The Displacement of Illegal Betting and Transnational Organised Crime
By Martin Purbrick,Chairperson of ARF Council on Anti-Illegal Betting & Related Financial Crime
Illegal betting in Asia has been a core business of transnational organised crime groups in the region for decades as the profit margin and relatively low operational risks involved in the business have made this an attractive means of revenue generation for criminals. There is a distinct evolution of the displacement of illegal betting (and gambling) by organised crime groups across Asia that provides lessons for stakeholders regarding how to tackle the problem.
This displacement of illegal betting and gambling has partly been related to two major factors. Firstly, local illegal operators expanded during the 1990s in parallel with the growth of the Internet, mobile telecommunications, and televised sports (especially football), with many of them progressing from being national criminal groups to be transnational groups. Secondly, changing patterns of national law enforcement, sometimes with an international impact, have forced the expanded transnational illegal betting operators to move their bases of operations to countries where laws are less enforced.
Up to the 1990s, there were large illegal betting groups that dominated their local markets in Hong Kong, Macau, Malaysia, Thailand, and Singapore. Mainland China illegal betting markets were less developed as the impact of the economic opening up through the 1980s had not yet had the effect of creating a very large consumer market for gambling with sufficient disposable income.
For instance, GDP per capita in China in 1980 was USD194, in 1990 was USD317, in 2000 was USD959, and by 2021 was USD12,556.[1]In addition, the percentage of the population in China using the Internet was effectively 0% in 1990, only around 2% in 2000, but had grown to 70% in 2020.[2]Television viewing figures for sports have also grown, illustrated by the Asian Women’s Cup final in February 2022 which was watched in China by at least 31million live viewers on the national CCTV channel, whilst at least 22 million people in Vietnam watched their team compete in the tournament.[3]
Increased wealth, access to the Internet, and interest in sports such as football have fuelled a parallel interest in betting on racing and other sports in huge population areas of Asia. As many countries in Asia have strict limitations on legal betting, there is a continually growing illegal betting market across the region. The illegal betting market has not only included the expanding national illegal bookmakers whose business grew to become international from the 1990s but also international operators, some linked to organised crime groups.
Key customer markets in Asia for illegal betting are China (where legal market limited to the Welfare and Sports Lotteries), including Hong Kong (which in itself has a significant illegal betting market of up to USD2 billion in turnover),Cambodia (where online sports betting is illegal), Indonesia and Malaysia (where in both countries gambling is illegal under Sharia Law), and Thailand (where only state lotteries and horse racing betting is legal). The illegal betting market dominates Asia, and provides a huge revenue stream for Asian organised crime groups in these countries as well as a channel for money laundering across the region.
Organised crime groups active in illegal betting and gambling operations have been displaced in the past several decades. Chinese organised crime groups in particular have been displaced from their home country to other parts of Asia.This is a continual process that will change as national law enforcement agencies understand new threats and take local enforcement action, which in turn displaces the criminal groups elsewhere. In the gambling sector in the past two decades, Asian organised crime groups involved in gambling have evolved and been displaced through the following transitions.
From 1998 to 2004, Chinese criminal groups have been displaced from Hong Kong to Macau and Guangdong Province. This displacement came from firstly more effective policing in Hong Kong during the1990s, and secondly an opportunity from the Triad conflict in Macau in themid-1990s for Hong Kong based major Triad factions to take over casino VIP rooms as well as multiple casino junkets. Major Hong Kong illegal bookmakers also expanded their markets to Guangdong Province and shifted their operations across the border, partly due to policing in Hong Kong in the 1990s, but also to capture the emerging new consumer market in the mainland.
From the early 2000s to 2017, Chinese organised crime groups from Mainland China and South East Asia (Singapore and Malaysia) were displaced to the Philippines, where they operated online gambling with licenses in the Cagayan Economic Zone Authority, the Aurora Pacific Economic Zone & Freeport Authority, and the Authority of the Freeport Area of Bataan. The US Navy base at Subic Bay and the US Air Force Clark Air Base at nearby Angeles City both became Freeport Zones after the departure of US military in the early 1990s, but both retained a thriving prostitution industry controlled by criminal groups with international links to bring in customers as tourists. The criminal groups in the Freeport Zones also gravitated to operating casino gambling aswell as later online gambling as a new revenue stream in the 1990s and 2000s.
From 2016 onwards, Chinese and South East Asian organised crime groups were displaced from special economic zones in the Philippines to national licensing under the Philippine Amusement and Gaming Corporation (PAGCOR) as ‘Philippine Offshore Gaming Operators’ (POGO), following President Duterte’s instruction that licensing be centralized. Whilst this action by the national authorities improved the administration of gambling licensing, it did not yet displace transnational organised crime groups from the Philippines.
From 2018 onwards, Chinese and South East Asian organised crime groups were displaced from the Philippines to Cambodia (especially Sihanoukville) as well as Vietnam (to a lesser extent) to operate casinos and online gambling,following pressure by the PRC government on the Philippines authorities to take action against Chinese criminal groups operating POGOs.
From 2022 onwards, Chinese and South East Asian organised crime groups have been displaced from Cambodia to Myanmar to operate casinos, online gambling, and other criminal activities (people trafficking, online fraud, etc), following pressure by the PRC government on Cambodian authorities to take action against Chinese criminal groups operating in the country.
The pursuit of illegal betting and gambling operators displaced to South East Asia continues. By October 2022, it was reported that 90% of illegal gambling operations in Cambodia had been shut down following the enforcement action taken by the authorities.[4]This is a substantial claim, but it is questionable how the authorities can ensure that the criminal activity does not return after the initial crackdown and also if the large scale illegal operators have been affected.
The criminal groups in Myanmar are also not completely out of reach of law enforcement. In August 2022, Chinese businessman She Zhijiang was arrested in Thailand for allegedly running illegal online gambling. Mr She has allegedly been involved in a USD15 billion project called Yatai City in a Myanmar border village that was intended to become a Singapore-like business hub. Mr She was reportedly arrested by the Thai authorities on the basis of an INTERPOL Red Notice issued by China, illustrating the importance of cross border cooperation to combat illegal betting.[5]
The displacement of illegal betting and gambling, as well as the organised crime groups operating these businesses, has illustrated the scale and prolonged nature of the crackdown by the Chinese authorities, which was reported by the ARF Council in 2021. The ARF Council reported that “The focus of this crackdown is on cross-border illegal betting encompassing both illegal betting websites hosted offshore, and overseas land-based casinos. It incorporates illegal betting on racing and other sports as well as online casinos, illegal lotteries, and other forms of illegal betting. The crackdown was launched because cross-border illegal betting causes CNY 1 trillion (USD145 billion) to flow out of China to offshore websites and casinos every year,threatening economic security and social stability.”[6]
Indications are that the crackdown by the Chinese authorities on illegal gambling, other transnational organised crime,and the related capital flight, is likely to continue indefinitely as part of the efforts by the government to combat corruption and criminality. An outcome of this is the sophisticated network of facilitator businesses in Asia to launder money from illegal betting and gambling.
Given that there remain large parts of Asia where betting on racing and other sports, as well as gambling, remain largely illegal, and efforts such as those by the Chinese authorities will continue, it is certain that Asian organised crime groups will continue to prosper from this illegal business and adapt to continual displacement to new relatively safer havens for their operations. Based on the displacement seen from the 1990s to the present day, we should ask where to next?
The ARF Council has started to answer this question by highlighting the use of new, and evolving technologies by illegal betting operators. The use of Web3‘play to earn’ games developing betting, NFT products related to betting, and betting in the Metaverse, all illustrate that very soon a safe haven is not needed for organised crime groups to operate illegal betting and gambling as their IT resources for these new technologies can be located anywhere on the planet with no scrutiny from the authorities and law enforcement agencies.
Displacement of Chinese and South East Asian organised crime groups involved in illegal betting and gambling from Asia to new regional hubs will continue to diversify as they utilise continued technology improvements to operate and deliver remote gambling as well as related money laundering. In the past two decades, organised crime groups clustered in jurisdictions where at the time there was limited or no law enforcement interdiction, such as the Philippines,Cambodia, Vietnam, and Myanmar.
In the future, these groups are likely to use technology on a far more international basis with operations disguised as IT service providers, which will be more difficult to identify. This will make illegal betting and gambling operators even more transnational than now, with front companies purporting to be involved in sophisticated Web 3.0 online gaming or sports entertainment, corporate entities registered in offshore locations where owner identity is guaranteed, bank accounts utilising established money laundering hubs, and IT servers as well as trading rooms based almost anywhere. Technology development will continue to expand the reach of illegal betting.
[1] The World Bank, GDP Per Capita (current US$) – China (https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CN )
[2] The World Bank,Individuals Using the Internet (% of the population) – China (https://data.worldbank.org/indicator/IT.NET.USER.ZS?end=2020&locations=CN&start=1990&view=chart )
[3] Inside World Football, Asian Women’s Cup breaks digital and TV records with 31m watching final in China, 18 February 2022 (https://www.insideworldfootball.com/2022/02/18/asian-womens-cup-breaks-digital-tv-records-31m-watching-final-china/#:~:text=It%20is%20estimated%20that%2086,below%20the%20age%20of%2035. )
[4] Gambling News, Cambodian Illegal Gambling Scene Almost Completely Shut Down, 3 October 2022
(https://www.gamblingnews.com/news/cambodian-illegal-gambling-scene-almost-completely-shut-down/ )
[5] Caixin, Fugitive Behind $15 Billion Myanmar Business Hub Arrested in Thailand, 16 August2022 (https://www.caixinglobal.com/2022-08-16/fugitive-behind-15-billion-myanmar-business-hub-arrested-in-thailand-101927067.html?utm_source=ARF+Anti-Illegal+Betting+Taskforce&utm_campaign=65d8b8ed37-EMAIL_CAMPAIGN_2022_07_15_03_56_COPY_01&utm_medium=email&utm_term=0_7971e33499-65d8b8ed37-416971257 )
[6] ARF Council on Anti-Illegal Betting & Related Financial Crime, How China’s Crackdown on Illegal Betting Impacts Global Betting Markets,September 2021 (https://www.asianracing.org/aib/resources )