Here’s Why This UN Agency Calls to Criminalize Unlicensed Crypto Exchanges in SEA

The United Nations Office on Drugs and Crime (UNODC), an organization formed to promote health, justice, and security by addressing illicit drugs, transnational organized crime, and terrorism, has released a report focused on Southeast Asia. 

• The report recommends that regulators from Southeast Asian countries declare the operations of unlicensed virtual asset service providers and money service businesses as a criminal offense. 

What’s the significance: The recommendation seeks to combat illegal activities connected to cryptocurrency. If crypto-related scams have been minimized, the public’s view of the industry could be better. 

About the Report: In October 2024, the UNODC published the “Transnational Organized Crime and the Convergence of Cyber-Enabled Fraud, Underground Banking and Technological Innovation in Southeast Asia: A Shifting Threat Landscape.”

• What’s in the region? The report highlighted that the transnational organized crime threat landscape in Southeast Asia is evolving faster than at any previous point in history.
  • It is because several countries in Southeast Asia have been targeted as a key testing ground for transnational criminal networks looking to expand their influence and diversify into new business lines. 
• The fraudsters’ technique: UNODC also found that crime syndicates have rapidly integrated new service-based business models and technologies including malware, generative AI, and deepfakes into their operations while opening up new underground markets and cryptocurrency solutions for their money laundering needs.

The Big Picture: The report further showed proof of why Southeast Asia has been the home of crypto scams in the past months. 

• There is an identified entity that is engaged in at least hundreds of millions of dollars in transactions with criminal operations.
  • These criminal operations are performed by groups connected to or directly involved in large-scale drug trafficking, human trafficking, cybercrime, and child sexual abuse material.
• Entities sanctioned by the U.S. Office of Foreign Assets Control (OFAC) and wallets linked to North Korea’s Lazarus Group were also found to be active in the region.
• The report then showed that cryptocurrencies are marketed as rewards in online gambling sites.

• There is also a proof, the agency said, that $USDT, a dollar-pegged stablecoin, is being used for money-laundering.

“The growing adoption of cryptocurrency within Southeast Asia’s illicit economy has served as an important catalyst for cyber-enabled fraud operators based in the region to expand globally. This is due to the ease with which rapid crossborder transactions can take place, widespread misinformation and low levels of understanding about how cryptocurrency functions, and, in some cases, the breakdown of cross-border law enforcement cooperation, investigation, case intake, and asset recovery.”

United Nations Office on Drugs and Crime

Between the lines: UNODC’s report about crypto crimes entering the region has been seen in the Philippines firsthand. 

• In late August 2024, the Philippine National Police raided a suspected cryptocurrency scam hub in Parañaque City, arresting over 400 workers involved in fraudulent online activities, including Filipinos, Chinese nationals, as well as citizens from Myanmar, Malaysia, Indonesia, and Vietnam.

Key Recommendations: To counter crypto-related crimes that have entered in Southeast Asia, UNODC’s Regional Representative Masood Karimipour stressed that governments should recognize the severity, scale and reach of this truly global threat, and to prioritize solutions that address the rapidly evolving criminal ecosystem in the region.

• Recommendation #1: To make it possible, national governments should declare money business services and virtual asset service providers who operate in their respective countries without proper licenses should be held criminally liable, as the report stated.
• Recommendation #2: UNODC also recommended greater monitoring of organized crime involvement in casinos, junkets, cyber fraud operations, and other businesses linked to scam operations.
• Recommendation #3: Regulators should also train their authorities in online gambling operations and money laundering methods enabled by emerging technologies, particularly cryptocurrencies.

“As law enforcement and regulators stepped up their efforts against casinos, illegal online gambling, and cyber-enabled fraud in Southeast Asia, organized crime have hedged and consolidated by expanding operations across inaccessible and autonomous non-state armed group territories and other criminal enclaves in and around the Golden Triangle and elsewhere in the region and beyond. ” 

United Nations Office on Drugs and Crime

This article is published on BitPinas: Here’s Why This UN Agency Calls to Criminalized Unlicensed Crypto Exchanges in SEA

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