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Organized Crime is Leveraging Artificial Intelligence and Cryptocurrencies, Concerning New UN Report Says

The landscape of organized crime in Southeast Asia has witnessed a rapid and significant transformation in recent years, particularly with the adoption of advanced technologies by criminal groups. This transformation, marked initially by the growth in cross-border trafficking of synthetic drugs and other commodities, has now extended to the realms of online casinos, cyber-fraud, and the sophisticated use of blockchain technology and artificial intelligence​​.

According to a new report published this week by the United Nations Office on Drugs and Crime, the rise of crypto and AI technology has led to a revolution in the regional underground banking architecture, enabling the movement and laundering of vast volumes of state-backed fiat and cryptocurrencies. With the utilization of AI, scam operations have also begun to grow quickly.

This shift is particularly evident with the proliferation of online gambling platforms, e-junkets, and both illegal and underregulated cryptocurrency exchanges in Southeast Asia. These platforms have altered the traditional dynamics of fund movement, allowing for faster, anonymized transactions, and have contributed to the expansion of the region’s illicit economy. 

“Casinos and related high-cash-volume businesses have been vehicles for underground banking and money laundering for years, but the explosion of underregulated online gambling platforms and crypto exchanges has changed the game,” said Jeremy Douglas, UNODC Regional Representative for Southeast Asia and the Pacific in a statement. “Expansion of the illicit economy has required a technology-driven revolution in underground banking to allow for faster anonymized transactions, commingling of funds, and new business opportunities for organized crime. The development of scalable, digitized casino- and crypto-based solutions has supercharged the criminal business environment across Southeast Asia, and particularly in the Mekong.”

The Seedy Underbelly of Artificial Intelligence 

There has been a significant uptick in the use of large language model-based chatbots, deepfake technology, and automation tools in cyber fraud operations. These technologies enable the creation of computer-generated images and voices that are almost indistinguishable from real ones, allowing for social engineering scams with high success rates that target individuals and pose a considerable threat to the formal banking industry​.

According to the report, a recent identity fraud study noted a 1,530 percent increase in deepfake incidents in the Asia Pacific region between 2022 and 2023, with Indonesia, Hong Kong, and Cambodia being the leaders of the proverbial scam pack.

Scammers leveraging AI technology are able to execute schemes that manipulate people’s trust and emotions via sophisticated investment fraud, financial grooming practices like ‘pig butchering,’ sextortion, and impersonating law enforcement or government officials. These schemes are particularly effective because they utilize AI-generated content that appears highly credible and authentic. 

One example, cited in the report, came from China, where an individual was convinced to wire transfer a little over $500,000 USD to an individual posing as a close friend. According to Chinese law enforcement, a large portion of the money was put on hold before the transfer could be completed. Still, the scammer utilized commercial AI face-swapping and voice technology to put on a very convincing show.

AI is not only used in executing specific fraud schemes but is also part of a broader trend of diversification in cyberfraud operations. Authorities in Southeast Asia have noted that these operations are expanding into the development of malicious mobile and web applications, malware, and the broader blockchain gaming industry. They also include online bank fraud schemes, high-risk and under-regulated cryptocurrency exchange and payment services. This diversification signifies a deepening integration of AI and other advanced technologies in criminal activities. Moreover, criminal groups have ties to “hackers-for-hire” who will essentially commit cybercrimes for a fee or provide preset “off-the-shelf” toolkits that anyone can use. According to the report, these mercenary hackers use AI to help develop better toolkits, find exploits in apps or software, and essentially turn that around for easy profit.


Casino workers in a now closed Myanmar live-stream casino. (Image: UNODC)

Welcome to the Cryptocurrency Crime Market

The development of scalable and digitized solutions has supercharged the criminal business environment across Southeast Asia, especially in the Mekong region. Casinos and junkets have long been instrumental in the underground banking and money laundering infrastructure, serving the needs of transnational organized crime groups in the region. The anonymity offered by various payment methods in online gambling accounts, combined with limited regulatory oversight, makes it difficult for authorities to trace the source of funds and determine whether these accounts are being used for legitimate gambling or for underground banking and money laundering purposes​.

Crypto is only making all this worse.

After China banned cryptocurrency transactions, trading, and mining in 2021, the industry migrated to other jurisdictions, notably in Southeast Asia, where there has been a rise in cryptocurrency adoption and the establishment of high-risk and underground cryptocurrency exchanges. Organized crime groups have extensively diversified into cyberfraud operations, using cryptocurrencies in a manner that often bypasses the traditional stages of the money laundering process​.

“Organized crime groups have converged where they see vulnerabilities, and casinos and crypto have proven the point of least resistance,” Douglas explained. “That said, operations against syndicates in countries including Cambodia and the Philippines have caused a partial displacement, and we have seen criminals moving infrastructure into other places where they see opportunity — basically where they expect they will be able to take advantage and not be held to account, to remote and border areas of the Mekong, and recently elsewhere.”

The UNODC report estimates there were more than 340 licensed and unlicensed land-based casinos operating in Southeast Asia as of early 2022. Many shifted online to offer live dealer streaming and various proxy betting services, allowing for cryptocurrency money transfers to really shine. The formal online gambling market is projected to grow to more than US $205 billion by 2030, according to the report, with the Asia Pacific region scooping the largest market growth at a projected 37%.

The report examines some common trends, chiefly that finding willing employees is fairly simple. “Points running” gangs and “motorcade” teams facilitate the movement of illicit funds through multiple bank or cryptocurrency exchange accounts, as well as online casinos, to obfuscate the source and destination of funds. While risky work, young people in East and Southeast Asia find these types of jobs better than unemployment. Working in tight syndicates, they essentially collect crypto and money for criminal activities such as drug trafficking, cyber fraud, and illegal gambling, then run it through multiple channels and wallets to try to cover up the proverbial money trail.

Another easy way to make money is to sell “mule” bank accounts at around $30 USD a pop. Organized crime groups have integrated cryptocurrencies into their illegal betting operations, particularly utilizing Tether (USDT) for underground fiat exchanges. Criminal groups are willing to pay good money for bank accounts, and often require several to keep money flowing without investigators and banks catching wise.

China did have some success in attempting to shutter this type of activity via their Operation Chain Break. In one case, Chinese authorities dismantled a cryptocurrency-based ‘points running’ network that laundered US $5.6 billion for criminal groups involved in telecommunication scams and illegal gambling. 

However, much like whack-a-mole, other organizations began to pop up elsewhere, including politically unstable countries like Myanmar, where cryptocurrency lines the pockets of both the various rebel groups and authoritarian government leaders. 

Overall, the report concludes that investigations need to begin focusing their attention on these new technologies, and develop methods to better target them. Artificial intelligence and cryptocurrency are only making things easier for criminal organizations, and the good guys are now trying to play catch up.

MJ Banias is a journalist who covers security and technology. He is the host of The Debrief Weekly Report. You can email MJ at mj@thedebrief.org or follow him on Twitter @mjbanias.