A recent report by a UN body highlights the rapid rise of crypto-related cyber fraud in Southeast Asia. The United Nations Office on Drugs and Crime (UNODC) estimates that the region suffered financial losses of around $37 billion (roughly Rs. 3,10,663 crore) in 2023 alone due to fraud. To counter this growing trend, the UNODC has recommended penalizing unlicensed crypto companies, which are exploited by money launderers to facilitate illegal transactions.

“Building on the existing underground banking infrastructure, including under-regulated casinos, tours and illegal online gambling platforms that have adopted cryptocurrencies, the proliferation of high-risk virtual asset service providers (VASPs) across Southeast Asia has now emerged as a new vehicle through which this has occurred, serving criminal industries without accountability,” the report said.

The report recommends that unregulated and unlicensed virtual asset service providers (VASPs), particularly crypto exchanges, be proactively “identified and prevented from operating” as part of the regulatory crackdown.

The UNODC released a report this week titled “Transnational Organized Crime and the Convergence of Cyber ​​Fraud, Underground Banking and Technological Innovation in Southeast Asia: The Changing Threat Landscape.” Based on ‘extensive evidence’, the report reveals that organized crime groups are exploiting casino complexes, special economic zones and border areas to cover up illicit activities.

Commenting on the situation, Masood Karimipour, Regional Representative for Southeast Asia and the Pacific, UNODC, said: “Organized criminal groups are gathering and exploiting vulnerabilities, and the evolving situation is rapidly outstripping the capacity of governments to contain it.”

He further emphasized that cybercriminals are becoming increasingly sophisticated in using advanced technologies to carry out large-scale fraud, resulting in significant financial losses.

“This has led to the creation of a criminal services economy, and the region (Southeast Asia) has now emerged as a key training ground for transnational criminal networks looking to expand their influence and diversify into new lines of business,” Karimipour added.

UNODC has strongly advised the governments of Southeast Asian countries to become more vigilant and prioritize practices that can reduce the number of cyber fraud cases.

In addition to cryptocurrency exploitation, the report highlights a staggering 600 percent increase in AI-powered cybercrime, including deep spoofing, in the first half of 2024 alone. The misuse of artificial intelligence has been identified as a critical driver of financial crime across the region, including Cambodia, Indonesia, Malaysia, Singapore, Thailand and Vietnam.

“The integration of generative artificial intelligence has not only expanded the scope and effectiveness of cyberfraud and cybercrime; they have also reduced the barriers to entry for criminal networks that previously lacked the technical skills to exploit more sophisticated and profitable methods,” said John Wojcik, regional analyst at UNODC commenting on the situation.

According to Statista, the crypto market in Southeast Asia is estimated to grow by 4.13 percent by 2025 – amounting to an estimate of 4.4 billion (roughly Rs. 36,944 crore).