Chinese crime syndicates have set up sophisticated online scamming operations throughout Southeast Asia that rake in an estimated $64 billion a year. Relying on forced labor, the scam compounds “look almost like penal colonies,” says USIP’s Jason Tower, adding: “This is happening on an industrial scale.”
U.S. Institute of Peace experts discuss the latest foreign policy issues from around the world in On Peace, a brief weekly collaboration with SiriusXM's POTUS Channel 124.
Transcript
Alice Stewart: Right now, we're going to talk about China and the growing influence in concerns over China and what they are doing to America and scamming Americans out of money. My guest Jason Tower is the director of the Burma program at the United States Institute of Peace. You can follow him on X @Jason_tower79. Jason, thank you so much for joining me.
Jason Tower: Thanks for having me on.
Alice Stewart: I'm glad you could join me. This is frightening, you know, we always hear about China and the Belt and Road Initiative and the actual visible concrete signs of China's debt trap diplomacy. But this is a concern here called scam compounds. And it's a way to scam billions of dollars from Americans. Explain to us what these scam compounds are.
Jason Tower: Yes, so you see these, increasingly, we would refer to them either as scam compounds or fraud factories, but based in mainland Southeast Asia, especially in Borderlands, you have these large, they look almost like penal colonies. But you have large numbers, hundreds of 1000s of people that are held inside of these compounds that are basically perpetrating quite sophisticated online scamming called pig butchering. Which refers to this long form type of con where scammers build trust with victims before ultimately pushing them to invest their assets into fraudulent cryptocurrency types of applications and platforms. So, we've seen now global losses from this activity in excess of 64 billion U.S. dollars. That's according to a new USIP senior study group report that we just put out this morning, actually, that looked quite closely at the criminal networks and their practices and how this activity is now increasingly targeting Americans. But you know, the evolution of these compounds, seems to link back to a little over a decade or so ago, as a lot of Chinese organized crime groups went overseas to build out space where they could perpetrate initially online gambling operations targeting the Chinese gambling market. And during the pandemic, this shifted increasingly towards fraud and towards fraud targeting a global population, and increasingly, Americans.
Alice Stewart: I want to ask you this, there's a lot of folks listening as they're driving this morning, getting ready for work or school. And this sounds so foreign, obviously, we're dealing with China. But this is a serious issue for 10s of 1000s of Americans and people across the world. How does this come about? Do they pick up the phone? And are they calling Americans? Are they targeting them online? Are they shooting them emails? I mean, people listening here, what do they need to be mindful of?
Jason Tower: Yeah, probably most listeners have received some of these messages over WhatsApp or LinkedIn, or one of the other very common types of social media platforms, including Facebook Messenger. But the scams usually start off with what appears to be a misfire text message or social media message. Might be something like, "the delivery I sent to you, did you get it?" And you know, if the person doesn't know who this individual is, maybe they will be intrigued by a somewhat attractive looking profile picture which often the scammers will use to try to attract attention. And they might, you know, just ignore the message entirely. But many people will respond saying, "No, I didn't get the delivery, who are you?" or maybe "you have the wrong person." And then from there, the scammer strikes up a conversation. And if the scam works, you know, over the coming course of a couple of weeks and months, that relationship will become a relationship of trust, sometimes a romantic relationship even online. And then at some point, the scammer will introduce the con which is a link to a fraudulent cryptocurrency app. Which once you've installed on your phone and started to put funds into on the backside of this, the scammer is basically able to take all of the funds redirect them into an account overseas, somewhere in Southeast Asia. Often where both the victim and also largely law enforcement have extreme difficulty getting these funds back. My
Alice Stewart: My guest Jason Tower, he is the director of Burma program at the United States Institute of Peace. And Jason, you're talking about a very sophisticated scam. And people across America and the globe are potential targets. But you mentioned something I thought was interesting. They these scammers, contact people and unwitting people, and begin a quasi-fake relationship with them before they eventually try to seek some type of monetary payout from them. But are you serious, they could engage in some type of quasi relationship for weeks or months with some person that has no idea they're being scammed? I mean, did they invest that amount of time before they scam people?
Jason Tower: They do. I mean, this is happening on an industrial scale. So, in these operations, you know, you have people that again, it's also important to point out that many of the people that are doing the scamming are also victims themselves. So, the scam syndicates are actually trafficking people using another form of fraud, HR fraud, putting out fraudulent advertisements, posts, and tricking people into flying off to a destination in mainland Southeast Asia where they think they're getting a high paid job. And then they're being forced to go into one of these scam centers. So, you've got, you know, 10s of 1000s of people on these compounds in Southeast Asia who are basically held there against their will and forced to scam. And you know, they have access to large databases, lots of information about possible victims, and they use that information against the victims. So, they're often targeting people on some of these different platforms, having a pretty good idea about what sort of script to deploy in the fraud against that particular individual.
You know, there is certainly a time investment involved in building these relationships. But then some of the losses are also astronomical. I mean, we have single individuals in the U.S. who've lost upwards of $50 million to one of these scams. So, you could sort of see the way in which these scams can really net very large amounts of assets to some of the criminal actors. Beyond that another level of harm is the psychological harm, right? Because many of these people actually do enter into trusting relationships with the scammers, not realizing until far too late that it's a scam. And they're invested emotionally in these relationships as well, which could be very damaging once they find out that they've been tricked.
Alice Stewart: It's so frightening. It's mind boggling to think, Jason, I have just one minute left, what is the U.S. doing? What is the Institute of Peace? How are you combating this or trying to put an end to it?
Jason Tower: Yeah, so one of the biggest problems here is just simply the lack of information behind it, you know, who are the criminal organizations behind it? How are they moving these funds? How are they getting information about victims? This is a very new form of crime that the U.S. is only becoming more aware of as a threat to U.S. and regional security. So, our first start with this study group was really to try to get a mapping of you know, who are the criminal actors behind this? What is their relationship with the People's Republic of China? How does this activity start to target Americans? You know, trying to get answers to a lot of these questions. And from here on out, and with the launch of this new report, we hope that this will both help in terms of raising awareness as well as identifying some specific web specific policy options. And tools that the U.S. can use together in partnership with its allies in the region to try to address this activity.
Alice Stewart: It's certainly mind boggling to think about this, but we certainly appreciate what you and the U.S. Institute of Peace are doing to combat that. And most importantly, as you say, educate people to be wary of that. Jason Tower, director at U.S. Institute of Peace, Jason, thank you.
Jason Tower: Thanks.