Southeast Asian border states are experiencing a boom of Chinese-operated gambling syndicates. This proliferation of casinos and digital crimes parallels China’s ingenuine crackdown and criminalization of cross-border gambling. Both Chinese and Southeast Asian states play significant roles in propping up these syndicates, calling for attention and intervention of the international community. 

China, a place where gambling is embedded across its culture, movies and hobbies, has criminalized gambling. Currently, the only legal sources of gambling in Mainland China are the state-owned welfare lottery or the sports lottery, with exceptions reserved only for the two Special Administrative Regions (SARs), Macau and Hong Kong.

The other legal option for the Chinese betting-addicts would be to travel overseas, and ASEAN countries have become one of the hottest destinations for casino tourism. While overseas betting could be completely legal, evidence suggests that more and more Chinese citizens have established unlicensed or illegal gambling activities throughout Southeast Asia. The Chinese Supreme People’s Court stated that orchestrating overseas gambling, especially in Southeast Asia, “resulted in significant capital outflow,” and could also “foster other forms of violent crimes” such as intentional killing or human trafficking, thus it “should be given severe punishment.” Therefore, organizing Cross-border gambling now results in heavier punishments (usually 5 to 10 years of imprisonment) than the domestic equivalents (maximum 3 years). 

However, China’s effort to criminalize gambling has failed to eliminate the industry. Asian Racing Federation (ARF) and The Mekong Club estimated that last year, of the $1.7 trillion in global illegal betting, at least half was generated from China. In fact, China’s criminalization has driven online gambling offshore, and increasingly digitally, into Southeast Asia, where regulatory environments are much more relaxed. The result of the migration is a wave of cybercrime and security threats that both China and Southeast Asian states have struggled to contain.

The Story of How China Set Foot in the Southeast Asia Gambling Business

Southeast Asia casinos contributed to about one-third of China’s capital outflow through illegal betting last year, amounting to an estimated $25 billion. This is almost equivalent to the revenue generated from the legal gambling business in Macau, the world’s largest gambling city (MOP 226.8 billion, or $28.1 billion last year). This huge influx of capital to the Southeast Asian countries has contributed significantly to their economy, thus prompting governments to relax legal enforcement.

The Golden Triangle Special Economic Zones (GTSEZ) are the prime examples of such relaxed regulations on setting up online casinos in these Southeast Asian states. GTSEZ were set along the Mekong River between Laos, Cambodia and Myanmar borders that have historically been associated with manufacturing opium and heroin, and now host the world’s largest producer of methamphetamine, money laundering and cross-border trafficking due to its strategic tri-border geography.

This historically criminal hub represents a lucrative opportunity for already-established Chinese crime leaders to exploit the region’s weak economic and legal surveillance. These syndicates are treated preferentially by the local governments, due to their promise of inordinate sums of foreign investments, a major source of revenue in these countries. 

Take Kings Romans Group as an example. The Chinese-owned company is sanctioned by the United States for using casinos to launder money and traffic drugs, yet still gained 10,000 hectares of land from the Lao government to build Kings Romans Casino, the largest casino in the GTSEZ. It is not hard to see the Southeast Asian states have been increasingly permitting these Chinese mafia leaders into the less-regulated, designated gambling zones for profit, essentially allowing crimes to sprout in these areas.

What is less often discussed is the involvement of the Chinese government with these Chinese syndicates. To the Chinese government, even though the expansion of Chinese casinos indicates capital flight, China has long term gains from debt trap projects and hegemonic influences. More specifically, the Belt and Road Initiative, or the BRI, is key to maintaining its strategic geopolitical hegemony in the region through its debt trap projects in Southeast Asia. 

China’s political involvement is exemplified in the Yatai New City in Shwe Kokko, Myanmar, which appeared as a massive high-tech developmental project under the BRI, but in reality exists indeed as a digital scam and laundering hub. Located in the warring state of Myanmar in the hands of regional warlords, Yatai is a sparsely populated empty town. Under the massive chandeliers in the casinos, foreigners are rarely the ones casting chips. In fact, there were virtually no foreign vistitors in this remote state of Myawaddy. The now-detained mastermind, She Zhejiang, admitted to the public that the project was all but a project to help spying for China, and he pointed that he was not the only one involved in overseas espionage. The Philippine mayor Alice Guo, for example, was accused by She for affiliating with the Chinese espionage and illegal gambling operations. These large gambling operators are important “white gloves” middlemen to handle laundering money and intelligence gathering for the Chinese government, which can then use the immense foreign capital and bargaining chips to scramble for regional influence from the host countries. 

“C is for Casino, but also for Crimes”

Unsurprisingly, most of the money “made” in these casinos is not from the actual gambling, but through illicit transactions called money laundering. Money obtained in illegal ways—oftentimes from trafficking or scams—is effectively disguised as legitimate profit by placing the fund into casinos, the casinos then help “layering” the funds into different streams of investments so to divert the money from the original source, and lastly “integrate” them back to the legal market. Chinese syndicates, known privately as “motorcades,” serve as the middlemen who “layer” the funds through their multiple bank and cryptocurrency accounts, as well as through under-the-table transactions in casinos. 

But building these casinos costs money. Millions of dollars are poured into constructing these Smart Cities that allegedly aim to uplift the “underdeveloped” these peripheral states with tourism and diversified economic development. Underneath the facade of elaborate complexes host trafficked, enslaved victims from “pig slaughtering” scams perform a variety of scams, ranging from romantic to cryptocurrency investment fraud, helping the syndicates channel fraudulent funds into casinos and back into their pockets.

While casinos shield the money laundering process, cryptocurrency accelerated the process by enabling illicit financial activities to scale in terms of transaction size, speed, and frequency, without geographical constraints. 

Ironically, local governments also advocate for cryptocurrency in gaming. Thailand, where online gambling was legalized in March this year, has seen increased advocacy for the incorporation of cryptocurrency into e-gaming. Former Thai Prime Minister Thaksin Shinawatra claimed that crypto in legalized online gambling can increase the projected tax collected through stablecoin transactions. 

This explains why during the pandemic, these cross-border casinos flourished and developed despite international lockdowns and quarantine. These Chinese syndicates in Southeast Asia argued that online betting allowed them to “transform their economic model” to digitalization in order to sustain operational expenses and to satisfy the ever-growing demand for betting, concealing the truth that it is all for conducting money laundering and layering underneath the roulette tables.

Beyond Southeast Asia: Inter-State Crackdown Cooperation

China’s mission to eradicate gambling activities abroad is like trying to catch rats stealing your cheese and hiding in your neighbour’s attic: you hate your hard-earned cheese being stolen, but you have no right to catch mice that are not within the walls of your house. The best one can do is to fix your borders, and try to catch as many rats while they are still inbound.  

China, infested with high gambling addiction, overseas crime and capital outflow, could only resort to using domestic law to criminalize online operators operating overseas casinos or fraudulent activities within China. However, this effort was minimal. For one, licensed casino owners are still allowed to operate in loosely regulated SEZs as long as their “white gloves” middlemen stay undercovered. Secondly, the unlicensed casinos and relevant operators do not fall under the local statistics of Gross Gaming Revenue (GGR), meaning the evidence of them performing underground laundering is extremely difficult to trace. Therefore, whether regulated or not, China faces the problem of charging gambling operators with domestic law, as well as eradicating the expansion of laundering crimes overseas.

However, contrary to China’s domestic ambitions, its crackdown effort in Southeast Asia has proven quite passive. While China could hold victimized claims that these online gambling operations targeted Chinese citizens, the state selectively disregarded that most of the criminals have long been identified as its citizens. China has also been utilizing these strategic smart city development plans for geopolitical gains through the Belt and Road Initiative, rendering recipient states hesitant to eradicate Chinese syndicates.

With the difficulties being said, cross-border cooperation tackling human trafficking, money laundering and fund evasion has been organized between China and the relevant countries. The most successful case is the Philippines, where President Ferdinand “Bongbong” Marcos Jr. overturned his predecessor Duterte’s proliferation of Philippine offshore gaming operators (POGOs) and completely banned them from operating in 2025. This initiative by Macros was applauded by the Chinese Embassy for the best “interests of both Philippines and Chinese peoples.” 

The international community must recognize that this is neither a national nor a regional crisis, but an international one. Western countries including the US, often the victims of crypto scams from these syndicates, should be more attentive in the matter of the international fraud by sharing their intel on criminal-tracing from their victims. By increasing international cooperation and exchange of information, the US would re-affirm its role in regional stability and human rights development, and might also balance China’s influence in this traditionally sinicized region.

Meanwhile, China and Southeast Asian states must cooperate genuinely to diversify their economy to prevent criminals from maliciously utilizing grey areas in Southeast Asia for benefits, and to prevent capital outflow from China. China, the single largest beneficiary from stopping capital flight and enlarging Macau’s role in the entertaining industry, could organize more extensive cross-border formal enforcement such as the Thai-Burmese-Chinese cooperative crackdown on KK Park. Stronger border surveillance with bordering states, continuous talks on IP and cryptocurrency security are also crucial to reduce impacts of human trafficking, illicit money exchange, and digital crimes. While much has been done, more sincere contributions could be made in the future.

Image credits: rawpixel.com 

Alvin Wong
Alvin is an International Relations undergraduate student at the University of Toronto. Born and raised in Hong Kong, Alvin is the President of Cantonese Debate Club and a journalist of Synergy on Southeast Asian Contemporary Asian issues in his University. He is interested in unraveling issues including cybersecurity, digital transformation, border crimes and authoritarianism.