Is Southeast Asia becoming the Silicon Valley of fraud?

The tech industry is booming in Southeast Asia, and so is cyber fraud. With the continent becoming a digital crime superpower, have we reached the point where it might create global challenges?

There are thriving tech hubs in Myanmar, Cambodia, and Laos. Multi-story buildings owned by billionaires house huge corporations, where thousands of tech workers lean towards their computer screens and work daily to innovate and develop the newest digital technology.

But what if these aren't Silicon Valley-like tech giants but the headquarters of cybercriminal organizations instead? That’s the current scenario in Southeast Asia.

Organized digital scamming crime has been on the rise in this part of the continent, with sophisticated networks with close ties to China operating not that differently from legit businesses – lobbying governments, doing bookkeeping, and having employees and offices all across the continent.

Of course, the bookkeeping is based on networks of money laundering, innovative technology is developed to steal money, and employees are often the victims of human trafficking who were tricked by attractive job listings in the tech industry and then forced to scam while risking being electrocuted.

That is the case of a casino metropolis, Sihanoukville, in Cambodia. An Al Jazeera investigation revealed that it’s one of the epicenters of cyber slavery, where many victims are imprisoned and forced to scam in the massive compounds belonging to the business and political elites, all under the guise of the casino industry, sheltering in post-COVID deserted resorts and hotels, and tax-free special economic zones (SEZs).

Does this mean Southeast Asia is becoming a significant force on the dark side of tech, with a thriving scam economy?

A global crisis of pig-butchering scams

According to a UN report in 2024, the shadow economy of unregulated crypto exchanges and online casinos in Southeast Asia has successfully diversified its income to include cyber fraud, among other illicit activities. UN estimates that criminal gangs have detained at least 220,000 individuals from over 40 countries in scam centers located in Cambodia and Myanmar alone.

The rise of Southeast Asia’s cybercriminal networks is posing threats globally and to US national security, a recent report by the US Institute of Peace (USIP) states. Researchers call the most popular pig-butchering scams a “global crisis.” This type of scam involves creating fake online profiles to build deep trust with the victim before defrauding them.

It’s estimated that criminal syndicates worldwide stole approximately $64 billion by the end of 2023, actively targeting individuals in the US and Canada. In 2023 alone, US citizens' losses totaled $3.5 billion, while their Canadian counterparts experienced losses of around $350 million.

Geopolitics plays its part

Irina Tsukerman, a US national security lawyer and geopolitical analyst, told Cybernews that Southeast Asia has recently become a hub for startups, digital economies, and technology investments, closely tied to deregulation and openness to foreign investments. However, the lack of a regulatory environment also increases the risk of malicious actors exploiting the environment.

“What makes this brew so potent is the addition of several factors that make the geopolitical environment unique and particularly vulnerable. Southeast Asia cannot be easily defined by any one particular form of governance or culture and country. It runs the gamut of small semi-authoritarian but economically liberal states,” says Tsukerman.

Political corruption is enabling criminal networks to thrive. Since the 2021 coup, Myanmar has been under military control, Laos is a one-party communist state, and both Cambodia and the Philippines have fallen under authoritarian rule.

Notably, China has a growing influence in the region. In the ongoing competition with the US for influence in Southeast Asia, China has made strides by funneling billions into infrastructure ventures and economic partnerships, as indicated by surveys and expert analysis.

China’s growing influence in the region is also reflected in the fact that many cyber fraud criminal networks are related to China.

“The significant challenges to the rule of law, a weakness of civic institutions to some extent, economic loopholes and fragility of states undergoing rapid, almost uncontrollable change or growth, and authoritarian impulses and organized crime efforts to exploit these political and economic trends,” says Tsukerman.

Criminals go after people’s desperation

According to Jason Lane-Sellers, director of fraud and identity at LexisNexis Risk Solutions, the escalation of cybercrime isn't inherently tied to Asia's geographical boundaries.

He explained to Cybernews that cybercrimes can originate from anywhere, highlighting the driving force behind them – the desperation of people, which makes the population prone to manipulation.

“We see hot spots and scam centers within Asia, but not only within Asia but also in Latin America, the Middle East, and parts of Africa. It is a global trend,” Lane-Sellers said.

“Whether it's human trafficking, or it's in some countries taking advantage of the desperation of the people who want a job or the income stream.”

It is especially prevalent in border or cross-border regions, where criminals can take advantage of different jurisdictions. This makes it easier for them to operate across borders, engaging in criminal activities with a reduced risk of detection and prosecution. These regions see a convergence of physical and digital criminal activities.

“It's where you can take advantage of the geopolitical situation, or economic situation. Where you can kind of squeeze,” says Lane-Sellers.

According to him, some governments in Southeast Asia, like the Philippines, have been trying to address the issue, but they still need more resources to identify cybercrime activities effectively.

Lane-Sellers explains that while criminal operations may be based in the Asia Pacific region, their targets are often in countries like the US, UK, France, or Germany, and it is not always easy to trace criminals' locations.

"Once they do, then they can work with the government to try and shut them down, but it takes time and effort to do it. The criminals move from country to country, and they can move their operations kind of quickly and effectively," he says.