The COVID-19 pandemic had a huge impact on the way that we live and work. Many people, especially the previously un-tapped un-banked market, have embraced online retail and commerce for the first time. The volume of online commerce increased almost exponentially over the first few months and years of the pandemic—and while many people have returned to ‘bricks and mortar’ venues, they have also retained online access.
This was hugely beneficial in ensuring that vulnerable people did not have to leave home at the height of pandemic waves. Unfortunately, it has also played a key part in creating a ‘perfect storm’ for scam attacks.
A series of unfortunate events
Many of those venturing online for the first time were very naïve about the online world—I might even go as far as to say clueless. They were also often emotionally vulnerable as well as physically vulnerable, because they were separated from family members who would normally help and advise.
At the same time, of course, there were also other people who were staying at home with time on their hands. Lockdowns across the world played into the hands of criminals and hackers because they suddenly had both time to develop new and more sophisticated scams, and a new and unsuspecting set of targets.
We have seen a huge rise in scams and financial crime as a result. These have been global, but there seems to be a particular focus on Southeast Asia. Singapore’s Straits Times reported that $168 million had been lost to the top ten types of scam alone in the first half of 2021, and that overall crime was up by more than 10%. I believe this was just the ‘tip of the scams iceberg’. More than six billion scams were expected by the end of 2022. We have seen over $3.5 billion dollars of crypto-laundering in Hong Kong alone in the last four and a half years—and that’s only what we know about.
Much of this was both predictable and inevitable. However, there is still one big question: why Southeast Asia?
Building a picture about crime
Several locations in the South-East Asian region have become hotbeds of money laundering and financial crime. It isn’t too much of a stretch to say that this region has become the nerve-centre of crime networks whose tentacles stretch around the world. Special Economic Zones from Mong La and Myawaddy in Myanmar to Poipet in Cambodia and Bokeo in Laos, the region are gaining an unwanted reputation for lawlessness and crime on an international scale.
There is one other factor that I haven’t yet mentioned: gambling. As lockdowns took hold, in-person gambling in casinos stopped, which was the very-purpose of the Special Economic Zones in the first place so Online gambling took over—and that offered criminals huge opportunities for laundering enormous amounts of money. Governments reacted with regulations and tighter controls on online gambling—and criminals moved their activities elsewhere.
In particular, there was a massive increase in scam-centres, large ‘call-centres’ running scams on a massive scale. There have been many reports about these, including stories of rescues of those forced to work in them, who are often the victims of trafficking. Realistically, of course, these centres are not just running scams. They also provide more opportunities for money laundering. The Diplomat, a well-known current affairs magazine focusing on the Asia-Pacific region, described the area as “Southeast Asia’s casino scam archipelago”. It has described criminal networks stretching from online commerce to call centre-based investment scams, with money laundered via online gambling and cryptocurrency trading. The conclusion has to be that everything is connected.
Taking action against crime
Governments and supra-national bodies are fully aware of the issues. They are also trying to act. In March 2022, the United Nations Office on Drugs and Crime (UNODC) published a new Regional Programme for Southeast Asia and the Pacific covering 2022 to 2026. This programme addresses five key themes in the region: the response to illegal drug trafficking, international organised crime, corruption and economic crime, terrorism, and building accountable criminal justice systems.
It is a good start. Despite their best efforts, however, governments and justice agencies are often on the back-foot: responding to criminal activity rather than pre-empting it. The real question is what they can do instead? Banks around the world are now using analytics to prevent, rather than merely detect, fraud. There is potential for its use in identifying scams and fraud in Southeast Asia too. SAS provides a unique real-time machine learning solution that is tuned to detect scam-based fraud and money laundering. By tackling this at the enterprise-level, banks can see the ‘big picture’ and see stolen money from customer accounts shifting to ‘mule accounts’ on onwards to high-risk entities such as crypto-currency services.
The key point is – scam-based fraud and money laundering are connected at the source. The best way to detect and prevent it is to connect it at the destination as well (the banks). SAS can help.
The current situation is bad—but there may be a glimmer of light that could be the end of the tunnel.
