How Cambodia Became Asia’s Online Fraud Hub
Cambodia has grabbed the headlines this year for all the wrong reasons: a rising Asian leader in “internet fraud”, “forced labor” and “human trafficking”.
But why, in particular, has Cambodia become a hub for online scams? How international cyber fraud became so prevalent in this 16.7 Southeast Asian country. million? The answers start with an unlikely source – ground.
There’s a familiar joke to many Cambodians: only generals with two or more stars can own land in Sihanoukville, a popular beach destination in the south of the country. These lands eventually change hands and end up being owned by Chinese investors, who turn them into hotels, casinos and, finally now: cyberfraud activities.
Cambodia has private land, but its domestic politics have been turbulent for decades, with ownership rights still unclear. Large amounts of private land are still concentrated in the hands of the political elite through violent means, such as the forced conversion of private land to state land or the eviction of residents for commercial development.
In 2007, the government evicted longtime fishermen living in Sihanoukville over the construction of a public road, and 105 family homes were burned down by police.
The suffering behind development
The seemingly unrelated land factor is the basis for Cambodia to become a hotbed of fraud in the virtual world. On July 15, the documentary Forced to scamproduced by AlJazeerarevealed that the special economic zone in the western province of Pursat was actually a cyber fraud park.
Often, these parks come in the form of offices rented from owners of online gaming companies for rent and management fees. “Management fees” are collected by specialist properties, also known as area managers. But law enforcement experts say the management cost is a protection fee charged by landowners to provide political sanctuary for businesses.
As developing countries, Southeast Asian countries lacked the foundations of early Western countries that built their national wealth through colonial advantages. Due to its disadvantaged position in the development of global capitalism, the Cambodian government has adopted “extractive” strategies to rapidly accumulate capital for national development, i.e. looting and exploiting the country’s natural and land resources. . But these strategies have also created suffering.
According to the World Bank, Cambodia’s economy has grown by more than 7% since 2011, thanks to its garment and real estate sectors. But behind these gains lie a number of obvious disasters: the destruction of forests, drug and gun violence, and the proliferation of internet scams.
Cambodia is now ranked as the Southeast Asian country with the highest level of corruption for the fourth consecutive year; it also has the highest rate of forest degradation in the past two decades, with large areas of virgin forest destroyed by logging.
In the latest 2022 Trafficking in Persons Report from the US State Department, Cambodia was even downgraded from the initial Tier 2 to Tier 3, highlighting the country’s vast internet fraud and forced labor parks.
From fishing port to gaming hub
Cambodia’s complex political and economic structure has been shaped by the many changes of government and state institutions since French colonization in 1863. After the formal independence of the Kingdom of Cambodia in 1953, the government was overthrown several times, especially with the Khmer Rouge communist party. regime from 1975 to 1979, the occupation of Vietnam from 1978 to 1989 and the UN takeover from 1992 to 1993.
China has been Cambodia’s largest foreign aid donor since 2003.
It was not until 1998, when Hun Sen became Prime Minister, that the political situation in Cambodia stabilized. Hun Sen used “democracy” as a cover to begin moving towards a developmental authoritarian state, where one-party rule and Hun Sen’s family patronage network provide an umbrella for corruption.
In terms of international relations, China has been the largest donor of foreign aid to Cambodia since 2003, and the Sino-Cambodian alliance has gradually become a shield for Cambodia against international democratic forces.
During the UN takeover, the West hoped that foreign aid would be used to stimulate Cambodia’s economic growth, thereby achieving social stability and, in doing so, would promote the political democratization of Cambodia. But with the development of China’s Belt and Road Initiative and continued investments from Beijing, Cambodia’s dependence on the West has gradually diminished, providing a safety net for Hun Sen’s authoritarian regime.
Belt and Road Black Market
The Belt and Road Initiative has not only brought Chinese capital to Cambodia, but also unsavory industries such as prostitution, gambling and drugs. Although naturally not planned as part of the initiative, they have attracted countless Chinese investors and speculators who have taken the opportunity to travel abroad.
Under China’s tough policies against these industries over the past decade, organizers have moved to Southeast Asia, such as Manila in the Philippines, Sihanoukville in Cambodia and Myawaddy in Myanmar.
In 2019, there were 91 casinos with legal licenses in Sihanoukville, most of them run by Chinese. Additionally, clubs in the city provide sex and drug services with the help of Cambodian officials. These establishments are housed by Cambodian officials in the form of shares, and they employ armed Cambodian gendarmes as security personnel.
With Cambodia’s only deep-sea port, Sihanoukville is also a key development target of China’s Belt and Road project. Led by Cambodia’s pursuit of rapid economic growth and Chinese investment, Sihanoukville has grown from a small fishing village into a seaside port to the country’s third-largest city.
From late 2017 to mid-2019, Sihanoukville earned a reputation as a “gaming city” with a rumored “300,000 online gamers”, and the sector relies on local protection forces to spread across Cambodia .
In 2019, there were 91 casinos with legal licenses in Sihanoukville, most of them run by Chinese
Cyber fraud and gambling go hand in hand
Many believe that the Cambodian cyber fraud industry grew out of the legitimate gambling industry. In fact, the popular industries of real estate investment, casinos, and online fraud have developed in parallel. But problems escalated after the 2019 “818 Gambling Ban” forced online gambling companies out of Cambodia. Following the ban, a large number of online gambling companies started moving to places such as Myanmar, Dubai and Georgia.
The 818 gambling ban not only caused a mass exodus from legal online gambling companies, but also caused another serious harm. The property investments, casinos, clubs, supermarkets and restaurants that have sprung up around the industry have all been devastated, leaving countless investors unemployed and Sihanoukville workers unemployed.
Many from Hong Kong and Taiwan have come to Cambodia trapped in cyber fraud activities.
Internet gamblers fled, investors lost money, businesses closed, casinos laid off staff – Sihanoukville’s economy came to a halt overnight. This was the beginning of Sihanoukville’s descent into a Wild West. The city is home to many gangsters who depend on players for their livelihood and who have expert kidnapping techniques. So they formed professional gangs to kidnap Chinese people inside Cambodia and sell them to online fraud sites. With the outbreak of the COVID-19 pandemic, the cost of selling people has risen alongside the cost of smuggling, recently hitting around $25,000.
In terms of business, due to China’s ongoing operations against illegal industries, anti-fraud propaganda and other policies, the profits of online game companies in mainland China have been limited. In 2020, following the outbreak of the COVID pandemic, the Chinese government tightened its immigration policy.
With the online gambling and fraud industry dominated by the Chinese population, China’s measures to restrict external mobilization have deprived it of much of its labor pool. Along with the rise of international fraud, they began to seek labor from other countries and attract well-paid foreign workers.
This is how so many people from Hong Kong and Taiwan ended up in Cambodia, trapped in cyber fraud activities.
A difficult question to address
The countries and regions where online gambling companies congregate, such as the Philippines and Cambodia, are among the poorest regions in the world and attract desperate speculators. Nations themselves are eager to develop their economies and fight poverty, and therefore accumulate national wealth by extracting national resources by any means possible.
Former Philippine President Rodrigo Duterte, for example, refused the Chinese government’s request to revoke online gambling licenses, citing the need to feed the people. Cambodia’s 2019 gambling ban, enacted in exchange for free aid from China, eventually caused organizations to operate covertly across Cambodia.
With Cambodian officials denying the existence of online gambling parks in Cambodia, these fraudulent companies have become even more brazen in human trafficking and abuse.
Why are online fraud businesses alive and well? In addition to being protected by developing countries, they attract all kinds of people and industries to serve them. Multinational money laundering organizations transfer money for them. Information sellers continue to supply them with personal and confidential information from around the world. Snakeheads (Chinese gangs) all over the world secretly send employees of different nationalities to them. Travel agencies provide them with visas and booking services.
It is truly a global industry with a global impact, but nowhere is it deeper than in Cambodia.