Victims, Scammers, and Scammers Who Are Victims (the dark side of the digital economy with Mark Bo and Ivan Franceschini)

People become commodities within the industry. Once you're in there, your contract has been signed, your passport has been taken, you can then be bought and sold. And we've spoken to people, they've been bought through dark industry. There's widespread brutality within these compounds. If you don't perform, you can be subject to various types of physical and mental abuse, sometimes amounting to torture.

What you described, that aspect of victimhood. So when we think about the workforce in the compounds, we don't ever think about them as all victims of human trafficking, slaves and everything else. We also don't ever think about them as all criminals. Most of them, they fall in between.

Hey, everyone, it's Paul here today. We're discussing a very dark side of the digital economy. Have you ever received an innocent text or it looks innocent, that says, "Hey, how's it going?" And you might respond to it, you might not, but behind that is a massive fraud network on the other end. It's not just some individual hacker. It's probably part of some kind of huge fraud network, and we're going to unpack that today in terms of what's going on with online fraud and these large-scale digital scams. So what you get as this innocent little message is actually maybe thousands of people linked to it. So we're going to talk about so-called pig butchering, fake jobs, impersonating authorities and a lot more.

It's a little bit like a true crime episode today on Policy Prompt. We're not talking about a few hackers working out of a basement. This is industrial-scale fraud zones, trafficked and forced labor run out of guarded compounds using sophisticated technologies targeting victims worldwide. It's a global network for sure, and there's this epicenter that's emerged in Southeast Asia that we're going to take a look at.

Talking with two of the authors of the book today on Scam: Inside Southeast Asia's Cybercrime Compounds. What really struck me about this book is the scale of what's going on. I really hadn't thought about those numbers, the number of workers in these compounds, the billions of funds that are in play, and actually the physical size of these sites themselves. It's a whole ecosystem around them. And the number of countries that are pulled into this web, whether it's on the labor side, or the transit points for money or the targets for scams. And technology, of course, is central to a lot of this. It does make scams much easier to scale now. You can use text, social media, encrypted chats. There's AI-assisted stuff, fast payment systems. But maybe tech can offer some hope as well, about cracking down on it through better fraud detection techniques, integrated coordinated law enforcement across financial institutions, across borders so there may be some ways to improve things.

Bottom line is are things getter worse? Are governments cracking down? That's one of the things we're going to talk about today. Are people more wary about getting tricked? Are they more wary about getting, taking these too good to be true jobs that turn out to be forced labor, or taking the bait on a scam? Probably not, but let's see what the authors say.

Today we have Mark Bo, who's a research and long based in Asia, in East and Southeast Asia, working with local civil society partners to improve practices and development projects. He uses his financial background skills to investigate stakeholders involved in Asia's online gambling, fraud and money laundering industries. Ivan Franceschini is a lecturer and author based at the Asia Institute, the University of Melbourne, and he focuses on ethnic Chinese transactional crime, especially in the field of online fraud. The book's third author Ling Li couldn't join us today because I think she's working on a PhD somewhere. So today we have Mark and Ivan. Welcome, Mark and Ivan, to Policy Prompt.

So I'm going to jump in right away to a question that's a good way to start off. And that is how did the three of you authors with different geographies, and presumably different backgrounds and things, how did you come together to write this book on this topic? Tell a couple of things about your journey to coming together and working on this topic.

I think the three of us, we all really stumbled into the subject I think. I knew Ivan for quite a while. As you mentioned in the intro, I've been based in the Southeast Asia region for a number of years. My field of focus was in business and human rights, so as part of that a lot of the work I was doing was tracking investment and financial flows into the region. I was based in Cambodia for a lot of my time while I was overseas. I met Ivan, Ivan was doing quite a bit of work looking at labor conditions on construction sites in Cambodia, especially down in Sihanoukville on the coast. So we had a bit of a back-and-forth over the years.

For me, I started to look more closely at this topic, I started to pay attention to, around 2015, '16, there was this huge increase in private capital, mostly from China, flowing down into Sihanoukville and to the border areas into the casinos, and the industries and the businesses surrounding casinos. Then we started to see more reports of crime connected to those sites, often violent clearly, with signs of organized elements to it. I think Ivan came back to revisit some of his study sites where he'd talked with construction workers back in the pre-COVID times and he found that several of those sites had actually turned into basically locked down buildings, which we later found out were housing online scam operations, online gambling.

Yeah, we were starting to work on this, we did a few articles, and then Ivan, he met Ling I think by chance at a coffee shop. She was working on a piece of research on bride trafficking actually, trafficking of Cambodians and people from the region into China. Then she learned while she was in country about what was going on, the growth of the scam industry, trafficking into it, and then she ended up sticking around in Cambodia and shifting her focus onto trafficking into Cambodia rather than out of Cambodia, which was her initial focus. So yeah, we all came to it from different angles, and yeah, somewhat it was unplanned, but it's become all of our focus now.

Thanks. Ivan, anything you wanted to add to that journey?

It was unexpected in a way. My focus was on labor rights. Yeah, I wouldn't have expected to work on this a few years ago. We just stumbled in the story, we had to work on it at some point.

Thanks. And Mark, you mentioned a Cambodian town, Sihanoukville, and we'll get into that I think in the conversation because you have a lot, there's a lot in the book about that city. It's a fairly small place, under 100,000 people, what's been going on there as an example of just the scale, astounding scale of this.

One thing that I wanted to start off with right away for listeners is what are we talking about here. Part of the book talks about the different scams that are out there and I think it would be helpful for you to describe what pig butchering is, which is what everyone hears about. But also, some of the other scams that are out there, including the impersonation stuff. Just paint us a little bit of a picture of what are those scams that are now at the forefront in this large scale industry.

Yeah. So pig butchering, the one you've mentioned, that's a type of scam that has really captured a lot of the public discourse around this, I think because it's so brutal really. The term pig butchering, it's a very unpleasant term, but it's one that's used by the industry. It refers to this technique whereby scammers will make contact with the potential victim, often like you said, through some of these fake wrong number messages. So, "Hi, Andy, how's it going?" And then you reply and say, "This isn't Andy." Then they'll reply and say, "Oh, very sorry for wasting your time," and then they'll strike up a bit of a conversation. And they'll be doing this by the thousands, so you've got sim boxes that will be sending out tens of thousands of text messages. Most will fail, a few will get a response. And then from that, a few more will get a bit of a conversation going.

You'd think you wouldn't fall for it, but they're very good and they do manage to suck people into these conversations, build up a bit of friendship. Sometimes romantic, but not necessarily. And then over time, steer the conversation towards some kind of investment. They'll start to talk about how they've made money investing in this crypto coin, or gold or a foreign exchange, whatever. And then they'll pull people into making some small investments on a platform that they recommend. It will be a website or an app that they control that looks very convincing. The victim will put some money in, they'll see, oh, they're making money. They'll let them cash out a little bit at first to build confidence. And then over time, coach them to invest more and more. Say, "The more you invest, the bigger the win is going to be."

This can drag on for weeks, months, sometimes longer. And then eventually when people realize that, "Something's up, I want to take my money out," of course the money's gone because the website, the app never really existed. It was just a piece of software that the scammers have developed themselves and they control themselves.

So that's the big one, like I said, it's got a lot of attention. But there's really, there's loads of different scams. Some are high value, like some of the pig butchering scams that you've seen in the news, people have lost hundreds of thousands or even millions. But then there's lots of high volume of more low value scams constantly being pumped out, shopping scams and all kinds of stuff.

More impersonation scams, really they're a big problem in the Asian region, but I think spreading as well. It involves usually someone receive a call or a message saying that they're under investigation for something. Sometimes it will be these people posing as police. They'll say, "We've intercepted a package with some illicit content. We've intercepted a package of drugs addressed to you and you're under investigation." Sometimes it's very sophisticated. They'll have a police uniform, they'll set up a whole police station set behind them for a video call. And they'll convince people that it's real, they're under investigation. Often, they've bought stolen data so they know stuff about the target already, so it makes the scam more convincing.

And then the way they extract the money is they'll tell people, "You need to transfer the contents of your bank into this account while we investigate the source of your funds. And if everything's okay, you'll get it back." And then of course, they don't get it back. So that's happening, lots of scams like that targeting people in China, but also Vietnam, Thailand, Japan, Korea. It's very widespread.

That's just a couple. There's so many. Like you say, we set out some of them in the book, but we could write a whole book on the various types of scams alone.

I just have to say one thing about my own experience because I was involved in one of those impersonation scams directly. When I worked for the finance department at the federal government in Canada, it turned out that somebody was using my name and title to correspond with people saying they were me and that they should take action, like what you're describing. Ultimately, I got a phone call from a family member saying, this was within Canada, "Are you Paul Samson?" I said, "Yeah." And they said, "Are you the author of these things?" And I said, "No, absolutely not." There was an investigation and things that went on, but it led nowhere. This had been going on for quite a while. So I've seen that directly and it happens everywhere.

Yeah, they're very good. They will have gone online and looked for someone in a regulatory role. They found you, they found your picture, they found your profile and they just used your profile. They're very good.

Yeah. In this case, there was no image used or anything like that, but there was a name and a title.

You mentioned as well that you got very focused on this, let's say around 2015, 2016, because there was a spike in activity, things were starting to show up on your radar more. And then you referred to the scamdemic, or others at least have talked about that, and then COVID entered a whole new realm for the ability to have these larger scale scam operations. Do you want to talk a little bit about what happened there? What was the COVID dynamic that pushed this up?

So one thing we do in the book is to look back at the history of the industry. We try to trace back to understand where these operations came from because it's not that they happened overnight, they suddenly appeared. So they have roots that go much deeper than that. So we looked back to the '90s, we look back to Taiwan originally to the first operation of this kind of telecommunication scams. And then we look at mail in China, and we look at this first nucleus of scam operation over 20 years ago. We tried to trace how they moved over time, over the past few decades. And we saw that in the 2000s, it started moving out of China and Taiwan. As the governments started to crackdown harsher and harsher, they started to move out and they had to find new places to move, to be based in.

So they moved to Southeast Asia, certain parts of Southeast Asia. So we saw that at the beginning ... I think in the early 2010s, we see a spike in activity in Southeast Asia, mostly in Cambodia and the Philippines, and Laos and Myanmar to a lesser extent at that time. But we see these operations taking root in the region. But the thing is, at the beginning, these operations which were mainly staffed by ethnic Chinese scammers, they were mostly ethnic Chinese and Taiwanese, people from mainland China, also from diaspora. At the beginning, they were quite small. They were based in villas, in apartments, hotel rooms, so they were quite small. These operations were all quite small.

What we saw is that in the second half of the 2010s, they started to grow, they started to get bigger and bigger. And we saw that at the end of the decade, before COVID, they started to coalesce into these bigger facilities, the scam compounds that we discuss in the book. Basically, much, much bigger facilities. There are facilities of all size, but many of them are quite big. So you have compounds where you have dozens of different operations working together, sharing the same infrastructure, and we start seeing that before COVID.

The devious part of the industrialization of this kind of scam economy, we see the operations getting bigger because they can count on better infrastructure, IT infrastructure, better services. They can count on local protection. So they realized that coming together and sharing infrastructure, and paying together for protection and better fees was a better way to achieve profit.

And COVID is what boosted the industry. During COVID, people were miserable, they were isolated. The technology of course kept improving over time and then COVID basically supercharged the industry. And that's when we started seeing these compounds mushrooming all over these places. They stayed in mostly Cambodia, Philippines at that time, but Myanmar and Laos also. And then since then, these compounds have been growing in numbers, they have been growing in size, and then the business, the market has been growing incredibly big.

So that's basically what we saw over the past 20 years looking back. So these operations, they move around a lot. They move from place to place, responding to crackdowns, they respond to law enforcement crackdown and to measure taken by governments. There are push factors that are at play here and we saw that in China and Taiwan. But then we also look at why, we try to understand why they chose certain locations. Why Cambodia? Why Myanmar, Laos and Philippines? So that was important to us.

It was important to us to go beyond explanation, "Oh, it is a Chinese thing, these are ethnic Chinese scammers." We wanted to understand why they go to certain locations. And then in that case, one thing we realized, it's that explanation that has been going around which is, oh, these places are the lowest. There is the chaos and there is no authorities, or the scammers can do whatever they want. It's not very convincing. We realized that these places are quite stable. The scammers went to these areas because they could count on good infrastructure, cheap land, for instance. They could count tourist borders. It was easy for them to move around, the people they need to staff the operations.

But most importantly, they could count on protection. They could count on local elites who would provide protection and support, which is what they needed. They wouldn't be able to operate in chaos, they needed people in place who could help them to establish their operation. If you think about it, if you are a scammer and you want to invest money in an operation, you wouldn't go to a war zone. It would be too unstable to risk it. You don't build a big facility in a place that can be destroyed, or bombed or occupied at any time. You need a place where you have guarantees. And Cambodia, Myanmar up to some point, that can be discussed, but Myanmar, Cambodia, Laos and the Philippines offer exactly these kind of conditions.

So basically, this is what we saw and this is what we trace, what we discussed in the book. I think Mark might have something to add?

Yeah. I think you covered it well. Coming back to the issue of the COVID pandemic, I think that there is, in some of the discussion around this, this idea that the industry grew out of the COVID pandemic, which I don't think is true. I think it was already well established and growing. I think it was, like Ivan said, it was really turbocharged by the COVID pandemic because you had a situation where a lot of people were stuck at home, a lot of people lonely. People were vulnerable and people are exposed on one side, in terms of being targeted by the scams. And then in countries where it was established, borders were locked down, so a lot of people were stuck in Cambodia, a lot of Chinese nationals stuck in Cambodia, couldn't leave, so they were drawn into the scam compounds.

Yeah, so I think it's a major factor, but if the pandemic didn't happen this industry would still be here and it would still be growing. It might just not have grown as fast as it did.

Right. So that's a very good description of that broader ecosystem required to support these large facilities. They're at scale, so you can't do it just with a few people. But can you paint us a picture of what one of these compounds would look like? There are guards, there are people without passports. It's not like people are coming and going, they are captive in at least some of these facilities. Can you paint us a picture a bit of what it might look like in some cases?

So if you're looking at the compounds, there's a variety. Sometimes we're talking about office buildings that might be above a casino, it might be a public-facing casino. People can come in and out of parts of the building. Then there might be offices upstairs which are sealed off from the rest of the building. Or quite often, we see office complexes built around the casino complexes. In other places, they're just purpose-built compounds. They look like business parks, but they're completely sealed. There's movement in and out, but the people that are able to move in and out are the more senior people and the managers. The rank-and-file people that are doing the grunt work of these scams, they are for the most part not allowed to leave.

A lot of these people have been trafficked, they've been deceived into the work. They're stuck in some way. But there are people that go in voluntarily, but even those people, they're not allowed to freely come and go. Their passports are usually taken, their personal phone can be taken. And once you're in, you're in. Very often, you have to sign contracts even saying that you'll work there for a year. If you break that contract, you'll have written into it that you have to pay some arbitrary fine. And then if you do break it, then they can add all these other fees that they can make up as they wish.

So you have a situation where people become commodities within the industry. Once you're in there, your contract has been signed, your passport has been taken. You can then be bought and sold, and we've spoken to people that have been bought, sold multiple times across different compounds. And sometimes even sold to people who then take them to third countries. So yeah, it's a very dark industry. There's widespread brutality within these compounds. There are these areas of exception. Within these compounds, the bosses and the managers rule. If you don't perform, if you don't meet the ... They'll set you KPIs, they'll set you key performance indicators. If you don't contact enough people in a day, if you don't make enough money in a month, you can be subject to various types of physical and mental abuse, sometimes amounting to torture. So very dark places, very strictly controlled.

Yeah, in the book you paint the picture of the compounds, but you also give stories of people that got out and told their story and things, because it's all very patchy. Presumably, there's a lot we don't know.

But one thing in the book that I think is fundamental that was new to me is that who are the criminals and who are the victims here. That you want to be careful in the end person getting scammed is clearly a victim, but you're describing a whole lot of victims along the chain there, including people that are potentially trafficked, or certainly captive and doing this against their will, even though they're doing a scam. The instigators are the ones that are the pure criminals, and everyone else has got a bit of victim and criminal attached to them. I've painted it in a black-and-white way, but how would you describe that spectrum let's say?

I think what you just said is exactly the right word, it is a spectrum. So when we think about the workforce in the compounds, we don't ever think about them as all victims of human trafficking, slaves and everything else. We also don't ever think about them as all criminals. Most of them, they fall in between.

A spectrum is exactly the right word, this is what we use. Now, we describe this as a spectrum of victimhood. On one side, you have the criminals. There are the managers you just discussed, the managers, the masterminds. Yeah, they are criminals. But you also have frontline scammers who enter the compound knowing what they're going to do. They know what they're going to do. They expect to be able to make money, sometimes they do. So these are criminals who work into the compounds in full knowledge of what kind of activities they will be engaging in and then they decide to stay in of their own volition. We can discuss their motivations. Many of them might be inside for lack of opportunities, they don't find other ways to make a living in the places where they come from, we can discuss that. But they willingly engage into the activities and they continue to do so.

And then on the opposite side, exactly at the other opposite, the other extremely other, let's call them pure victims. You have minors, you have people who are trafficked, who are tricked inside. People who ever refuse to do scams, to get in and then they come up with all sorts of excuses not to do scams, and then they get tortured and all sorts of horrible violence. So you have two extremes.

But in the middle, you have other types. I will say we have two types, two main types we can say. One is the type, the people who enter the compounds willingly. They think, "I heard the stories, but I think I can manage. I'm smarter than them. I can make some money and then I will get out when I want." So they get in, they know what they're going to do, and then once they're in they realize that they cannot get out. But they knew what they were doing and now they're in, they're stuck, and they are tortured sometimes. They are subjected to violence like all the others. So what do you make of them? Of course they were criminals, but now they're also victims, so it's very blurry. If you're law enforcement, if you're an NGO with limited resources and you have to prioritize someone, these people might fall between the cracks because they don't know what to make of them. It's difficult. [inaudible 00:25:53] thoughtless though, we see them as victims like the others.

But now you have another category, it's not very visible, it's the victims, the people who get in because they're trafficked or tricked and everything. And then once they're inside, they manage to rise through the ranks, they manage to make money, they play by the rules and they realize that they can make money. And then they decide to stay on willingly, but they were victims in the beginning. And then maybe they start recruiting others. At the beginning, maybe they're forced, but then they decide to recruit others. Many recruiters are in Vietnam, for instance, according to investigations by NGOs in Vietnam, really great NGOs. Blue Dragon is an NGO working in human trafficking showed that many of the traffickers themselves have been trafficked at the beginning.

This is just to say that the moral boundary, everything is blurred in the compounds. It's very difficult to make sense from moral [inaudible 00:26:47], it's very confusing. You also have to think that when you talk with survivors, and there is a lot of distrust, this is an industry based on lies, the industry itself scam you. And then when the people come out of the compounds, of course they face a lot of questions. "How did you get in? How could you not know what you were getting into? How could you fall for that?" These apply to the victims, the targets of the scam, but also people on trafficking side. So when they face this constant mistrust and everything, that there is tendency to maybe exaggerate or to try to get sympathy. That happens a lot.

So it's a landscape that is extremely hard to navigate. I'm not saying we did. It is very hard for everyone to make sense of all of this, and also to talk about this thing. It's very, very difficult because the victims of scams, they suffer these extremes. What they suffer is extreme psychologically, financially, everything. Their lives are destroyed by these people. And then we are here trying to find ways to talk about the other side and try to make sense of this kind of universe, this kind of ecosystem where all these moral boundaries are blurred and it's really extremely difficult.

It's very hard for us to try to find the words to discuss this and the book is the result of constant negotiations and discussion. Are we going too far here? Is this the right description? We feel a lot of sympathy of course for the victims of the scams, but we're also trying to describe how the other side works without discounting all the suffering that these scammers have been causing.

Vass Bednar:

Policy Prompt is produced by the Center for International Governance Innovation. CIGI is a non-partisan think tank based in Waterloo, Canada, with an international network of fellows, experts and contributors. CIGI tackles the governance challenges and opportunities of data and digital technologies, including AI, and their impact on the economy, security, democracy and ultimately our societies. Learn more at cigionline.org.

Let's go to another topic here that I think comes out a lot in what you've done and that's the scale of what's going on here, we've talked about it already. Obviously, data is hard to come by in some ways, but you very painstakingly looked at any kind of source you could find, whether it's official data of some sort, or testimonies and other things, NGO work. So what do we know about the numbers, if I can put it that way? You've mentioned some very large numbers. Can you just talk a little bit about the scale of this in terms of number of people involved, the dollars we hear something about at the endpoint? But what kind of numbers do we have here?

Yeah. Like you said, it's a tricky one because there's under-reporting in a lot of places. Then where there is reporting, different countries are using different reporting methods, they record different things in different ways. So we don't have complete datasets, there's a lot of gaps, so we're piecing together what we can.

But I think last year, I think the US recorded $10 billion lost to online scams, that was just in the US. In China, I think it's probably a lot, lot more than that. When you look just last year, the Chinese government released the figures on how many scams, the value of the scams they'd managed to stop, which was already higher than that, and we can assume that a lot more won't be stopped. The UN has estimated more than, I think more than 30 billion in 2024 across the Southeast Asia region. So I think very easily, this could be costing people across the world more than 100 billion a year very easily. Because also, many scams are not even reported.

So it's a huge amount of money and you can see from the profits that are being made ... There's a couple of cases recently where sanctions have been levied against several alleged masterminds and business groups that are linked to the industry, and there was an indictment against one person in the US. And if you look at the numbers that they're talking about there and the wealth that they own, the properties that they've been able to purchase around the world, it's clearly an incredibly lucrative industry.

In terms of the, on the side of the people working inside the compounds, again it's a lot of, I think it's educated guesswork. Different UN agencies have estimated upwards of 100,000 people working in Cambodia, I think it's a lot more than that. Upwards of 200,000 in Myanmar. Again, really hard to estimate. But across Southeast Asia region, I'm sure there's more than half-a-million people working in the industry, not necessarily all trafficked. Like Ivan said, there will be some people that are professionals, some that are trafficked, and then the many shades of gray in between. So we're talking about a lot of people, a lot of people harmed, a lot of money being made.

Yeah, it's astounding really. Those numbers are just so large. But the fact that there are billions in play here creates enough incentive to keep doing this, but also to squeeze out. Because it's partly a numbers game of volume, that if you've got thousands of messages going out, you get a few hooks where the fish bites. You want this cheap labor approach to it, so it's a bad constellation of things here that push this to be a viable activity from a financial criminal perspective. And that doesn't seem to be slowing down because a lot of it's unreported, as you say.

Maybe that segues to the what are governments doing in terms of prioritizing this? Obviously, they're cracking down on certain elements at certain times, but has it moved up the list of priorities for some national governments? Is there more coordination happening now? What's the state of play there?

It's definitely moved up the list of priorities for sure. I think back to early on when I was first really looking at this, I think around 2020, 2021. I was Phnom Penh at the time and I was trying to talk to different embassies, different agencies there and it was really hard to get people's attention. I understand, looking back now, it was frustrating at the time, but there's many other priorities and this wasn't really well understood. People didn't know the scope and how abusive the industry was, but it was hard to get attention.

But I think especially in the last year, I think that there's been kind of a pivot. Like I mentioned, there were sanctions in October against one group that is allegedly a major player. And those sanctions, that has had a bit of a domino effect. So you've seen now investigations ongoing in Thailand, in Singapore, Japan. Just a couple of hours ago, South Korea issued huge sanctions, I've not seen anything like that come from South Korea before, against more than 100 people and entities connected to the industry.

It's really UN agencies, Interpol, Europol, there's a lot of focus going on into this now, which is very encouraging. But at the same time, like Ivan said, the reason why we believe this ended up taking root and expanding in the countries that it did is because the environment was receptive to it. There's an enabling environment in that, yeah, you need infrastructure of a certain level to sustain this, but the really key thing is really allies. So in Cambodia, we've seen at least two senators, their properties very credibly linked to the industry. A lot of very powerful business people, the business elite, and also elite families linked to people or places that are involved in this industry.

So as long as there's that protection on the ground, it's very hard to crack. It's a constant cat-and-mouse game. So there needs to be more global coordination to squeeze this, there needs to be that external pressure because over the last five years, there's been law enforcement actually in various different countries. It has an impact, but in the short term. They can take out a few less protected compounds and chase some out, but they'll move, they'll move to another place, they'll go quiet for a while, they'll reopen. But those really protected sites, they're generally never touched. So that pressure is key because that's brought about the things that we're seeing now in terms of this year there's been more enforcement action on the ground.

But I think beyond that, until there is genuine political will in the countries that are hosting it, there needs to be more coordination globally. The money is not just flowing into Cambodia, for example, or into Myanmar. People are being scammed, the money is going through real bank accounts. It's passing through accounts, financial systems in multiple countries. There's lawyers, accountants, corporate service providers that are helping these enterprises build and run their networks. The money's being cashed out all over the world, it's going into assets in London, in the US, in Japan, wherever. So there are many potential choke points. There needs to be that global action to disrupt and ideally disable. I think we're going in the right direction, but we're still not there yet.

Now, we talked about COVID being that spike moment. This was already on a trajectory to grow and increase and COVID might have supercharged that a bit. Are we now facing something with the sophistication of the AI tools, the voice replication, deep fakes and others things, is that now adding risk factors or scale here somehow? Do you have any sense of ... We talk a lot on this podcast about the technology angle of things. Is the technology coming to play here to make it even more difficult, or possibly on the enforcement side, that it's making some things easier? What's your view on the emerging technology angle here?

AI definitely plays a role in the industry, an important role. Deep fakes and the technology that allows you to create a fake personality, impersonate other people in video and the audio, and that of course facilitates the life of the scammers. They have at their disposal tools that, 10 years ago, would have been unimaginable. So that's definitely supercharging the industry again and we will see more and more of that, and it's terrifying.

We have been working also with some IT scientists, trying to understand this side of the industry. And we think that, based on our conversations and work with them, that the technology is not there yet completely. So all the LLMs, like ChatGPT, all these kind of tools, they are being used in the industry to translate and to do these kind of low level tasks, but they have the potential to automate the scams. Or they have the potential, later on, to reach a level of sophistication, these kind of technologies, that will make scams automated and it's not that far in the future in theory. We are not there yet. The scams still rely on human beings, they still need workers. Again, we see all this human trafficking. We also see these human operators behind the scams because they rely on these technologies, but they still need a human element.

But based on our conversation with them, and they have been doing some experiments in this sense with bots and stuff like that. It is not published yet, but we hope it will be soon. But the conclusion they reach is that we are getting very close to a situation in which scams might get automated. Which doesn't mean that the human trafficking side will disappear, but will be at least a silver lining if you want in a very scary situation. The workers, the slaves or the people inside the compound, they [inaudible 00:39:29] in so many different ways, like ransom and the other types of works. If AI gets more sophisticated, it doesn't mean that these kind of low level exploitation of human being will disappear.

But it will definitely make scams even more widespread and even more difficult to detect. That I think is a safe conclusion to draw at this point. I will say we are not there yet, but we are getting very close and that's something we should definitely be paying more attention to. We shouldn't think, "Oh, we are already there and it is already happening." It is not. It's going to get worse technologically speaking. The whole industry is based on technological advancements. You think about the scams or something creative, you think about the scammers as creative people, they are creative. They must be able to come up with creative way to target people. They need to be able to understand the way you think, what your desires and stuff like that.

But the fact is that the industry grew so much, it's not because such creative people. Technology played a big role from the beginning. The whole industrialization. As Mark say before, they send out tens of thousands of texts. That's a very basic technology, it's not that advanced, but that's something that enabled these kind of scams. And then every new step in technology will enable them to do more and more harm, so that's very scary. Yeah, that's very concerning.

Yeah. It makes me think that traditionally, you think of an exchange of emails or texts and you get to know the person. It could easily go to that next level where you have a video persona with the voice you want to give it, and it matches actually the fake identity and it looks real. In a way, just on a video, it would appear to be the real thing, it would be that good, adds another layer of deceit that makes it harder to detect a scam for some people. So the technology is going to matter here for sure. But there are sophisticated ways for tracking illegal, illicit finance flows and things like that that are also advancing, so perhaps there will be some things there. But it's an arms race, as you're saying. There's always getting one step ahead of enforcement.

One question I wanted to ask, and I don't propose to dive very deep into it. But it's we're talking about Southeast Asia here because there's an ecosystem of location, labor, existing criminal networks, language, but of course there are other nodes of activity. Like the famous princes in Nigeria that people have heard of and probably seen, or call centers out of India and things like that, but they're not part of a global network even if there are some similarities between that. And I know that's not what you've looked at, but you're not saying here that those networks are somehow slowing down or necessarily being overtaken by Southeast Asia, like in terms of activity levels?

Yeah. This is something we have actually been looking into, it's an idea that we had after we finished the book actually. Because we focused on Southeast Asia, a lot of media attention is on Southeast Asia right now because, of course, it's a big cluster and it's also a very violent cluster, an extremely violent cluster. We don't see that kind of violence, widespread violence, in other clusters. But we did realize that it's not the only one.

As you just said, there are other clusters, they're called clusters. They are exactly clusters. Southeast Asia, West Africa, some parts of Latin America, Eastern Europe, they all have their own online scam industry. And they might specialize in different types of scams, and they have their own groups and everything. And they're quite separate so far it seems, but we are looking into these kind of overlaps. We see that there is some ethnic Chinese groups that were active in Southeast Asia, now they are expanding in other parts of the world. We see traces of ethnic Chinese criminal groups in Africa, West Africa, but there's other parts. We seem them in Latin America. We see news of Chinese or other people from Southeast Asia, cities in Southeast Asia and countries getting arrested in Latin America, Africa, everywhere in the scam operations.

So we see, we're trying to understand how this works. Yeah, how it work because if they're connecting, they're linking up, it's not very clear yet. But that's definitely something that we need to look into. People like us, I am a China studies person and I started looking into this cluster, and then other people are looking specifically into the West Africa cluster. So there are not many people who are taking on more global. There are some criminologists who have been doing amazing work in this sense, but they usually don't look at Southeast Asia. Southeast Asia is new, that's why it's making the news.

But yeah, it's important to take a global view of the industry and try to understand how these clusters coexist, whether they compete, whether they work together, or whether they're a separate world. And so far, there's the assumption being they're a separate world, but it seems that they are not really. It seems that there is increasing cooperation. We don't have enough elements to say now, but you really raise a really important point. I think if we had thought about that earlier, the book would also have been different. I would have wanted to add this kind of comparative angle because it's really important not to forget about all the other sides.

And Mark might have something to add?

Just that my sense is that, at the moment, we're definitely seeing groups moving into other regions. I'm not sure why at the moment. It could be that it's a natural expansion of the business, exploring new markets as they call them. They could be hedging. There's a lot of law enforcement activity going on the Southeast Asia region, so maybe there's some hedging against that risk, being able to explore new territories and move there if need be. I think, yeah, we're still trying to work it out. We still don't have enough information, but definitely there's more to look at there in terms of the global connections.

The book talks about the role of ethnic Chinese people throughout the whole chain, sometimes as a mastermind or instigator, often as forced labor or maybe voluntary labor in some cases. And then the final victim, a lot of them are Chinese. At least, that's what I'm told when I speak with Chinese think tanks and others. They're like, "You know that actually," and you've said the numbers are unknown, Mark, but they're assumed to be large. So is the Chinese government, is it taking it more seriously now because there are a lot of victims here that are Chinese? Is it becoming more important of them, or is this a runaway train that they don't really have too many levers to control?

It definitely appears to be a major priority. I think it actually has been for longer than we realized because, at least when we started to really dig into this when we were working on the book, we started to dig more into older Chinese language news reports and also court documents where we could find them, or at least reports on court cases, and we found stuff going back years, to the early 2010s. It was appearing in official documents and it was a concern, and we found evidence of arrests being made in Cambodia 10 years before this hit the news. There were some pretty significant arrests of people in Cambodia and Laos where people were deported under Chinese police escort and they were linked to phone scams at the time mostly. So I think it's been a priority longer than we probably realize, but it's not really been broadcast by the Chinese government.

I think the amount of attention their placing on this has definitely increased, but I think they're also doing more to make that public because I think one thing, there's definitely reputational harm that's occurred because of all this. But I think also, the Chinese population are really concerned about this because scams are incredibly common, so many people have been scammed or know someone that has. And I think the Chinese state needs to show people that it's serious about this, it's doing something. So I think it's definitely a priority.

I think a lot of what we've seen, I mentioned before there were sanctions from the US and the UK which have put a lot of pressure on, but I think the earliest pressure was coming from China. So there was huge crackdowns in the north of Myanmar, and I'm sure that wouldn't have happened without pressure from China. I'm sure they're leaning on Cambodia. But I think one thing that this shows is I think it dispels this idea that China is all powerful in the region. I think it's definitely having an influence when it comes to the handling of the industry, but I think it also shows the limitations of that influence as well.

So as we wrap up here, any final thought from either of you that we didn't touch on that you really want to get out there as we take the last minute or two here?

One point that we try to make in the book, that we try to raise every time is that about the identity of the victims. Right now, I don't have a sense of how widespread the idea is, but a lot of people have been saying that the people in the compounds, the victims, the human trafficking and everything, there are a new type of victim. They are educated. They're a different type of survival from human trafficking, modern slavery and everything. They are educated, they speak with different languages, they have IT skills, so they paint them as this new type of victims of human trafficking. With the idea that if you make that assumption, the idea is that these are privileged in some ways people who just should know better because they're educated, they have opportunities and everything.

So one thing that come out from our work is that this is not the case. We see there are so many people in the compounds doing this type of scam work, they are really poor people with very low level of education who have never left their home countries before. We do see some educated people for sure. But the case of Chinese, Vietnamese, Indonesian in some cases survivors, but Vietnamese and Chinese for sure, they are the ones we engaged the most with, we see really, really poor people who end up in the industry. But it's often overlooked in discussion of the industry. There is this idea, again, that these are a new type of slavery and that's something we have been trying to challenge with our book.

This is one thing that I don't think came up in our discussion, which a point that could be quite important to make. I think more people are realizing how what I just said, but I still see it as discussed, going around sometimes, which is quite upsetting because that's a very severe implication for the way in which these victims are being treated. That's the only point I have.

Also, another thing that has become really clear, especially over the last year or two years, how diverse the industry has become. We talked earlier about how it moved out of Taiwan, out of mainland China and spread into Southeast Asia. And the workforce to being was heavily dominated by mainland Chinese or ethnic Chinese from the region. But now there's more than 60 nationalities being recorded inside the compounds now, and I think this is indicative of how the industry has grown and expanded into new markets.

So they're targeting people in Sri Lanka, so they want Sri Lankans. Vietnamese, Indonesian, Thai, huge amount of victimization there in terms of the targeting of the scams. So if you have nationals from those countries, you're going to be much more effective. You need people that know the colloquialisms, they know culture, they know when the holidays are, they know the festivals. So if you're doing a long con when you convince someone that you're a friend, if you want to build someone's confidence, you need that diverse workforce if you're going to target diverse markets.

So it's really complicated things because you've got now a lot of people coming from African countries where they don't have an embassy in the country, or maybe even the region. So you've got someone from, say Uganda, stuck somewhere in Cambodia, it's very hard for them to get consular assistance. So the industry's getting more diverse, more sophisticated and that's making the response to it even more challenging.

Well, thanks to you both for joining Policy Prompt today and for your tireless work that's been going on for a long time. All the best to you. Ivan, thanks for joining from Australia, where it's going pretty late I think now. Good to meet you both.

Thank you.

Thank you.

So that was definitely a conversation about the dark side of the digital economy, of the transformative technologies that are making scams more tricky, more full of traps. And it's definitely a transnational crisis, this is global, it's spreading across countries, but it plays out in ways at the sub-national level like we heard that is very real in these compounds that have a large number of active parts to it, and complicit pieces, and then links to other countries and other things through financing. But it's played out in Southeast Asia in particular I think in ways that people have not been aware of. We all get those messages on our phones and we know there's a lot going on, but I don't think I certainly hadn't thought about what's it really looking like in the background, so there were a lot of eyeopening things there for me.

And the scale of the human suffering at multiple levels becomes really, really clear when you walk through it in this way. Even though there are some interventions and responses happening, as we heard, the incentives are so strong from a financial scam perspective to do this, it's a very hard genie to put back in the bottle. So I think it's going to be an ongoing battle between the latest technologies to scam and the latest technologies to detect, and the ability to enforce these things. They're mobile, they're adaptive, and there's money to be made for the criminals at the head of it and they're going to keep finding ways to do it. So it doesn't feel like the end is in sight, but there is maybe more of a crackdown from governments because of the scale here and the suffering.

Vass Bednar:

Policy Prompt is produced by me, Vass Bednar, and CIGI's Paul Samson. Our supervising producer is Tim Lewis, with technical production by Henry Daemen and Luke McKee. Show notes are prepared by Lynn Schellenberg, social media engagement by Isabel Neufeld. Brand design and episode artwork by Abhilasha Dewan and Sami Chouhdary, with creative direction from Som Tsoi. The original theme music is by Josh Snethlage. Please subscribe and rate Policy Prompt wherever you listen to podcasts and stay tuned for future episodes.