roughly equal to the adult population of Iceland. The collective amount of money stolen by their scams is 45 percent higher than the GDP of Iceland. Or to put it another way, if the scam compounds based in Cambodia, Myanmar and Laos were a country, then its economy would be large enough to rank in the middle of all the countries in the world. However, the GDP per capita would be around USD146,000, which is almost enough to place them at the top of global rankings. But the people who work in these compounds are not enjoying a high standard of living equivalent to that found in a wealthy economy. They are slaves, and they suffer violence if they refuse to work.
The income generated by scammers goes to crime lords who can afford to buy police forces and government officials. Scam kingpins have become the de facto rulers of the territories they have colonized in Southeast Asia. They also keep looking to expand across other continents too. But the international response is not to send troops to liberate the slaves. We have barely begun to disconnect scam compounds from the networks they rely upon. Some countries resist the simple but highly effective control of blocking obviously fraudulent inbound international traffic. Part of the reason for the paltry international response is that much of the private sector has been calculating the value of fraud in entirely the wrong way. The cost of network fraud is not measured solely by how much network providers lose. It should not be calculated by adding together a $30,000 bypass fraud here to a $70,000 IRSF fraud there and so forth. As much as telco managers care about these frauds, they do not compare to the totals stolen from ordinary people every day of the week by the enormous number of slave scammers forced to work in scam compounds. And the harm being done to these slaves has a cost that cannot be calculated.
The USIP report, “Transnational Crime in Southeast Asia: A Growing Threat to Global Peace and Security”, can be freely obtained from here.
