The United Nations Office on Drugs and Crime (UNODC) has called on Southeast Asian countries to criminalize the operation of unlicensed money service businesses and virtual asset service providers (VASPs) amid rising concerns over their involvement in illicit activities.
According to a recent report by the UNODC, certain unlicensed VASPs, some with ties to criminal networks, are facilitating transactions for illegal activities such as fraud and high-risk gambling. The agency warns that these platforms play a role in crimes like drug trafficking, cybercrime, and even human trafficking.
Unlicensed Exchanges Linked to Serious Crimes
The report cited an unnamed entity that had conducted transactions worth “at least hundreds of millions of dollars” with criminal organizations, including groups engaged in large-scale drug operations, human trafficking, cybercrime, and child exploitation. Some entities were even found to be under sanctions by the U.S. Office of Foreign Assets Control (OFAC).
Additionally, the report highlighted connections between some crypto wallets and North Korea’s Lazarus Group, a notorious hacking syndicate involved in cybercrime.
Masood Karimipour, the UNODC’s regional representative, emphasized the urgency of the issue: “It is more critical than ever for governments to recognize the severity, scale, and reach of this truly global threat, and to prioritize solutions that address the rapidly evolving criminal ecosystem in the region.”
UNODC Recommendations
The UNODC’s recommendations extend beyond criminalizing unlicensed VASPs. The agency also suggests:
- Enhanced surveillance of organized crime involvement in sectors such as casinos, cyber fraud operations, and other scam-related activities.
- Improved training for law enforcement on handling online gambling schemes and money laundering techniques, which are increasingly facilitated by advanced technologies like cryptocurrencies.
The report further notes that while not all scams in Southeast Asia involve cryptocurrency, digital assets are frequently used by fraudsters because of the ease of conducting cross-border transactions and widespread misinformation about how cryptocurrencies work. This is compounded by low levels of understanding among users, making them vulnerable to exploitation.
Rising Online Fraud in Southeast Asia
Online fraud has been growing rapidly across Southeast Asia, often operating out of inconspicuous office buildings or casino complexes. A previous UN report estimated that 220,000 individuals are involved in scam operations in Cambodia and Myanmar, many of whom were tricked into these roles under false job offers.
One of the most prominent scams in the region is “pig butchering,” a romance scam where fraudsters gain victims’ trust online before convincing them to invest in fraudulent schemes. Other common scams include impersonation, job scams, asset recovery schemes, and phishing attacks.
Emerging technologies like artificial intelligence and deepfakes have also increased the sophistication of scams. For instance, phishing attacks targeting crypto users have become more frequent and costly. In September 2024, over 10,000 victims lost a combined total of $46.7 million to various crypto phishing scams, according to Scam Sniffer, a Web3 anti-scam platform.
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