Criminal enterprises are constructing fully proprietary financial systems, including self-made stablecoins, exchanges, and private blockchains, which are optimized to facilitate the laundering of billions of illicit dollars. They are doing all of this while operating within the world of crypto, purchasing infrastructure if it is available and building it themselves if it is not. Such narratives come from a recent report from the United Nations Office on Drugs and Crime.
Constructing a Shadow Financial Network
The UNODC report presents a worrying scenario of criminal organizations not only utilizing existing cryptocurrency systems but actively developing their own shadow monetary networks within the digital universe. This tactical change helps them to be self-sufficient, circumventing detection and evading the watchful eye of mainstream systems bound by anti-money laundering (AML) regulations. These syndicates are now building the infrastructure for closed-loop systems, which make the origin and circulation of many illegal funds much more difficult to trace.
One very alarming case highlighted in the report is the Chinese-language Huione Guarantee (now rebranded to Haowang) ecosystem and marketplace. This single platform based in Phnom Penh, Cambodia, has purportedly processed an estimated $24 billion worth of cryptocurrency tied to fraudulent activity over the past four years. Huione’s user base exceeds 970,000, along with hundreds of thousands of vendors, establishing it as a massive, self-sustained financial ecosystem devoid of regulatory oversight.
Industrializing Cybercrime: A Trifecta of Technology
Due to their not-so-long-ago exposed vital installations of blockchain technology in addition to self-made stable coins and A.I., the scam centers based in Myanmar, Cambodia, and Laos have reached new unfathomable levels of sophistication, effectively industrializing cybercrimes. As a result, these centers have started using advanced technologies to commit highly complex fraudulent schemes or scams further broken down into phishing transactions, investment frauds, and the notorious “pig butchering” scams, all of which alarmingly bring billion-dollar profits.
A Global Expansion: Beyond Southeast Asia
It is no secret that Southeast Asia marks the epicenter for such crypto-fueled activities, but the UNODC report has stated an alarming tendency towards Africa, South America, and the Pacific. This expansion underscores the growing global reach of Asian money laundering and undeclared banking activities. The UNODC urged all governments around the world to face the reality of the issue and take swift preventative measures; otherwise, bypassing these criminal syndicates will be exceedingly effortless.
Busting the Networks: Enforcement Action
In the past year, enforcement agencies around the world have been conducting multiple operations around cyber-enabled fraud, culminating in the arrest of several hundred Chinese, Filipino, Indonesian, Malaysian, Thai, and Vietnamese nationals. For example, in October 2024, Hong Kong police closed down a scam center and arrested 27 suspects who were using AI deepfakes to perpetrate a crypto romance investment scam where victims lost more than $46 million. Likewise, in December 2024, Nigeria’s anti-corruption agency staged a dramatic raid in Lagos, purportedly busting an enormous crypto romance scam syndicate, and arrested 792 individuals.
The Need for an International Response
The UN report stresses the need for immediate action by the global community to address the sophisticated and multi-faceted organized crime problem from syndicates capable of creating their own financial structure, issuing stablecoins, and running private exchanges. These developments create even more concern with respect to existing measures for controlling and combating money laundering. The state and the regulators must act in concert to formulate and establish appropriate policies designed to neutralize these networks for the benefit of their targets, while also stopping the further systemic production of crypto-enabled cybercrime.
