Online scams: how the criminal industry that makes billions in fraud works

The U.S. Treasury Department says Americans have lost more than $16.6 billion to an online scam industry, largely based in Southeast Asia, that targets victims around the world.

Scam centers rely on forced labor and have proliferated during the pandemic. According to some estimates, they earn at least US$64 billion a year.

Authorities in several countries have tried to rescue people who were kidnapped and enslaved to work as coup plotters. But while the United States and Britain recently imposed sanctions on a Cambodian company accused of running a massive scam, experts say much more work will be needed to build cases against the criminal syndicates that fuel the industry.

Here’s how these centers work and why they are so difficult to close:

Scammers gain the trust of victims on social media.

Fraudsters in Southeast Asia specialize in “pig butchering,” a process in which the scammer builds trust with a victim over weeks or months before asking them to invest in a fraudulent cryptocurrency fund. In this sense, they are like farmers fattening pigs for slaughter.

The victim usually receives a message from someone posing as a financial advisor on Facebook, WhatsApp or Telegram. Then, the scammer directs the person to transfer money through a website that pretends to be a legitimate investment platform. In 2023, the president of a small bank in Kansas did just that, losing about $47 million from the bank to “pig slaughterers.”

Scammers also use romance scams, where they convince divorced or recently widowed people to send large amounts of money after a brief courtship. Sometimes they simply call victims, pretending to be bank representatives to ask for account information, PIN codes and Social Security numbers.

Operators can target victims around the world because they use scammers who speak their native language.

Chinese nationals are the largest group trafficked by criminal gangs to scam complexes in Southeast Asia, according to Interpol. The facilities also house Brazilians, Indians, Filipinos and people from parts of Africa and Eastern Europe.

Scam centers depend on a constant supply of labor and electricity.

Many of the large complexes that host scam operations are within special economic zones created by governments in Cambodia, Laos and Myanmar to attract foreign investment. These zones are mainly along the borders with Thailand, giving criminals easy access to the country’s reliable electricity and telecommunications networks.

Operators also use Thai airports and roads to deliver supplies and traffic workers. In many cases, workers are lured to Thailand with the promise of jobs in customer service or information technology. But after arriving in Bangkok, they are taken beyond Thailand’s porous borders, imprisoned in compounds and often subjected to physical abuse and torture.

Myanmar’s border regions are a particularly fertile location for these centers. The country is in the middle of a civil war. Independent experts say Myanmar’s army and ethnic armed groups offer protection in exchange for a share of the profits. The military government denies any involvement with coup groups, saying it “actively” works against them.

These multi-story complexes are in cities in Myanmar that border a narrow river that marks the border with Thailand — so close that you can hear the hum of generators on the Thai side. From the outside, they look like ordinary office buildings and condominiums.

Governments try to crack down on scam operators.

Several countries are trying to combat scam centers.

This year, China, India and South Korea sent flights to repatriate hundreds of people released from compounds in Myanmar. A court in China sentenced 11 people to death after finding them responsible for operating an illegal gambling and scam scheme in the country. And Thailand cut power and telecommunications lines to one of Myanmar’s largest coup complexes.

Myanmar’s military government said this month it carried out a raid on a major scam complex, and SpaceX said it disabled more than 2,500 Starlink devices that fueled many of the online fraud operations there.

Separately, the American and British governments recently imposed sanctions on a Cambodian company accused of operating a major scam. South Korea has expressed concern about its citizens who have disappeared into scam centers in Cambodia, and a senior Thai official has resigned following allegations of bribery linked to cybercrime in Cambodia.

But these actions are unlikely to affect profits in an industry that generates about $64 billion a year, said Jason Tower, a senior expert at the Global Initiative Against Transnational Organized Crime, a Geneva-based advocacy group.

One sign of this: Even in the midst of a mass crackdown by Chinese authorities in February, the construction of coup complexes in Myanmar continued.

Dismantling the scam industry will require coordinated international efforts.

Investigators need to share more financial data and information obtained from rescued scammers, Tower said.

But tracking the money is difficult because profits are laundered through luxury properties and crypto Bitcoin wallets. They also find support in countries in Africa and South Asia where organized crime and corruption have weakened governance.

For now, Tower said investigators are moving too slowly and the scam centers they target are too profitable — and easy to set up — to stop.

This article originally appeared in The New York Times.