In some respects, the following story is not news. It is an affirmation of what we should already know about the way international criminal gangs are making a fortune from scams run from a compound in one country while targeting victims in a different country.
This week, five men pled guilty in a US court to their part in laundering USD36.9mn of proceeds generated by a scam run from Cambodia. They were:
- Joseph Wong, from California;
- Shengsheng He, from California;
- Jose Somarriba, from California;
- Yicheng Zhang, from China; and
- Jingliang Su, from China and Türkiye.
Note the nationalities of these men. For all the fuss made about criminals lying beyond the jurisdiction of law enforcement, there are usually some gang members who are within their jurisdiction. National police forces can do more to tackle criminals who live within their borders.
The next learning point comes from the Department of Justice’s press release.
…co-conspirators residing overseas would contact U.S. victims directly through unsolicited social media interactions, telephone calls, text messages, and online dating services and gain the victims’ trust.
It is a mistake to pursue piecemeal strategies that implement controls on some comms channels but not other comms channels. Scammers do not care if their initial interaction with a victim occurs through a robocall or Tinder. Despite this, the vast majority of countries continue to maintain rules and implement controls that treat scam activity involving traditional telecoms services as separate to scam activity involving the many forms of communications made possible by the internet.
The scammers in Cambodia duped victims into purchasing bogus digital assets. But it is not enough to just call a victim in the USA from Cambodia; there also has to be way to move the victim’s money out of the USA. Therein lies the third lesson that should not need reiterating but does need reiterating: we can also trace scams by following the money, and stop scams by preventing the flow of money.
This particular gang opened a bank account in the Bahamas in the name of Axis Digital Limited. Axis Digital was a front created by two of the Californians: Jose Somarriba and Shengsheng He. Funds paid into the Axis Digital account were converted into the stablecoin Tether and transferred to a digital wallet controlled by peers in Cambodia. The money was then split and forwarded on to gangsters who run various scam compounds around Cambodia.
Other front companies and accounts were also created to launder money.
Wong managed a network of money launderers in Los Angeles who registered shell companies, opened U.S. bank accounts, and wired victim funds to international bank accounts. Zhang opened and operated two U.S. bank accounts used to launder victim proceeds.
There is more that telcos and other comms businesses can do to reduce scams. But we will make very little progress if we do not take a rounded view of how scams work, and how societies need to defeat scams. Blocking lots of calls will make no difference if the scammers can reach victims via a dating app or social media network instead. Criminals are motivated by money; it will often be easier to trace the flow of money than to trace a call. Tracing a call accomplishes little, especially if there is no criminal conviction and no effective control that prevents the caller using a different comms channel in future.
It is at least as important to use economic sanctions against Cambodia, which has profited from the migration of scam compounds that were previously located in China or Myanmar. They need more financial motivation to tackle crime, as a counterweight to the enormous financial gains being made by allowing scams to be run from compounds within the country. And law enforcement and banks should seek to stem the flow of money before it reaches the accomplices in Cambodia. Starve the compounds of their profits and you remove the motivation for continued crime. Better still, stopping the flow of money out of rich countries like the USA is a more effective worldwide strategy than trying to persuade every other country to do more to fight crime.
The Department of Justice press release about this case can be read here.
