Evictions and Evasions: State Involvement in Southeast Asia’s ‘Golden Era of Organized Crime’

As global attention on Southeast Asia’s transnational crime epidemic continues to increase, the sophistication of analysis on it is rising in sync. Last week’s U.N. Office of Drugs and Crime (UNODC) report is an exemplar of this trend, its all-star team of authors setting a new standard for publicly available intelligence on the underground banking system and the myriad technological innovations underpinning “the most powerful criminal network of the modern era.”

The 142-page report packs in a stunning volume of information on how these criminal networks are leveraging existing infrastructure and adapting to market, regulatory, and enforcement efforts to disrupt their activities. As with UNODC’s January 2024 report on the region’s underground banking sector, this report centers the role of the gambling industry as the primary vehicle for laundering the magnificent proceeds of a true “golden era of organized crime.”

Its most significant contribution is a compelling demonstration of how physical casino infrastructure operates as a legal, fiscal, and regulatory shield, allowing for the co-mingling of funds from different sources and rendering the predicate crimes and perpetrators impossible to trace. The report illuminates this reality through case studies and provides useful recommendations to regulators.

Less helpfully, the dominant depiction of those national regulatory actors in this report is as a class of victims. The states at the culpable epicenter of this wave of criminal activity are explicitly characterized as having been “targeted as a key testing ground for transnational criminal networks looking to expand their influence and diversify into new business lines” – completely avoiding any mention of state actions that may have directly encouraged that “targeting.” Similarly, the crime wave is presented as primarily a technical hurdle to overcome, with the “situation rapidly outpacing the capacity of governments to contain it.” Side-stepping the fundamentally political nature of the problem, the report’s recommendations hinge primarily on the need to build up the regulatory and enforcement capacity in those countries where the crimes are taking place, as well as more regionally.

And certainly, insufficient response capacity is one factor contributing to the flourishing of regional organized crime. Yet, glaringly absent from UNODC’s analysis is a reckoning with the politically inconvenient reality of profound state involvement on the criminal side of the equation. For instance, the word “corruption” appears just four times over 142 pages. “State-involved,” “state-driven,” “state affiliated,” “kleptocracy,” and other related terms are entirely absent. These omissions reflect constraints inherent in the broader U.N. system, which finds it exceedingly difficult to call out specific member states, even in such extreme cases.

Overwhelming evidence places state-affiliated elites at the dead center of the criminal networks and suggests that state institutions across the Mekong subregion are being systematically leveraged into co-perpetration. This is so much the case that it is actually quite difficult to speak meaningfully about this issue without relaying the extent of state affiliation. This dilemma becomes apparent in UNODC’s report via such epic word puzzles as the one encountered on p. 81:

Business Group 1 (BG 1), which controls “Telegram Marketplace 1” (TM 1), is a powerful and influential conglomerate headquartered in one Mekong country, with past and present subsidiaries registered in various countries in Europe, North America, and Southeast Asia and the Pacific. The Group consists of several large financial and technology companies engaged in business lines including cryptocurrency exchange and OTC services, multi-currency (fiat and crypto) payments, online gambling, transaction guarantee and insurance, and property development, among others.

Generally, U.N. agencies also can’t name criminal entities that haven’t already been sanctioned or convicted. But, from the various context clues about this company, which appears 20 times throughout the report, “BG 1” undoubtedly refers to HuiOne. HuiOne Group is a holding company overseeing various scam-focused marketplaces and money laundering tools and is perhaps one of the most critical corporate entities to the current flourishing of the crime. The chairman of HuiOne’s board is Hun To, the notorious and litigious cousin of Cambodia’s Prime Minister Hun Manet. In the past, when evidenced scrutiny has befallen HuiOne, key government mouthpieces have jumped quickly at the opportunity to deny the allegations – thus becoming accessories to the corporation’s crimes.

But state involvement extends well beyond bald propaganda and shadowy companies to the actual explicit “law enforcement responses” themselves. For years, the Cambodian government has oscillated between denying the existence or scale of the online scamming industry; vowing to crack down on it; and actively repressing locally situated civil society actors who counter their fraudulent claims. This strategy has proven to be relatively effective for relieving bouts of intense international pressure while ensuring the sustenance of the underlying industry. With the detention of internationally renowned journalist Mech Dara, the repressive side of this project is virtually complete. Without a proportional response by the international community to defend local civil society and restore a remnant of human intelligence gathering, Cambodian government cover-up operations should be smooth sailing from here.

Following these longer established patterns successfully piloted by Cambodia’s kleptocracy, there has been a trend of sporadic, pre-announced crackdowns and highly publicized eviction notices across the region in recent months.

In May, the Karen Border Guard Force in Myanmar announced that all scam operators would be evicted on September 30. A few weeks back, Jason Tower of the U.S. Institute of Peace published some helpful analysis deconstructing the BGF’s various propagandist tactics and the reality on the ground that little has changed besides a continued explosion of criminal activity.

The situation in Laos is little different, where sanctioned criminal kingpin Zhao Wei signaled to scam operators that raids were coming in advance of the limited law enforcement action that hit Golden Triangle Special Economic Zone (GTSEZ) in August. While the longer-term impact on the notorious GTSEZ remains to be seen, there are numerous reports of criminal operations relocating to Cambodia and Myanmar. Sources also suggest that Zhao himself is expanding his criminal activities to Cambodia, where he is even less likely to face accountability or meaningful disruption.

Conversely, the Philippines’ recent crackdown on Philippine Offshore Gaming Operators (POGOs) appears to be an example of legitimate and significant movement to counter the expansion of organized criminal networks. The difficult part in the Philippines will be eliminating the informal POGOs that operate beyond the reach of traditional regulatory bodies. Nonetheless, Philippine law enforcement is making strides in pushing back against the encroachment of criminal activity, and the government there appears to recognize the threat posed by the presence of such actors to its legitimacy and licit economic security.

However, the likely impact of enhanced regulation in the Philippines will be direct displacement into the established hotspot contexts, particularly Cambodia, where the physical infrastructure is already in place and costs/risks remain exceedingly low.

Against this backdrop of sovereign criminality, numerous “Mekong Development Dialogues” and similar talkshops are proliferating in Bangkok and other regional convening hubs as the international community struggles to formulate a coherent response. In such environs, the natural inclination is to look to state actors as development partners first. Each country must choose its development pathway and the international community is merely there to reveal the options. This is the basis of international cooperation in a rules-based order. It assumes, more or less, good faith engagement from governments whose incentives are aligned toward basic common goals like ensuring stability, improving economic security, and reducing crime. Yet, a “member states first” approach will ultimately be found wanting as a strategic frame for countering a crime co-perpetrated by said member states.

When, conservatively, 40 percent of the combined GDP of three of the subregion’s countries is derived from a single criminal industry (among many others) and the evidence points to heavy state capture by those criminal groups, our operating assumptions require significant re-evaluation, simply on grounds of harm minimization. The bleak conclusion we should draw from UNODC’s tour-de-force report is that “Un-named Companies A-Z” and “Un-named Countries 1-3” are highly unlikely to divest themselves in the near term from their most lucrative criminal investments.

Efforts to obscure or de-center state involvement in organized crime are particularly dangerous at this moment where knowledge about regional transnational crime is entering the mainstream. Traditional approaches won’t work here. Capacity building campaigns in the epicenter countries will be fruitless given the profound incentive misalignments. Data sharing and law enforcement collaboration with thoroughly co-opted regimes would be even more ill-advised.

What is needed, rather, is a coordinated set of interventions designed to constrain the profitability of the criminal activity itself as well as to isolate and delegitimize those entities and institutions that find themselves intractably vested in them – including and especially those states that have effectively ceded their sovereignty to opaque criminal interests. Correcting for the Financial Action Task Force’s inexplicable de-listing of Cambodia, one of the world’s premier money laundering enablers would be a great place to start.

Empty eviction notices, show crackdowns, and arrested journalists are not arising from “capacity” gaps or helplessly “targeted” countries. Rather, they emerge from savvy calculations cynically designed to manipulate a rules-based order that is hoping against reason its most troublesome actors will fall in line. It’s time to stop falling for the charade.