Scam Inc 3: The bottom line

0:28The Economist then it's, you know, you need to convince people and to invest into crypto. The place was run by Chinese. The bosses were Chinese. Rita, Gavesh, Jalil and Sarah were all trafficked to scam centres in the border regions of Myanmar. Fraud compounds in this area had been rapidly expanding. Whoever scammed Shane Haynes, the CEO of that bank in Kansas, may even have been working out of a compound here or somewhere like it. But Myanmar isn't Kansas. There's a brutal civil war going on, and I couldn't just show up and expect a friendly welcome. Plus, it's not like the criminals behind the scam compounds are eager to explain their business model to The Economist.

1:16But there is one man I was able to speak to, who has been inside the compounds and who knows the people running them.

1:27Sammy Chen is a Taiwanese businessman. He told me about a place called KK Park. It's one of the most notorious scam compounds in Myanmar, and one of the biggest. It's as though Amazon dropped a bunch of fulfillment centers and a massive office complex in the middle of the jungle. Yeah, I've been there 10 or 15 times. I go to their shopping streets, supermarkets and hotels. I usually visit the property management office and the administrative office. And after I finish my work there, I leave. Otherwise, I just stay for a bit to go to karaoke. Sammy is one of the few people who can move freely in and out of KK Park.

2:15You know, just one section of KK Park has a monthly landscaping budget of 7 million Thai baht. That's more than 200 ,000 US dollars. It's beautiful. His experience of these scam compounds is a world away from the trafficking victims scamming at banks of computers. His stories are an insight into what sort of lifestyle all that fraud money is enabling for bosses. and it's the kind of lifestyle that involves a lot of karaoke. It's incredibly debaucherous, bright lights, luxury, over-the-top decadence. There are girls in the private rooms to accompany you. For example, three of us went there, me, the boss of one park and the owner of a company.

3:03We had seven people serving us with a DJ playing. Even the ceiling and floor turned into massive video screens. Three girls were there just to feed us fruit, hand us cigarettes, pour us drinks. But they weren't allowed to drink with us. Then there were three other girls whose job it was to drink with us, toast, play games and keep us entertained. It's that kind of hellhole. Sammy looks like a guy full of stories like this. He's got a missing front tooth. He tells me that he lost it when a soldier struck him with the butt of his gun. He's also a chain smoker. He says he quit for 10 years, but took it up again to cope with the stress of the job.

3:48Sammy is something of a slippery character. He's a kind of middleman. Several years back, he had some small property investments in Cambodia. That's how he came to know a network of legitimate and illegitimate firms operating out of places like KK Park. During the pandemic, he saw that his fellow Taiwanese were being tricked into scamming. So, he says, he decided to try to do something about it by working his contacts. Now, he claims to play all sides. He's mates with the Chinese scam bosses. They party together. In Chinese business culture, doing deals often involves alcohol and karaoke. If you've had a night out together, that shared experience might make you a little more trustworthy.

4:33But he says he also works with different governments to rescue human trafficking victims. His chummy relationship with the criminals inside helps him persuade them to let a few people out.

4:47I'm friends with the owners of the parks. Why are we friends? Because I don't touch the bottom line of their business. Their first priority is their own security. So they want me to help them avoid trouble. For example, if I tell them that Interpol is investigating and that's going to be bad for business, then they will release people to avoid problems. A lot of cases are resolved like this. People who track organised crime in Southeast Asia and know Sami have mixed opinions about him. Yes, he's getting people out, but what compromises is he making to get that access? So I've been warned to be cautious with what Sami says.

5:33But he's still one of the only people in the world who can answer at least some of my questions about how the Chinese scam bosses operate. From The Economist, this is Scam Inc. Episode 3, The Bottom Line.

5:57Sammy told me about a particularly memorable night at KK Park. He'd been having drinks with the bosses. When I got back to my hotel, I realised why those girls are called support hands. They're there for you when you've had too much to drink and need someone to support you. So they gave me this great hotel room that even had a living room for 15 ,000 Thai baht for the night. 15 ,000 Thai baht is more than$400. But when I got to my room, the girl didn't leave. And she said someone already paid her to stay the night. I thought to myself, oh God, what am I going to do? So she took the bedroom and I slept on the sofa.

6:46But the sofa had fleas and the room was full of mosquitoes. I thought about spending the night watching TV, but the TV was just sitting there without a plug. But the girl, on the other hand, she was making 56 ,000 renminbi for the night, and I didn't even touch her. 56 ,000 renminbi is nearly$8 ,000. I interviewed this 25-year-old girl from Jiangxi. I asked her if she came willingly or she was deceived. The woman told Sami she was in debt back in China. When the first wave of the pandemic hit, her cosmetics business went under. Then in the second wave, she tried to open a games room, but that also failed.

7:34So it added to her debt. In total, she owed over a million renminbi. The woman said she'd come to KK Park willingly, to make money. She was told she'd be an escort, a companion to male customers at karaoke, but that she wouldn't need to sleep with the men, and that she wouldn't have to do drugs. But it turned out that was a lie. I asked why she didn't leave after that, and she said she already invested too much. She was here, so why not stick it out? That's the same with most people who come here. Which is why I say, hate the game, don't hate the player. A lot of people end up here. It's not that they don't have choices.

8:19But once you adapt to this environment, you start accepting things the way they are. And your perspective on life changes. Sami says most people inside these scam compounds aren't trafficking victims like Rita, Gavesh, Jalil and Sarah. Many came willingly. At least at first. Miyawati in Myanmar, the home of KK Park, is relatively safe from the country's civil war. Internal migrants have flooded there. That left a lot of people looking for work. And workers came from abroad too. There's good money in fraud. But it's a grey area. Maybe some volunteered, at first. But life inside wasn't what they thought.

9:09That's how it usually is. I willingly came out to scam, but I didn't agree to be beaten. Sammy believes fraud bosses would actually prefer not to recruit unwilling participants like Rita. They're a lot of trouble. They often don't want to or don't know how to scam, and they're usually trying to escape. Plus, foreign governments sometimes make an issue of them. So bosses dislike forced labour only as much as it hurts what they care about most. The bottom line. Because the key thing to understand, says Sammy, is that scam bosses are running a business. And like any good business person, their primary goal is to maximise profits.

9:55The underground criminal ecosystem is a perfect marketplace. Jackie Burns-Coven used to be an intelligence officer with the United States Department of Defense. Her focus was on the Middle East. There were conflicts in Iraq and Afghanistan at the time, and I was working at, you know, top secret classified levels. Jackie says something funny happens when you're working with top secret intel. You're so deep in it, you're left a bit blind to what's right out in the open. I wasn't allowed to be on social media for my job, and I realize now how much I was missing out. And now all I deal with is open source intelligence.

10:37These days, Jackie leads cyber threat research at a company called Chainalysis. She monitors global cryptocurrency transactions. She's never been to KK Park, but she can, in a different way from Sammy, see inside. By following the money in and out. There's nothing top secret about crypto payments. Every transaction, in Bitcoin or Ethereum or Tether, is recorded in the blockchain. Anyone who knows what they're looking for can see payments move from virtual wallet to virtual wallet. And so this transparency, being able to see the full flow of funds without filing a single subpoena, is remarkable.

11:23In 2003, Jackie was approached by a contact at an NGO. This NGO had been working with people who'd been tricked into running pig butchering scams out of a compound in Myanmar. Not only were these scammers being held captive against their will at these compounds, but also their families were being extorted in some cases for their release. To Jackie, that presented an opportunity. These families were being made to pay ransoms in cryptocurrency. Digital wallets are transparent, but the holders of those wallets are anonymous. A crypto wallet address is a string of letters and numbers, no names. But Chainalysis has been mapping out the blockchain, trying to assign real-world identities to these wallets.

12:12So we're tagging essentially a phone book of all the services in the cryptocurrency ecosystem, the legitimate ones, exchanges and payment processors and ATMs to more illicit services like darknet marketplaces, ransomware, child sexual abuse material sites and the like. Chainalysis has also tagged the wallets of known scammers. Scams have been the highest grossing crime that we follow for as long as I can remember. I've been at Chinalysis for five and a half years and it's never been as bad as it is now. The NGO working with former scammers had provided Jackie with two wallet addresses, wallets into which their families were told to send ransoms.

13:04We plug them into our data set and immediately we see all these scams connected to it, just directly funneling funds into this wallet. Those two wallets were interacting with wallets they'd already identified as belonging to scammers. And we could see dozens of different scams basically emptying their funds into the same wallets as these ransom payment wallets. Those funds were pooling together into one big pot. Those ransom payments were part of a wallet that had seen$100 million go through it. $100 million. That's how much money had moved through just one wallet associated with KK Park. And what that tells us is that this wasn't a rogue guard that was trying to make a few grand to line their own pockets.

14:01This was centralized, sanctioned activity from the top that was all being funneled through the same pot. We're working with entrepreneurs, to put it nicely, but they're always innovating. They're always willing to pivot to the path of profitability, the path of least resistance.

14:26I really do think that Jackie is right to use the word entrepreneur. It's a more accurate description than, say, gangster. Or, at least, I think of the 21st century gangster as more of a tech bro in jeans and a hoodie than a tattooed criminal. And that's how they see themselves too. When I speak to people in the industry, I'm struck by the euphemisms they use. They describe the low-level scammers as kerfu or customer service. That, of course, means they describe the scam victims as ke hu, or the customer. And the industry is wang luo, or the internet, rather than scamming. What I find most terrifying is how this language masks the depravity of it all.

15:18I've read about these scam compounds. I know they're sophisticated and structured and well run. but just how centralized everything was, like how professionalized it had become. Like there's probably a CFO, there's a real estate arm, there's a security arm. So we're aware that these compounds are surveying the landscape. Which geographies have we not tapped yet? What languages are we missing on staff? They're issuing fake job ads, but they have a few distinct bullet points with skill sets that they need these future scammers to have. I'm told that right now, if you're a programmer or anyone with any kind of knowledge of AI and you're trafficked into a compound, it's basically impossible for you to get out.

16:12You're just that valuable. Riches made from cybercrime have driven this industry not just in Myanmar, but around the world. Fraudsters have set up businesses throughout Southeast Asia, in the Philippines, Cambodia and Laos, and beyond in the Middle East, particularly Dubai. Similar schemes thrive in Eastern Europe, West Africa and South America. Around half a million people work as scammers around the world, according to the United States Institute of Peace. These businesses scale to suit their environment. Some are run from hotels. They might rent out a few floors, put up metal gates and hire armed guards.

16:56Hotel owners look the other way. Other operations might be even smaller. They run out of little hideaways in apartments or offices. And unfortunately, criminals around the world are watching. They're also seeing the headlines of what these scam compounds are raking in. And we're seeing this form of crime being adopted around the world. Reports have emerged that Latin American crime syndicates, including one of Mexico's most infamous cartels, have diversified into pig butchering. It's truly troubling what a global enterprise has become. and they're making what I imagine in their mind is our business decisions.

17:42The criminals are fast to adapt when the police try to crack down. They can up sticks and start over somewhere else with just a few phones and computers and an internet connection. And new players can easily enter by tapping into an underground economy of scam services. Think about all the firms tied to a global corporation like McDonald's. marketing companies, accountants and consultants. McDonald's moves its money through major banks, does business with potato and beef farmers and manages a global network of franchises and distribution. It's also one of the world's largest real estate owners.

18:23All of this to sell you a Big Mac and fries. The same thing is happening here. It's just that the money isn't in hamburgers. It's in scams. As I've dug into this, I've realised that to ask who scammed Shane in Kansas is like asking who made my Big Mac. You're missing the point. That person, if it even is just one person, is a cog in a machine. Shane was duped not by a single scam artist, but by a whole scam industry. Large, organised and powerful. An industry I've come to think of as Scam Inc.

19:21Hello, I'm Zannie Minton-Bedos, Editor-in-Chief of The Economist. Thanks so much for listening to Scam Inc. I hope you're enjoying it as much as I am. One of the reasons I think this podcast is really terrific is that it's the best kind of economist journalism. Su Lin and her colleagues are joining the dots across geographies, between business and politics. And that's what we do at The Economist more broadly. Whether it's the impact of President Trump's policies or of artificial intelligence, what my colleagues do is to try and join the dots. And then we give our subscribers the results of that thinking and that reporting in whatever form they want.

20:01Whether it's The Weekly Economist, whether it's daily analysis or short-form video or indeed subscriber events. And of course, access to all of our podcasts. And we've done a lot of award-winning, superb podcasts. I'm really proud of all of this journalism. I hope we're taking the best of what The Economist has done now for more than 180 years and are translating it into the mediums of today. So sign up, search for The Economist. Now back to the story.

20:41Jackie has been watching Scam Inc. grow. She sees scam businesses trade tech and share tactics on messaging apps and online forums. And these marketplaces, which are selling malware, hosting services, domain providers, all of the necessary components, whether you're involved in cyber espionage, disruption activities, sabotage, or whether you're involved in stealing, extorting or scamming for cryptocurrency, you need those basic ingredients. For scammers, those basic services might include recruitment, which can involve kidnapping and transporting workers, as they did with Rita and the others. Or they might offer fake and stolen profiles for social media sites and dating apps.

21:27Or AI tools like instant translation or face-changing software. We've actually seen some threat actors ask for funding, like almost angel investing. A lot of this happens not on the dark web, but on the open internet. They will actually post their special pig butchering package offerings. It's not illegal to buy pictures of attractive men or women, so they're operating on the clear net.

22:02When someone has already built a relationship with a potential victim, they sell that account to someone else. And that's called a client acquisition fee. Sami says that even scamming itself gets parceled out. It's broken down into small tasks, each one often outsourced to a specialised subcontractor, focused on just one or two parts of the process.

22:29It's like, I don't have time to build relationships, so just give me people who already trust someone, and I'll take it from there. Some people specialise in doing this, so there are different roles in the scamming business. And those roles can be divided up between businesses, businesses that run side by side in the scam compound.

22:54The entire park operates under a unified system. And each park contains many groups, and each group has many companies. So the park is responsible for managing relationships with the army, police, and government. It also provides internal security and has some internal rules and regulations to make sure that the companies don't fight or cheat each other.

23:21And the park will operate casinos, brothels, money laundering operations, currency exchange businesses and supermarkets. The park acts as a landlord. The company, on the other hand, is a tenant. The parks have rules, and those rules might or might not abide by the law. But if you're an aspiring scam boss and you're willing to obey the park's regulations, you can set up your own little fraud factory. It's kind of like a franchise model. So the agent essentially joins the company as a franchisee. It's rare for a single person to manage an entire industrial park alone. Too much work. If I run a company on my own, I won't get very far.

24:11So to expand into a larger conglomerate, I've got to bring in others. They invest, we each take charge of different parts, and that way we can really grow. Sami says those conglomerates might run several criminal business lines at once, like prostitution, drugs and gambling. But scams, and pig butchering scams in particular, have become the most lucrative. There's more money to be made from scams than from drugs That's because a scam can wipe out the wealth of an entire family How many people in the US use cocaine? There are plenty of Hollywood stars who use cocaine Do they go bankrupt? Do drugs drive them to bankruptcy?

24:55No But if they get scammed They'll be broke within three months

25:05A bank CEO with a co-carbet? That's peanuts. The real money is in a bank CEO who thinks he's hit it rich in crypto.

25:18After making a lot of money from scams, the company realises you can make them even more money, so you aren't allowed to leave. Every day is a challenging day because it's a life-death situation with us. Rita had been lured into working in a scam compound in Myanmar. She'd travelled from the Philippines. A month and a half into her time there, she successfully swindled a man in Canada called Edgar out of$78 ,000. Her manager was thrilled. And he also told me, oh, I dream of one day that you are also a team leader. I just say, oh yes, I want it. Maybe someday I will be a manager also. because I need to make him feel that I want there.

26:07In truth, Rita was plotting a way out. She began by building trust with her team leader, by making him believe she wanted to stay there. I'm scamming the scammer because I need to do that. I need to do that because I have a three-year-old baby girl that time. I need to go back. Rita was rewarded for her success in scamming Edgar. Her boss granted her request to share a room with other Filipinos. They were given a washing machine. Rita even got phone privileges. My own phone. And then you could connect to the internet, you could do whatever you wanted. Yes. Yes. Rita and her roommates got to work.

26:53They started contacting every Filipino politician they could think of. The president, the vice president, all the senators. In the end, one replied.

27:08We got a call from Rita, a desperate call for help, apparently from Myanmar. And she told us that she and other Filipinos were being held in a scam compound in Miyawadi. Jay Beckamer is an attorney in the office of a Philippine senator. We set up a Zoom call. I remember seeing her face, but I remember that it was in a very cramped room. They had bunk beds all around, all Filipinos, and then they told us the story. I told the attorney that, please, if you can do something, don't go beyond November 30 because November 30 is the schedule of one of the boys to be shot. Bosses were threatening to kill one of their group by the end of that November for failing to make any money.

27:59They needed rescuing, urgently. I remember that they were whispering. It was like they wanted to make sure that they wouldn't get caught. It would be tough to get the group out of Myanmar. Rebels controlled that part of the country. Regular diplomatic channels wouldn't work. Jay contacted pro-democracy activists who had an in with some of the rebels. Jay is vague about this next bit. She agreed to speak to me on the condition that we didn't get into her exact methods. But in the end, by raising the problem with the right people, she managed to create just enough trouble for the criminals holding Rita and her friends.

28:38Just like Sammy said, the scammers decided that it wasn't worth keeping them. Well, most of them. The Chinese scambosses were prepared to release all but one of the 12 Filipinos who wanted out. They didn't want Rita to go. So they said, OK, OK, all the other Filipinos in the group can go, but we'll hold Rita. Rita was their star performer. There were some members of that group who were messaging me directly, saying that, oh, let's just leave Rita behind. But I can understand that in a way, they just wanted to go home. Jay considered it. She traveled all the way to the Thai Myanmar border. Better to return with 11 captives than none.

29:33But I think our contacts delivered. One day they said, Tomorrow morning, you will be fetched by the military like that. I was just so happy and surprised when at 6 a.m. I was informed that, okay, we're all riding the boat. No one gets left behind.

29:58So we were rescued November 24. God bless. Yes. The other captives you heard from in the last episode, Jalil, Sarah, Gavesh, all found their own ways out. Some raised money from contacts back home and paid their own ransoms. But to be clear, Rita and the others got lucky. They're the exceptions. It's because of escapees like them that we know what goes on in these compounds. For every person who gets out, there are so many more who do not. In the summer of 2023, the UN estimated that at least 120 ,000 people were trapped and being made to work in scam centres across Myanmar. When they got back, it was sobering because then we realised the gravity of the situation because they told us there were many more Filipinos there.

30:59and that this compound is just one of many compounds mushrooming in that region. Rita told her about the many, many people still trapped. She said that recruitment is in full swing. So if you want to go back home, you would have to find two replacements for you. And that really gave me pause. So this is an operation that will persist. They have the business model down pat. The operation persists for the people left behind and for the people who escaped. Everyone I spoke to is struggling to adjust to their old life. Sometimes I sleep and then I dream that I'm at that place. When I wake up, it's like, oh, thank God I'm home.

31:54Sarah, who was trafficked from South Africa, gets flashbacks. She still feels in between, neither fully here nor there. Sometimes I feel like I don't belong home anymore, like I should be somewhere else. I don't belong here. Sometimes I don't want to be with my family. It's like I feel like I'm being misplaced and I don't know where I belong. She's gotten to know other people who've been through this. They've had the same hard time adjusting. For some, it's so hard, they've gone back. They feel useless. You don't know what to do, so you're thinking, OK, I'd rather go back and stay in that scamming compound for the rest of my life so that no one would judge me.

32:40This is actually more common than you might think, and not just because people struggle to reintegrate into ordinary life. As Sammy said, scamming can be a lucrative job, especially if you're fleeing civil war or if you're young, capable and looking for ways to survive in a place that doesn't have many other options. For people who do this willingly, this is how I think about their choices. Would you rather be unemployed, toil in a field under the sweltering sun, or scam wealthy foreigners in an air-conditioned office? And, if you're good, there might even be a chance for some upward mobility, a night at karaoke with the bosses, or even a promotion.

33:25Plus, is it really that illegal anyway? The compounds mostly operate openly and in cahoots with the local police. If there even are local police. In other words, lower-level scammers who haven't been trafficked are also rational actors in this industry, just like their bosses. But some people do still feel shame for taking part. Maybe that's why some of the escapees I spoke to hadn't told their loved ones back home what really happened to them. They still don't know. You never told them. Oh, why not? I think it's hard for me. I experienced that. And if I will tell it to my mom and dad, it is harder for them that I took the risk.

34:20I don't know. So they just thought you were in Thailand working at a call center? So you came home and what did you do? I didn't came home in where my parents live. I spent two months in the province of my grandmother for safety purposes because they have my copy of my passport, the Chinese syndicate, and they can found me there. I think they can if they want. They can do that. And my recruiter is just roaming around, so I'm not safe. What about the other 11 Filipinos? Same. They all went to stay with other relatives? Yes.

35:17Rita was traumatised by what she'd been through. And still, she didn't feel free of it. Scam Inc. had kidnapped her, exploited her, and now it had followed her home. But who had she actually been working for? And how had they extended their influence all the way back to the Philippines? The actual syndicate of the people running this, we don't know where they are, but they were never around or with us. It's really big, as I tell you, this is huge. It's bigger than the world thinks it is. The actual syndicate of people running this. It turns out that the bosses we heard about in this episode, the guys who Sammy goes to karaoke with and Rita's boss, the one who wanted her to join him as a team leader one day, are just middle management.

36:14In fact, they report to a network of powerful international syndicates. Who they are, where they came from, and what their connections might be to China and its ruling Communist Party. That's on the next episode. And coming up in the rest of this series. How frequently was Shane exchanging messages with this person who was said to be Bella? Most days, multiple times a day. All the big bosses are still out there. Oh my goodness. They've just scammed several million dollars successfully. So their first step is, how do we try and launder these funds? I also requested to communicate with that man, to say sorry.

37:09Your best defense is to remind yourself that it could happen to you. To continue listening, you'll need to be a subscriber. Right now, you can sign up for as little as$2 a month. Just search Economist Podcasts Plus for our best offer.

37:30Scam Inc. is reported, produced and written by Sam Colbert and me. Our senior producer is Alize Jean-Baptiste. Our sound designer is Weidong Lin, and the music is composed by Darren Ng. Editing is by Claire Reid and Rosie Bloor, with help from Heidi Pett. Our executive producer is John Shields. We'd love to hear from you. please email podcasts at economist.com and put Scam Inc. in the subject line. I'm Sulin Wong. This is The Economist.