Cross-border organized crime in East and Southeast Asia has been a matter of concern for decades, with varying degrees of success in fighting and suppressing illegal activities and organizations. The latest report by the United Nations Office on Drugs and Crime (UNODC) unveils the changes in the method of operation of crime groups in the region, turning to technology and embracing the advantages of the digital era.
Online casinos, junkets, and cryptocurrency are now primary drivers of sophisticated money laundering schemes, enabling a much faster transfer of funds and increased anonymity of criminal actors. The report underscores the size of these operations with special attention to zones lacking adequate government control in the Mekong, such as online casinos in Thailand, which are accessible to the local population though not regulated by an official government body. This article will discuss the findings of the UNODC 2024 report and explore the role of casinos and crypto in Southeast Asia’s illicit economy.
The Evolution of Illicit Economy in the Mekong
In the last two decades, strict measures against illegal activities of casino junkets in Wenzhou, Zhejiang Province and Macau led to the arrest and conviction of dozens of members of a criminal group connected to the largest Macau junket operators, Suncity and Tak Chun. The leaders of the organization, Alvin Chau and Levo Chan, were sentenced to 18 and 13 years imprisonment, respectively, for a number of counts of illegal gaming activities like under-the-table betting and fraud.
Following the break up of this group and the closing of hundreds of junkets, the illegal operations moved further south to special regions in Myanmar and special economic zones with a notable absence of government control. This led to the establishment of over 340 brick-and-mortar casinos in the Asia Pacific region, exhibiting extreme market growth in an industry expected to bring in $205 billion by 2030.
Online casinos are also part of the e-junket scheme, with junket operators turning into customer referral agents to propel money laundering activities. Advanced technologies like mirror websites, crypto, and e-wallets further fuel the potential for illicit activities in the market, with digital platforms serving as a basis for cyber fraud.
Underground Banking and Money Laundering
Casinos and junkets are the perfect conduits for transfers and money laundering. The funds go through a three-step process of placing them into a legal business or a financial system, then distancing them from the illegal source, and finally, integrating the money into the legal economy. After the layering process, it becomes extremely difficult, if impossible, for authorities to find where these funds originate from.
The most common techniques for money laundering through casinos and junkets include:
- Cash-in cash-out: A simple technique where a criminal actor exchanges the money for chips and converts it into cash again, presenting the funds as casino winnings. To avoid suspicion, the money can be divided into several casino accounts.
- Collusion between players: This method works in games where players compete against each other, agreeing that one party will deliberately lose in favor of the accomplice. Again, illegal money is taken out of the casino as legal winnings.
- Junket financing: It allows a discreet cross-border transfer of money by depositing the funds into a junket account in one country and taking them out in another. The movement of these funds is completely out of reach to government agencies.
- Misuse of casino accounts: Criminals can use the online casino account to receive money and then withdraw the funds through the casino.
- Dummy room transactions: These involve VIP players who engage in payments for false services at the resort. The player receives a voucher for the room charges, which they cash out at the casino.
The increased illegal practices in crypto trading prompted the People’s Bank of China to ban crypto transactions and mining in 2021. Criminal organizations dealing with crypto frauds migrated to Southeast Asia in unregulated markets and continued their operations unobstructed.
Money laundering using cryptocurrencies involves the same process used for FIAT money, but crypto offers anonymity, so the first step of placing the funds in a legal system becomes redundant. Creating a crypto wallet is fast and easy, and transactions are instantaneous, allowing crime operators to make a huge number of transactions in a very short time, expediting the whole process. The volatility of the cryptocurrencies and frequent fluctuations in their value help to legitimize the increased crypto balance.
Technical advancements, the digitalisation of casinos, and the anonymity and speed of crypto transactions have enabled criminal groups to operate using physical and online casinos and cryptocurrencies for money laundering. Southeast Asia, particularly the Mekong, offers the perfect conditions for such operations, taking advantage of the unregulated special economic zones. Authorities are beginning to recognise the scope of the illicit economy in this region, preparing to tackle casino operations that facilitate money laundering.
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