Where does the money from cryptocurrency scams go? UNODC's transnational organized crime report reveals new trends in money laundering networks in Southeast Asia.

share
Where does the money from cryptocurrency scams go? UNODC

Author: Charlie Chen, CEO of Chainvestigate; Editor: Mike Chen, Investigative Analyst at Chainvestigate

Recently, the United Nations Office on Drugs and Crime (UNODC) released its latest report"Convergence of Transnational Organized Crime with Cybercrime, Underground Banking, and Technological Innovations in Southeast Asia: Evolving Threat Landscapes". Taiwan-based virtual currency investigation company Chainvestigate provided detailed blockchain data analysis for the report, helping expose complex money laundering networks in Southeast Asia.

The UNODC report, spanning 142 pages, covers various areas including online gaming, legislative and law enforcement recommendations, emerging technology crime methods, and money laundering techniques. Key highlights include:

  • Enormous Fraud Amounts: In 2023, the total fraud amount in East Asia and Southeast Asia reached $37 billion, with Taiwan suffering approximately $270 million in losses (based on data from the Criminal Investigation Bureau of the National Police Agency).
  • Abuse of Emerging Technologies: Criminal activities widely utilize technologies such as Deep Fake, blockchain cryptocurrencies, Generative AI, and cloud computing.
  • Diverse Fraud Techniques: Mainly focused on online gambling, investment fraud, and romance scams.
  • Specialized Criminal Group Division of Labor: Dividing tasks among programming development, fraud operation, and money laundering, extensively using virtual currencies for money laundering.

This article will discuss the following aspects of the UNODC report: major regional crime group money laundering cases uncovered in recent years, how crime groups launder money using large business conglomerates in countries near the Mekong River, and the findings of Chainvestigate.

Chainvestigate mentioned in UNODC report
Chainvestigate mentioned in UNODC report

UN: Southeast Asian Crime Groups Embrace AI, Telegram a Major Platform for Money Laundering Scams

List of Large-Scale Regional Crime Syndicate Money Laundering Cases

The UNODC report indicates that many crime funds are laundered through illegal online gambling, third-party payments, and peer-to-peer cryptocurrency service providers (commonly known as currency traders). Below is a list of large-scale regional crime syndicate money laundering cases compiled on page 66 of the report, including cases where a Taiwanese gaming company laundered its gambling funds through self-operated third-party payments and cases involving the laundering of proceeds by fraud syndicates.

Date

Type of Incident

Summary

August 2023

Illegal online gambling, some arrestees related to online fraud in the Philippines

Singaporean authorities arrested 10 individuals involved in money laundering from illegal online gambling, ultimately uncovering over $2.3 billion in funds and assets. The 10 suspects were sentenced to 13 to 17 months in prison and deported.

December 2023

Money laundering and illegal virtual asset services, involving illegal online gambling and online fraud

Chinese authorities disclosed details of the case of cryptocurrency tycoon Zhao Dong and his associates, whose platform provided payment and settlement services to criminal groups, involving online gambling and cryptocurrency investment fraud. The platform processed $449 million in a single month in 2020. Zhao Dong and other executives were sentenced to 2.5 to 11 years in prison.

April 2024

Money laundering, involving illegal online gambling, online fraud, and drug trafficking

Thailand's "Clean Up Operation" exposed a money laundering network processing up to $9.47 billion annually, linked to illegal online gambling, online fraud, and drug trafficking.

April 2024

Money laundering, involving illegal online gambling, online fraud, and drug trafficking

Thailand's "Black Hat Operation" uncovered a money laundering network collaborating with multiple transnational crime syndicates, capable of handling over $370 million in illegal gambling, online fraud, and drug trafficking funds.

May 2024

Money laundering, involving illegal online gambling and online fraud

Japanese authorities arrested key members of the Rivaton group, which allegedly processed over $487 million through more than 4,000 company accounts, related to online gaming and online fraud, involving over 500 shell companies.

August 2024

Money laundering and illegal virtual asset services, involving illegal online gambling and online fraud

Vietnamese authorities dismantled a local branch of a regional money laundering organization engaged in illegal peer-to-peer cryptocurrency services, with total transactions exceeding $1.1 billion USDT from November 2023 to May 2024.

August 2024

Money laundering, involving illegal online gambling and online fraud

Taiwan's court charged 32 individuals associated with the OO Gaming Group, alleging that the company's developed third-party payment application processed $1.4 billion worth of online gambling transactions and laundered $578,000 for fraud syndicates.

Exposing Money Laundering Activities of Large Business Groups in the Indochina Peninsula

In the report, the UNODC detailed the activities of Business Group 1 (BG1), Business Group 2 (BG2), and Business Group 3 (BG3) in countries of the Indochina Peninsula. They provide e-commerce and escrow services through the Telegram platform, engaging in illegal financial activities, including money laundering, fraud, online gambling, and supporting various organized crime groups. These groups have extensively utilized virtual asset technology this year, offering virtual asset services (such as payments, escrow, insurance, and even issuing stablecoins) and assisting criminals in fund transfers to evade regulatory scrutiny.

Based on the report's data, BG1 alone estimated virtual currency transactions ranging from $49 billion to $64 billion from 2021 to 2024, with at least several billion dollars involving illicit financial flows.

Funds from many fraud cases in Taiwan victims were transferred by fraud syndicates to wallet addresses marked as belonging to the mentioned business groups for multi-layered money laundering and integration (details can be found in the following image).

Figure 1: How online casinos are used for money laundering

Chainvestigate's Discovery: Nested Wallet Operation Model

In this report, Chainvestigate's expert team successfully identified and confirmed cryptocurrency addresses related to BG1 with multiple Taiwan fraud cases handled by our team and other cryptocurrency-related criminal activities.

Our investigation helped the UNODC gain a deeper understanding of these groups, demonstrating how BG1 uses a nested wallet operation model through virtual asset management service providers to conceal their tracks, mislead law enforcement agencies into requesting information from the wrong institutions. With the clues we provided, we hope to assist international law enforcement agencies in conducting correct and effective investigations.

Figure 11: Overview of the nested wallet operation model

Enhancing Cooperation to Address Challenges of Cryptocurrency Fraud

Through this international collaboration and exchange with UNODC, we deeply realize the ongoing global growth of cryptocurrency fraud, affecting people and law enforcement agencies worldwide. In the face of increasingly internationalized fraud syndicates and cross-border cooperation trends, public-private sector and international law enforcement cooperation become crucial.

Blockchain data analysis is crucial in the legal offense and defense of cryptocurrency fraud cases. Chainvestigate is dedicated to applying financial flow analysis methodologies and diverse virtual wallet address tagging in blockchain data analysis, providing actionable blockchain analysis data with legal partners to assist law enforcement agencies and victims in breakthrough investigations.

About Chainvestigate and the Article Author

Chainvestigate is a Taiwan-based startup specializing in cryptocurrency analysis and investigation, focusing on tracing complex cryptocurrency transaction records, especially in cryptocurrency fraud or embezzlement cases.
Honesty, transparency, and customer priority are our core values. Before providing investigative services to clients, we collaborate with lawyer Yi-Hsien Lu to offer client consultation services, helping clients understand how blockchain data analysis can be applied to their legal cases.

If you encounter cryptocurrency fraud or other criminal cases, please contact us through our official website: https://www.chainvestigate.com/

This article is written by Charlie Chen, currently serving as the CEO of Chainvestigate and concurrently as the Secretary-General of the Taiwan Virtual Asset Anti-Money Laundering Association. He has worked in the anti-money laundering departments of domestic and international cryptocurrency exchanges and holds various professional certifications, including Certified Anti-Money Laundering Specialist (CAMS) and Certified Cryptocurrency Anti-Money Laundering Specialist (CCAS).