Fraud factory

A fraud factory, fraud park or scam compound is a collection of large fraud organizations usually involved in human trafficking operations, generally found in Southeast Asia and usually operated by a criminal gang. Fraud factory operators lure foreign nationals to scam hubs, where they are forced into modern slavery, to scam internet users around the world into fraudulently buying cryptocurrencies or withdrawing cash via social media and online dating apps.^[1] A typical scam is known as "pig butchering". Trafficked victims' passports are confiscated, and they are threatened with organ harvesting and forced prostitution if they do not successfully scam sufficiently. Fraud factory operations proliferated in Cambodia, Myanmar, Laos and other countries during the COVID-19 pandemic and were further aided by the civil war in Myanmar.

The term fraud factory first appeared in a 2022 Sydney Morning Herald article about the Southeast Asian scams and human trafficking industry^[2] and was coined by Jan Santiago of the Global Anti-Scam Organization (GASO), a victims advocacy group, in describing scamming operations in the region.^[3][4]

The term was used by Kenya's Ministry of Foreign Affairs for the activity of trafficking victims to Asia where they use digital media to meet westerners and sell them cryptocurrencies.^[5] In Chinese, the term "fraud industrial park" (Chinese: 詐騙園區; pinyin: zhàpiàn yuánqū; lit. 'fraud park zone') has emerged in reference to these operations.^{[citation needed]}

Fraud factories are often operated by Chinese criminal gangs based in Southeast Asia.^[6] The gang's traditional revenue stream of gambling reduced during the COVID-19 pandemic and their activities increasingly focused on fraud factories thereafter to regain lost revenue.^[6]

Between August and late September 2022, the Kenyan embassy in Thailand facilitated the rescue of 76 trafficking victims.^[5] The victims were mostly Kenyan, and included Ugandans and a Burundian.^[5] The criminal gangs who operated the fraud factories had been targeting young and educated Africans.^[5] In November 2022, one Kenyan died after a botched organ harvesting operation associated with a fraud factory in Myanmar.^[7][5]

Myanmar is also an emerging destination for international labour trafficking, especially along its border areas.^[8] Victims in Myanmar include nationals from throughout Asia, including China,^[1] Hong Kong,^[1] India,^[9] Indonesia,^[1] Malaysia,^[1] Nepal,^[1] the Philippines,^[10] Taiwan,^[11] and Thailand.^[12] Victims are lured by the false promise of high-paying jobs, and are trafficked through major cities like Yangon and Bangkok, and transit points like Mae Sot and Chiang Rai.^[8] They are then forced to work in "special economic zones" along Myanmar's borders, such as Shwe Kokko.^[8]

In late 2023, the United Nations Human Rights Office estimated that at least 120,000 people in Myanmar were trafficked there and are being held in online scam compounds. At least 100,000 people are being held in similar circumstances in Cambodia. Other operations were also being run in Laos, the Philippines and Thailand.^[13][14]

In May 2023, the Philippine Senate's Committee on Women, Children, Family Relations and Gender Equality conducted an inquiry into the proliferation of illegal activities involving foreign nationals, including human trafficking and racketeering, within scam hubs in various points of the archipelago. Senator Risa Hontiveros presented videos and reports of recent raids made by Philippine law enforcement agencies on a number of commercial and residential properties in Clark, Pampanga, that resulted in the rescue of 1,300 victims and the confiscation of over ₱180 million in cash.^[15] By August, the committee discovered that many of these scam hubs had been "hiring" more locals than foreign nationals.^[16]

In March 2024, more than 800 Filipinos and foreign nationals were rescued from a large scam hub in Bamban, Tarlac, after it was raided for alleged illegal activities that included crypto and love scams; the hub was legally registered as a Philippine Offshore Gaming Operator (POGO) firm.^[17] In August 2024, another 162 foreign nationals were rescued from scam hubs in Cebu illegally operating as POGOs.^[18][19]

In 2022, BBC News reported the locations of fraud factories as being in Laos and Myanmar, notably in Kachin where the Kachin conflict is occurring, a factor that makes rescues difficult.^[5] In 2022, The Japan Times reported that factories which initially started operations in Cambodia later switched locations to Laos, and that victims were held in special economic zones in Laos and Myanmar, specifically in Myawaddy, as well as casinos in Cambodia, particularly in Sihanoukville.^[6][20] The trafficked victims are lured with job offers, with the BBC reporting one victim having traveled to Thailand for a job before being driven to Laos.^[5]

Fraud factory workers are trained to create online social media and dating personas, which they use to build up trust with westerners and engage in fake romance scams, with the goal of encouraging the westerners to buy cryptocurrencies.^[5][6] The targets of the bait and switch cyber crime were predominantly US citizens.^[5] The process of fraudulently building up trust with victims online in order to sell them cryptocurrencies is known as "pig butchering".^[6]

The trafficked Kenyans were prevented from leaving unless they paid 1.2 million Kenyan shillings and were threatened with forced sex work and organ harvesting if they did not meet work performance targets.^[5] Two victims who spoke to the BBC were rescued by Awareness Against Human Trafficking.^[5]

Traffickers confiscate their victims' passports. Some trafficking victims have returned to Kenya with broken limbs, from beatings by their captors.^[5] Vietnamese charity organization Blue Dragon reported that trafficking victims forced to work in scamming operations in Myanmar, are forced to sell their organs if they fail to meet quotas.^[21]

During the Myanmar civil war, the Three Brotherhood Alliance launched Operation 1027 against the Myanmar military regime on 27 October 2023, with one of the intended goals being to eradicate scam centers in the Kokang Self-Administered Zone along the northeastern border with China, which had grown frustrated with the Myanmar government's lack of response against fraud factories.^[22][23] On 5 January 2024, the alliance fully captured the city of Laukkai in Kokang from the Myanmar military, and soon more than 40,000 people involved in Kokang's fraud factories were returned to China.^[24][25][26] Analyst Jason Tower called their operation "extremely successful" in eradicating scam centers from Kokang, although some syndicates were able to move their operations to Cambodia, Laos, and Myanmar's Kayin State.^[26] By March 2024, Brig. Gen. Zaw Min, a former Regional Operations Command (ROC) chief of Laukkai, was imprisoned by Myanmar's military government for his alleged role in online scam operations, and was later given a death sentence in July.^[27]

In 2024, Rappler reported that many in the Philippine media as well as government had been unaware that a large number of scam hubs in the Philippines had been operating in the country under the legal cover of Philippine Offshore Gaming Operator (POGO) licenses that were issued by the Philippine Amusement and Gaming Corporation; although POGO licensees were first issued in 2003, they flourished during the presidency of Rodrigo Duterte. A 2024 congressional investigation of scam and trafficking operations by a Tarlac POGO hub led to the arrest of Bamban mayor Alice Guo and her alleged sister and sister-in-law, Shiela Guo and Cassandra Ong, as well as a manhunt for Duterte's former spokesperson, Harry Roque, who has been on the run after questions on his sudden wealth led to questions about his role in a Pampanga POGO hub, identified as Lucky South 99, that was also managed by Cassandra Ong.^[28][29][30]

In March 2024, the head of Interpol estimated that the combined revenues of Southeast Asian organized crime networks were $2 to $3 trillion per year, with a typical criminal organization making $50 billion per year.^[31]

Scam compounds are able to continue operating even though their locations are known, by bribing local law enforcement and politicians.^[32] As of 2024, organizations had allegedly harassed at least one researcher, using deep fakes to impersonate his father over phone and video chats, after stealing his phone number.^[32]

Cambodia, Laos, and Myanmar in Southeast Asia have been the most known fraud factory destinations.^[9] These countries are particularly vulnerable due to their strategic location next to China and weak law enforcement.^[33] Below are known cyber scam hotspots:

•  Cambodia:
  • Sihanoukville^[34]
  • Poipet^[34]
  • Bavet^[34]
•  Laos:
  • Golden Triangle Special Economic Zone^[34]
•  Myanmar:
  • Laukkai (on the border with China)
  • Myawaddy^[34] (on the border with Thailand) and nearby:
    • KK Park
    • Shwe Kokko^[34]
  • Mong La^[34] (on the border with China)

In November 2023, China issued arrest warrants for junta-aligned Ming Xuechang, and three other Ming family members for their involvement in online scamming operations.^[35] Ming later committed suicide. The other three were captured by Burmese authorities and handed over to China.^[36]

In August 2024, the secretary of the Philippines' Department of Migrant Workers said that Philippine authorities will "get the statements of the [Filipino] victims [of the fraud factories in Laos] to pinpoint who recruited them [...] in the Philippines and file the necessary charges.”^[37]

• No More Bets, a 2023 Chinese crime thriller film about people trafficked into a fraud factory

General:

• Slavery in the 21st century
• Cryptocurrency and crime
• List of confidence tricks