UN agency calls for urgent action against crypto crime in Southeast Asia

The United Nations Office on Drugs and Crime (UNODC) expressed deep concern about the role of cryptography in facilitating illicit activities in Southeast Asia.

He notes that the existing underground banking infrastructure, including loosely regulated casinos, junkets and illegal online gambling platforms, has increasingly adopted cryptography as a tool for crime.

UNODC raises the alarm on cryptography

In its latest report, the UN agency said the rise of high-risk virtual asset service providers (VASPs) has created a new avenue for criminal enterprises to operate without accountability, further consolidating these activities.

As such, UNODC called for urgent action, recommending improved monitoring of organized crime in casinos, junkets and cyber fraud operations, along with better training for authorities to identify sophisticated crypto-enabled money laundering methods.

The report stated that while not all scams in the region involve crypto, it remains a preferred payment option among fraudsters due to the ease of quick cross-border transactions. This reality, compounded by misinformation and inadequate law enforcement cooperation, further highlighted the urgent need for greater regulatory oversight in the crypto space, UNODC added.

In a statement, UNODC Regional Representative for South-East Asia and the Pacific, Masood Karimipour, said:

“Taking advantage of technological advances, criminal groups are producing larger scale and harder to detect fraud, money laundering, shadow banking and online scams. This has led to the creation of a criminal service economy and the region has become a key testing ground for transnational criminal networks seeking to expand their influence and diversify into new lines of business.”

Tether in the spotlight, again

The UN agency also reported that Tether (USDT), especially on the TRON blockchain, has become the stable currency of choice for transnational criminal networks in East and Southeast Asia. These networks, involved in cyber fraud and money laundering, favor Tether for its efficiency in moving stolen funds.

While stablecoins like Tether have gained popularity among legitimate users, UNODC said on-chain analysis reveals USDT has significantly higher counterparty exposure to high-risk entities, including gaming platforms. ‘online gambling, cyber fraud schemes and high risk exchanges.

The report also highlights that Tether has been involved in hundreds of millions of dollars in transactions with entities linked to large-scale criminal operations such as drug and people trafficking, cybercrime and the distribution of child sexual abuse material.

In particular, some of these transactions involve wallets associated with OFAC-sanctioned entities and North Korea’s Lazarus group, known for hacking activities.

Cryptocriticism Misplaced: Report Shows

Although crypto often faces criticism as a tool for illicit activities, studies indicate that cash remains the preferred method for criminals. For example, a recent report by Homeland Security Investigations (HSI) highlighted that regulated crypto platforms provide essential support to law enforcement by leveraging the transparency of blockchain technology to fight crime and improve national security.

This is contrary to misconceptions about their involvement in illicit finance. In fact, data from Merkle Science reveals that only 0.61% of USDT transactions and only 0.22% of USDC transactions were flagged as potentially illicit between July 2021 and June 2024, which which indicates a significantly lower rate of illicit activity compared to traditional finance.

Furthermore, Chainalysis noted that illicit activities constituted only 0.34% of total on-chain transactions in 2023, indicating that concerns about crypto may be overblown compared to traditional finance.

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