OFAC Sanctions Southeast Asian Scam Networks: Combating the Industrialization of Crypto Fraud

OFAC Sanctions: Disrupting the Structures Behind Southeast Asian Online Scam Networks

This week, the U.S. Treasury announced sanctions against Southeast Asian scam networks that have been stealing billions from American victims. The Office of Foreign Assets Control designated nine targets in Shwe Kokko, Burma - a well-known hub for crypto investment scams under the protection of the Karen National Army (KNA) - and ten targets in Cambodia, where casino complexes have been converted into scam compounds.

The action focuses on ownership structures and operators that run these large-scale scam centers. It follows a disturbing trend: in 2024, Americans lost over $10 billion to scams based in Southeast Asia - a 66% increase from the previous year. And that number is likely understated, since much of this activity remains unreported.

Treasury officials underscored that these scams are not only a financial threat, but also a driver of forced labor and human trafficking. As Under Secretary John K. Hurley put it, Southeast Asia’s scam industry “not only threatens the financial security of Americans, but also subjects thousands of people to modern slavery”.

Sanctions Action: Revealing the Hidden Structures of Industrialized Online Crime

The designations in Burma center on Shwe Kokko’s Yatai New City, developed by Chinese businessman She Zhijiang and KNA leader Saw Chit Thu. What began as a small border village has been transformed into a purpose-built enclave for gambling, prostitution, drug trafficking, and online scams. Testimonies from trafficked workers describe being lured under false pretenses, detained, beaten for missing quotas, and in some cases forced into commercial sex work.

In Cambodia, compounds originally built as casinos have been repurposed into fraud operations. Companies such as T C Capital and K B Hotel Co. Ltd. operate complexes where trafficked individuals are made to run fake crypto platforms, while casino functions are used to launder the proceeds.

This is not the first U.S. action in this space. Earlier in 2025, OFAC designated the KNA as a transnational criminal organization, and FinCEN identified Cambodia’s Huione Group as a primary money laundering concern under Section 311 of the USA PATRIOT Act. In 2024, OFAC also sanctioned tycoon Ly Yong Phat and his conglomerate for abuses linked to scam compounds.

The Bigger Picture: The Rise of Online Fraud

The sanctions come against the backdrop of a broader global shift. Online fraud is no longer a marginal activity; it has become one of the fastest-growing forms of transnational crime. Techniques once seen as fringe - phishing emails, fake investment schemes - have now been scaled into industrial operations.

At the center of this is the rise of so-called “pig butchering” scams. Fraudsters build trust with victims through months of online contact, often framed as romantic or friendship connections, before convincing them to invest in what appear to be legitimate trading platforms. These platforms are in fact controlled by the scammers, who drain the funds once they are deposited. The method has become dominant because it combines psychological manipulation with the efficiencies of digital infrastructure: thousands of coerced workers running scripts, messaging potential victims, and funneling them into fake apps.

The result is staggering losses. U.S. officials estimate more than $10 billion stolen from Americans in 2024 alone , but the global figure is far higher. And the losses are not just financial. Behind every statistic are families whose life savings have been wiped out and workers trafficked into scam compounds under conditions of debt bondage or outright captivity.

A Real Problem: How Fraud is Becoming Professionalized

What makes today’s landscape different is not just the scale, but the professionalization of organized crime. Scam operations increasingly resemble corporations. They have hierarchies, HR functions, quotas, training regimes, and enforcement mechanisms. Workers are recruited - sometimes voluntarily, often under deception - and then slotted into defined roles. Management tracks performance. Enforcers punish failure. The operation functions less like a gang and more like a multinational firm.

This shift has been reinforced by the rise of “crime-as-a-service.” Syndicates now outsource components of their operations: bulk IP address sellers that keep scam websites online, laundering networks that wash digital assets into fiat, corrupt officials who provide protection, and even technology vendors who design the fake platforms. Each layer can be rented or contracted, lowering barriers for new entrants and making the ecosystem more resilient.

The effect is that organized fraud has become modular, scalable, and adaptive. Shut down one center in Myanmar, and another opens in Cambodia. Seize one domain, and another appears the next day with the same infrastructure behind it. This is why the comparison to industrialization is apt. Crime has moved from artisanal operations to assembly-line production - faster, more repeatable, and far harder to dismantle.

Fuel to the Fire: Internet, Crypto, AI, and Corruption Behind Industrialized Crime

The industrialization of fraud has been accelerated by a set of powerful enablers that make these operations easier to build, scale, and sustain.

• The internet provides the infrastructure for instant communication, anonymous outreach, and global victim pools. Messaging apps and social media have become recruitment pipelines - both for luring workers into scam centers and for targeting victims worldwide.
  
  
• Cryptocurrency has lowered the barriers for laundering illicit proceeds. Crypto assets allow syndicates to move value quickly across borders, outside traditional banking oversight, and then convert it back into fiat through poorly regulated exchanges or complicit financial institutions.
  
  
• Artificial intelligence adds another layer of sophistication. Generative AI can create more convincing fake profiles, automate victim engagement, and generate fraudulent websites or documents at scale. AI is rapidly lowering the cost of deception while making scams harder for individuals to detect.
  
  
• Corruption remains the essential lubricant. None of these compounds could operate openly without local officials, police, or military actors turning a blind eye - or in many cases actively protecting and profiting from the operations. In environments where bribery is normalized, organized crime becomes not just tolerated, but embedded in local political economies.
  
  

Together, these enablers explain why online fraud has become both more professional and more resilient. Technology expands its reach and efficiency, while corruption shields it from disruption. This combination is what allows organized crime to behave like a global industry rather than a collection of isolated groups.

Scam Compounds: A Social Problem Embedded in Local Economies

These scams also thrive because of the environments in which they operate. The UN Office on Drugs and Crime has warned that in some countries, organized crime is not just tolerated - it is treated as a business model. Compounds exist with the tacit approval of local officials, police, or border forces, who benefit from protection payments or profit-sharing arrangements.

This silent permission allows fraud syndicates to operate openly, with large compounds, corporate front companies, and even access to public utilities. In such contexts, organized crime becomes embedded in the local political economy. Shutting down one scam center does little if the broader system continues to give cover.

Scam Compounds: A Human Problem of Modern Slavery and Exploitation

Behind the billions stolen through online scams are thousands of people trapped in conditions of exploitation. Scam compounds recruit workers under false pretenses - promising call-center or tech jobs - only to confiscate passports and force them into scamming strangers online. Survivors describe being beaten for missing quotas, held for ransom until families pay for release, and coerced into commercial sex work when they fail to perform.

This is why sanctions and enforcement actions should be understood not just as financial measures, but as human rights interventions. Disrupting the revenue streams of these networks weakens a system that depends on trafficked labor, coercion, and violence. Protecting victims and preventing further exploitation must remain central to the policy response.

Why Sanctions Matter: Breaking Down the Architecture of Scam Compounds

Sanctions are one of the few tools that can reach across borders and directly disrupt the business model of scam syndicates. Unlike criminal prosecutions - which depend on arrests, extraditions, and cooperation from local authorities - sanctions can act immediately to freeze assets, block transactions, and isolate designated entities from the international financial system.

They matter for three main reasons:

1. Cutting financial lifelines. Scam compounds need access to banking, payment processors, and digital asset platforms to move their profits. Designations make it far riskier and more expensive to launder funds, shrinking the space in which these networks can operate.
   
   
2. Targeting enablers, not just perpetrators. Sanctions don’t only hit the low-level recruiters or call-center operators. They go after the property owners, casino operators, banks, and holding companies that make industrial-scale fraud possible. By moving up the chain, they impose accountability on those who profit most.
   
   
3. Sending a global signal. Sanctions also have a deterrent effect. They warn financial institutions, investors, and business partners that doing business with designated individuals or entities carries serious consequences. This pushes risk-averse actors to distance themselves, further isolating scam operations.

In that sense, sanctions are not just punitive. They are preventive and protective. They help shrink the ecosystem in which organized fraud can thrive. But as powerful as they are, sanctions are not a complete solution. They work best when combined with law enforcement action, international cooperation, private sector vigilance, and political will in the countries where scam compounds operate.

Cog in the Machine: The Role of Compliance in the Fight Against Scam Compounds

Sanctions are only as effective as the ecosystem that enforces them. This is where financial institutions - from banks to payment processors to crypto exchanges - play an essential role. Even though each firm is just one cog in the machine, building effective compliance workflows can make a real difference in shrinking the space for organized fraud.

The basics remain critical:

• Onboarding controls to identify and screen high-risk customers before they gain access to financial services.
  
  
• Transaction monitoring that flags suspicious flows consistent with scam-related laundering patterns.
  
  
• Ongoing due diligence to detect when existing clients shift into higher-risk behaviors.

Authorities have published red flag indicators to guide this work. For example, FinCEN has issued advisories highlighting typologies of pig butchering scams: rapid movement of funds into newly opened accounts, repeated transfers to crypto providers, sudden activity inconsistent with a customer’s profile, or transactions involving platforms linked to known fraud typologies. Similar alerts have been issued by regulators in Asia and Europe, emphasizing the importance of monitoring for unusual investment patterns and cross-border fund flows tied to scam operations.

When these red flags are integrated into compliance workflows - and paired with sanctions screening - financial institutions can detect and disrupt flows before they disappear into opaque networks. No single intervention will dismantle industrialized fraud, but collective vigilance across the financial sector can make laundering far riskier and more expensive for syndicates.

Building with ComPilot: Industrial-Strength Compliance for Industrialized Crime

If crime has industrialized, then compliance must evolve to match it. One of the biggest challenges for firms is that their defenses are often fragmented: onboarding checks in one place, AML monitoring in another, fraud detection in a third. Each system might catch part of the picture, but organized fraud thrives in the gaps.

At ComPilot, we help close those gaps by aggregating multiple workflows into a single, holistic view - from onboarding due diligence, to sanctions and AML screening, to fraud checks and transaction monitoring. 

This allows compliance teams to see activity in context, rather than in silos. And context is often what reveals the real story: a client that looks legitimate at onboarding, but whose transaction patterns align with pig-butchering red flags; or a payment flow that on its own seems routine, but combined with other data points matches typologies regulators have warned about.

Industrialized crime requires industrial-strength defenses. While no single company can stop these networks on its own, smarter workflows and better context help financial institutions play their part - making it harder, riskier, and more costly for scam syndicates to move their money.

👉 Talk to our team to find out how you can build industrial-scale compliance to counter the industrialization of scams.

‍