Southeast Asia Groups Using Crypto to Carry Out ‘Larger Scale and Harder to Detect’ Crimes: UN

Bad actors in Southeast Asia are increasingly leveraging crypto and “producing larger scale and harder to detect fraud, money laundering, underground banking, and online scams,” according to a new report released by the United Nations Office on Drugs and Crime (UNODC).

UNODC estimates that financial losses from scams targeting victims in East and Southeast Asia range between $18 billion and $37 billion in 2023, with a significant portion attributed to organized crime groups in the region.

The report highlights the integration of emerging technologies into criminal activities in the region—including cryptocurrencies and generative AI.

Slava Demchuk, UNODC Consultant and the CEO of crypto compliance firm AMLBot believes that the issue can be addressed. He told Decrypt that “the nature of crypto assets is that it is possible to identify their source, e.g., where they come from, by using blockchain analytics tools.” He explained that “such screening steps might indicate that the crypto address is associated with some risks, such as sanctions, illegal services, dark markets, etc.”

Masood Karimipour, UNODC Regional Representative for Southeast Asia and the Pacific, wrote in the Oct. 7 announcement that “organized crime groups are exploiting vulnerabilities, and the evolving situation is outpacing governments’ capacity to contain it.”

Cybercriminals reportedly leverage underregulated online gambling platforms and unauthorized virtual asset service providers are being used to launder their proceeds, according to the UNODC report. These platforms enable organized crime groups to move funds across borders with minimal oversight, integrating illicit money into the global financial system.

The report follows a recent talk by blockchain analytics firm Chainalysis detailing how the rise of Russian-language, non-KYC instant exchange services simplifies money laundering and sanction evasion. The UN report similarly suggests that illegal online casino operators have expanded their activities to include cyber-enabled fraud and crypto-based money laundering services.

“Evidence shows organized crime influence within casino compounds, special economic zones, and border areas to conceal illicit activities,” the report said.

Demchuk highlighted that because not all countries regulate crypto,“this opens the door for those who want to benefit from providing unregulated crypto services.” He explained that those firms “attract criminals as they know that there is no KYC process, no crypto screening, and they can easily exchange one crypto for another.”

The UNODC report also notes a rise in deepfakes made with generative AI by criminal groups in Southeast Asia during the first half of 2024. Criminals are utilizing generative AI to create deepfakes, enhancing their ability to commit fraud and deceive victims.

“These developments have expanded the scope and efficiency of cyber-enabled fraud and cybercrime,” said John Wojcik, UNODC Regional Analyst.

The comments follow a June 2023 United Nations report warning about the role of AI-generated deep fakes in conflict zones.

“While holding almost unimaginable potential to address global challenges, there are serious and urgent concerns about the equally powerful potential of recent advances in artificial intelligence,” the report read.

Organized crime groups are also involved in human trafficking, forcing workers into scam operations. Victims are often misled with false job advertisements and coerced into participating in illegal activities, including cyber fraud and money laundering.

Edited by Stacy Elliott.