Rachel Dettmer
We're focusing on the Asia-Pacific region in the fifth and final installment of our 2024 Financial Crime Market Outlook Series.
There are approximately 62 countries in this dynamic region – ranging from low to high-risk – all of which create a tangled and complicated financial crime market.
CPI 2023 For Asia Pacific
According to the Corruption Perception Index (CPI), the average score for the APAC region has remained stagnant for five years at 45 (out of 100), with very few countries displaying sustained or significant changes in corruption levels alongside declining scores for the region's earlier top scorers.
The key reason for this lack of progress falls at the feet of elected officials, most of whom have failed to implement and deliver effective anti-corruption agendas.
Related Resource:
Illegal, Unreported, and Unregulated Fishing: A Growing Transnational Threat
Illegal, unreported, and unregulated fishing (IUUF) is estimated to cost $50 billion globally in annual losses, making it the third most lucrative natural resource crime behind timber and mining.
A hotspot for this clandestine activity is in the Indo-Pacific region, with most countries considering it a major threat. It has a profound consequence on marine ecosystems and endangers biodiversity, but beyond just the environmental repercussions, it intersects with corruption, money laundering, and human trafficking, ultimately becoming a catalyst for transnational crime.
The Asia/Pacific Group on Money Laundering (APG) is an inter-governmental organization, with 42 member jurisdictions. Last November, the APG issued a paper on illegal fishing, with their research suggesting that governments have "low levels of understanding" on the ML/TF risks posed by illegal fishing, leading to poor AML/CFT responses that allow this activity to persist, despite its threat to national and regional security.
The paper goes on to identify red flags, sets out recommendations to respond to the growing threat of IUUF – including the reclassification of illegal fishing from a fisheries management issue to a serious transnational financial crime issue to trigger effective AML/CFT responses that protect the international financial system – and calls for coordinated international efforts to strengthen governance, enhance surveillance, and prosecute those involved in the illicit financial aspects of this detrimental practice.
Related Resources:
APG Issues Paper - Illicit Financial Flows Generated from Illegal Fishing - November 2023
FACT SHEET: Department of Defense Marks Two-Year Anniversary of the U.S. Indo-Pacific Strategy
Combatting IUU Fishing with AML Policies
The Dark Side of Innovation: Organized Crime in the Digital Age
Southeast Asia faces unprecedented challenges as transnational organized crime groups continue to push the boundaries of innovation and expand illicit revenue streams, according to a new report by the United Nations Office on Drugs and Crime (UNODC).
“Casinos and related high-cash-volume businesses have been vehicles for underground banking and money laundering for years, but the explosion of underregulated online gambling platforms and crypto exchanges has changed the game” – Jeremy Douglas, UNODC Regional Representative for Southeast Asia and the Pacific.
The eye-opening report looks at the convergence between online gambling, cyber fraud, money laundering, and human trafficking fueled by technology and increasingly sophisticated operations, creating a multifaceted threat with the gap between organized crime and enforcement authorities quickly widening. Failure to swiftly address this landscape will have consequences for Southeast Asia and other regions as organized crime reinvests to innovate, professionalize, and consolidate operations further.
Related Resources:
Methods and Trends of Money Laundering and Terrorism Financing
Cyber Scam Organization Disrupted Through Seizure of Nearly $9M in Crypto
When Worlds Collide: Human Trafficking and Modern-Day Slavery
According to the Walk Free Foundation, APAC is the third most vulnerable region in the world to modern slavery, with victims facing a range of serious violations and abuses.
While this is already a well-known and severe issue associated with the region, in recent years, organized crime groups have diversified into new operations such as illegal fishing and cyber fraud, further exacerbating human trafficking and forced labor.
For example, illegal fishing is unsustainable and undermines the legitimate industry. As a result, vessels must travel further for extended periods on the water and incur higher costs, making workers more vulnerable to forced labor conditions.
Likewise, economic instability, poverty, and escalating unemployment combined with the rise of social media platforms such as Telegram, WeChat, TikTok, and Facebook have made it easier to recruit vulnerable people with the promise of lucrative opportunities – increasing the prevalence of ‘Pig Butchering’ and human trafficking networks across Southeast Asia.
Worse yet, there are significant gaps in legislative frameworks to combat modern slavery across the region, and with corruption running rife, bribes from traffickers in exchange for protection from law enforcement and prosecution are commonplace.
Related Resources:
INTERPOL operation reveals further insights into ‘globalization’ of cyber scam centres
Modern Slavery in Asia and the Pacific
Human Trafficking 2024 — the US and Global Challenges for the Financial Community
Final Thoughts
The war between professional money launderers and anti-money-laundering professionals in the region rages on, with the rise of powerful technologies making the criminal landscape increasingly complex and transnational. The success of these criminal operations has helped expand the region’s broader, booming illicit economy, attracting new networks, innovators, and service providers to the criminal ecosystem of Asia Pacific.
Financial institutions are considered the first line of defense in this fight and in the face of an uncertain future, must engage technology solutions and reliable partnerships that allow compliance to become more data-driven even as regulatory requirements continue to mount. Contact us today to find out more about how we can help you fight financial crime.