The European Union urges Southeast Asia to crack down on unlicensed exchanges
2 min readThe United Nations Office on Drugs and Crime (UNODC) has made a strong appeal to Southeast Asian nations to criminalize the operation of financial services or virtual asset service providers (VASPs) without proper licensing in the crypto sector.
This recommendation follows evidence that VASPs, including those connected to criminal networks, are facilitating transactions for illicit activities such as fraud and high-risk gambling, as revealed in a recent UNODC report.
Allegations of drug trafficking and cybercrime
The report highlighted that an unidentified crypto entity had transacted with criminal organizations involving amounts equating to at least hundreds of millions of dollars.
These organizations include groups involved in large-scale human and drug trafficking operations, as well as cybercrime and child sexual exploitation. Additionally, entities under sanctions by the U.S. Office of Foreign Assets Control (OFAC) are implicated. The document also mentions digital wallets linked to the Lazarus Group, a notorious North Korean hacking group.
“It has never been more important for governments to recognize the severity, scale, and reach of this global threat and prioritize solutions for the growing evolution of this criminal ecosystem in the region,” said Masood Karimipour, UNODC’s regional representative.
The UNODC’s recommendations go beyond the criminalization of unlicensed VASPs. The agency also suggested increased surveillance of organized crime activities across various sectors, including casinos.
Moreover, the European agency called for more training for law enforcement to better handle scams involving gambling and money-laundering techniques that have been facilitated by advanced technologies, including those in the crypto sector.
Although not all illicit schemes in the region are connected to cryptocurrencies, the report notes that digital currencies are frequently used by fraudsters. This preference stems from the ease of conducting cross-border operations, widespread misinformation about how cryptocurrencies work, and the low levels of understanding among users regarding the sector.
Increase in online fraud
Online fraud has been growing significantly in Southeast Asia, often operating out of discreet offices or within casino complexes.
A previous report by the European Union estimated that fraudulent operations in Cambodia and Myanmar employ around 220,000 people, many of whom are lured in by false job promises. One of the most common scams in the region is known as “pig butchering,” where fraudsters gain the victims’ trust and gradually convince them to invest in fraudulent platforms.
The report also noted the rise of other illicit techniques, such as phishing attacks and schemes involving fake identities, among others.
Fraudsters are increasingly using emerging technologies, such as artificial intelligence and deepfakes, to enhance the effectiveness of these criminal schemes. Phishing attacks, in particular, have become one of the biggest issues for crypto users, leading to significant financial losses.
In September alone, more than 10,000 people lost approximately $46 million to such schemes, according to data from Scam Sniffer.
