Why organized crime relies on online gambling

Illegal online casinos are used by criminal gangs to launder billions in profits from cross-border crime.

Squeaky-clean Singapore was recently scandalized by a massive money laundering operation that exploited the country's cutting-edge financial technology networks to launder billions of dollars in ill-gotten gains from online casinos in neighboring countries.

The case highlighted how the unholy trinity of illegal online gambling, fraud and illegal drug trafficking brings billions in profits to international criminal gangs and how countries are manipulated for their purposes.

According to recent forecasts, the official online gambling market is expected to grow to over $205 billion by 2030, with the Indo-Pacific region accounting for the largest share of market growth.

As for illegal online gambling, in 2020 in China alone, authorities cracked down on 1,700 online gambling platforms and 1,400 underground banks, involving illegal transactions worth over one trillion yuan ($153 billion).

Consequences of China’s crackdown

There are several reasons for the rapid increase in cross-border crime in Southeast Asia.

One reason for this is China's rigorous approach, which is driving crime out of the country and spreading it into the weakly governed Mekong region, which also affects Myanmar, Laos and Cambodia.

A second factor is the high demand for illegal drugs, particularly methamphetamine, from many countries, especially Australia. It is the most widely used synthetic drug in the world.

A third factor is the widespread corruption throughout Southeast Asia, which is even more pronounced in the poorer countries of the Mekong region.

This rise in cross-border crime in the region is accelerated by the emergence of online gambling and cross-border criminal activities in the Mekong and neighboring countries.

These criminal activities pose the risk of destabilising these countries and are already clearly felt in many Southeast Asian states and the surrounding Indo-Pacific countries.

Underground banking system

Chinese criminal groups are using the infrastructure built by online casinos to operate an underground digital banking system, fueling the rise of cross-border crime in the region.

A clear example of the impact of Mekong crime is the major money laundering case in Singapore, which robbed a Chinese criminal gang of over $2.2 billion in assets. The gang made huge profits from illegal online gambling and fraud centers in Cambodia and the Philippines.

The group laundered the money to Singapore and invested in real estate and businesses in Singapore and abroad, such as the United Kingdom.

It is likely that other Chinese criminal groups involved in online gambling and fraud centers have reinvested their profits in Southeast Asia and around the world.

Scam centers operate by luring unsuspecting workers through fake job advertisements and forcing them to work for illegal online casinos and online scams.

A January report by the United Nations Office on Drugs and Crime outlines the symbiotic relationships between transnational crime and the rise of online gambling and cryptocurrencies in the region, which use illicit electronic networks such as the dark web and illegal internet service providers.

The role of drugs

It argues that increased global demand for methamphetamines and other illegal drugs has brought huge profits to regional criminal groups, who then use online casinos and other illegal electronic networks to launder the dirty money.

The Philippines is another online gambling hotspot and scam hub and has classified licensed online casinos as Philippine offshore gambling operators. These companies serve gamblers from mainland China as gambling is illegal in China, with the exception of state-run lotteries.

The country had attracted numerous Chinese criminal gangs that were forcibly displaced as part of China's crackdown on organized crime, and was ill-prepared to deal with the wave of crime (such as illegal immigration, prostitution, money laundering and corruption) that came with the emergence of online gambling and casinos (even legal ones).

Many people in the Philippines called for a ban on these companies, but the government hesitated, citing positive effects in terms of employment and taxation.

Last week, however, the government changed its stance and President Ferdinand Marcos announced a ban on all Philippine offshore gambling operators.

Many of the people employed in online gaming companies are mainland Chinese who have managed to stay in the Philippines illegally.

Corruption problems

Southeast Asian governments have been slow to respond to the threat posed by rising cross-border crime and online gambling and fraud hubs.

The opposite is the case for the ruling elites in Myanmar, Cambodia and Laos: they protect illegal online casinos and fraud centers because they are involved in corrupt activities.

China is concerned about these developments because many of the online gambling and fraud centers also target its citizens.

There are also concerns about possible capital flight, a development that allows Chinese citizens to circumvent limits on the amount they can send abroad (currently $50,000).

Some countries in the region are working together to control the online casino scourge. China is also working with several Southeast Asian countries to shut down online gambling and fraud centers.

Beijing had already called on the Philippines to ban online gambling in 2019 to support China's own crackdown on cross-border gambling. Beijing is also resisting what it sees as unfounded allegations that the Chinese government is linked to online gambling in the Philippines.

It is crucial that Southeast Asian countries recognize the seriousness of transnational crime and online gambling and fraud centers.

The region has enjoyed great success over the past seventy years with the globalisation of its electronics and other industries, and has experienced rapid growth in employment and income.

This success story will be undermined by the rapidly increasing cross-border crime in the region unless immediate action is taken before it is too late.

Originally published under Creative Commons from 360° information™.

Republished by 360Info, August 5, 2024