How Cambodia Became The Hub Of Asia's Online Fraud Racket
When China cracked down on cyber crime, many involved in the industry moved to Cambodia. The Southeast Asian country has since become synonymous with online scams and forced labor. But the Cambodian government isn't just turning a blind eye — it is actively benefiting.
Cambodia has been making headlines this year for all the wrong reasons: a rising Asian leader in "internet fraud," "forced labor" and "human trafficking."
But why, in particular, has Cambodia become a hub for online scams? How did international cyber fraud become so widespread in this Southeast Asian nation of 16.7. million? The answers begin with an unlikely source — land.
There is a joke familiar to many Cambodians: only generals with two stars or more can own land in Sihanoukville, a popular beachside destination in the south of the country. That land eventually changes hands and ends up belonging to Chinese investors, who turn it into hotels, casinos and, eventually now: cyber fraud activities.
Cambodia has private ownership of land, but its domestic politics has been turbulent for decades, with property rights still unclear. Large amounts of private land is still concentrated in the hands of the political elite through violent means, such as the forced conversion of private land into state land or the eviction of residents for commercial development.
In 2007, the government evicted long-time fishermen living in Sihanoukville, on the grounds of developing a public road, with 105 family houses burnt down by the police.
The suffering behind development
The seemingly unrelated factor of land is the basis for Cambodian becoming a hotbed of fraud in the virtual world. On July 15, the documentary Forced to Scam, released by Al Jazeera, revealed that the Special Economic Zone in Pursat province, in the west of the country, was in fact a cyber fraud park.
Often, these parks are in the form of offices that are leased to the owners of online gambling companies for rent and management fees. The "management fees" are collected by specialized properties, also known as zone managers. But law enforcement experts say the management cost is a protection fee charged by the landowners for providing political sanctuary to the companies.
As developing countries, Southeast Asian nations did not have the foundation of earlier Western countries that built national wealth through colonial advantages. Due to its disadvantaged position in the development of global capitalism, the Cambodian government has adopted "extractive" strategies to rapidly accumulate capital for national development, i.e. plundering and exploiting the country's natural and land resources. But these strategies have created suffering too.
According to the World Bank, Cambodia's economy has been growing at a rate of over 7% since 2011, thanks to its garment manufacturing and real estate sectors. But behind these gains lie a number of obvious disasters: forest destruction, drug and gun violence, and the proliferation internet scams.
Cambodia has now been ranked as the Southeast Asian country with the highest level of corruption for the fourth year in a row; it also has the highest rate of forest degradation over the last two decades, with vast areas of virgin forest destroyed by logging.
In the U.S. State Department's latest Trafficking in Persons Report 2022, Cambodia was even downgraded from the original Tier 2 to Tier 3, highlighting the country's extensive internet fraud parks and forced labor.
A Cambodian migrant worker going to Thailand
From fishing port to gambling hub
Cambodia's complex political and economic structure has been shaped by the many changes of government and state institutions since the French colonization in 1863. After the formal independence of the Kingdom of Cambodia in 1953, the government was overthrown multiple times, notably with the Khmer Rouge communist regime from 1975 to 1979, the 1978–1989 Vietnam occupation, and the UN takeover from 1992 to 1993.
China has been the largest foreign aid donor to Cambodia since 2003.
It was not until 1998, when Hun Sen became the Prime Minister, that the political situation in Cambodia became more stable. Hun Sen used "democracy" as a cover to start moving towards a developmental authoritarian state, where one-party dominance and Hun Sen's family patronage network provide an umbrella for corruption.
In terms of international relations, China has been the largest foreign aid donor to Cambodia since 2003, and the Sino-Cambodian alliance has gradually become a shield for Cambodia in the face of international democratic forces.
During the UN takeover, the West hoped that foreign aid would be used to boost Cambodia's economic growth, thereby achieving social stability and, by doing so, promote Cambodia's political democratization. But with the development of China's Belt and Road Initiative and continued investment from Beijing, Cambodia's dependence on the West has gradually diminished, providing a backstop to Hun Sen's authoritarian rule.
Belt and Road black market
The Belt and Road Initiative has not only brought Chinese capital to Cambodia, but also unsavory industries such as prostitution, gambling and drugs. Although naturally not planned developments under the initiative, they have attracted countless Chinese investors and speculators who have taken advantage of the opportunity to head overseas.
Under China's harsh policies against such industries in the last decade, the organizers have been moving to Southeast Asia, such as Manila in the Philippines, Sihanoukville in Cambodia, and Myawaddy in Myanmar.
In 2019, there were 91 casinos with legal licenses in Sihanoukville, most run by Chinese. In addition, clubs in the city offer sex and drug services with the help of Cambodian officials. These establishments are sheltered by Cambodian officials in the form of shares, and they employ armed Cambodian gendarmes as security personnel.
With Cambodia's only deep-water port, Sihanoukville is also a key development target of China's Belt and Road project. Led by Cambodia's pursuit for rapid economic growth and Chinese investment, Sihanoukville has grown from a small fishing village in a seaside port to become the third largest city in the country.
From the end of 2017 to mid-2019, Sihanoukville got the reputation of "gambling town" with a rumored "300,000 online gamblers," and the sector relying on local protection forces to spread across Cambodia.
In 2019, there were 91 casinos with legal licenses in Sihanoukville, most run by Chinese
Cyber fraud and gambling go hand-in-hand
Many believe that Cambodia's cyber fraud industry has evolved out of the legitimate gambling industry. In fact, the popular real estate investment, casino and online fraud industries have been developing in parallel. But problems mushroomed after the 2019 "818 Gambling Ban," which required online gambling companies to leave Cambodia. Following the ban, a large number of online gambling companies began to move to places such as Myanmar, Dubai and Georgia.
The 818 gambling ban not only caused a mass exodus of legal online gambling companies, but also brought about another serious evil. The real estate investments, casinos, clubs, supermarkets and restaurants that grew up around the industry were all devastated, leaving countless investors broke and workers in Sihanoukville out of a job.
Many from Hong Kong and Taiwan came to Cambodia, trapped in cyber fraud activities.
Internet gamblers fled, investors lost money, businesses closed, casinos laid off staff – Sihanoukville's economy came to a standstill overnight. This was the beginning of Sihanoukville's descent into a Wild West. The city is home to many gangsters who rely on gamblers for their livelihood and have expert kidnapping techniques, so they formed professional gangs to kidnap Chinese people inside Cambodia and sell them to online fraud outlets. With the outbreak of the COVID-19 pandemic, the cost of selling people has risen in tandem with the cost of smuggling, recently hitting around $25,000.
As for business, due to China's ongoing operations against illegal industries, anti-fraud propaganda and other policies, online gambling companies' profits in mainland China were limited. In 2020, following the outbreak of the COVID pandemic, the Chinese government tightened its immigration policies.
As the online gambling and fraud industry is dominated by the Chinese population, China's measures to restrict external mobilization have deprived them of a large part of their labor pool. Coupled with the rise of international fraud, they began to look for labor from other countries and to attract overseas workers with high pay.
This is how so many people from Hong Kong and Taiwan wound up coming to Cambodia, trapped in cyber fraud activities.
A difficult issue to tackle
Countries and regions where online gambling companies congregate, such as the Philippines and Cambodia, are among the poorest regions in the world and attract desperate speculators. The nations themselves are eager to develop their economies and tackle poverty, and therefore accumulate national wealth by extracting domestic resources whatever ways possible.
Former president of Philippines Rodrigo Duterte, for example, has refused the Chinese government's request to cancel online gambling licenses, citing the need to feed the people. Cambodia's gambling ban in 2019, passed in exchange for free aid from China, has ultimately pushed organizations to operate covertly throughout Cambodia.
With Cambodian officials denying the existence of online gambling parks in Cambodia, these fraudulent companies have become even more brazen in human trafficking and abuse.
Why are online fraud companies alive and well? As well as being protected by developing countries, they draw in all kinds of people and industries to serve them. Multinational money laundering organizations transfer money for them. Information sellers continue to provide them with personal information and privacy from all over the world. Snakeheads (Chinese gangs) around the world secretly send them employees of different nationalities. Travel agencies provide them with visas and booking services.
It's truly a global industry with global impact, but nowhere does it run deeper than in Cambodia.