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Cambodia's underground gambling scene represents a complex ecosystem of physical and online operations intertwined with the country's rapid casino expansion, especially in areas like Sihanoukville and Poipet. This illicit economy isn't just a matter of unlicensed betting. It has evolved into a significant avenue for money laundering, organized crime, and even human trafficking, driven largely by Chinese investment and a lax regulatory environment.
Growth of Gambling in Cambodia: A Background
The rise of Cambodia's gambling scene began in the mid-2010s, especially with Sihanoukville's transformation due to massive Chinese investments. Casinos sprouted across the coast, mostly targeting foreign tourists, as gambling remains illegal for Cambodian citizens. With over 300 licensed casinos by 2019, Cambodia became a gambling hub for foreigners, especially Chinese visitors seeking an alternative to Macau's stricter regulations.
However, a ban on online gambling imposed by Cambodian authorities in 2019 triggered a shift. While the policy aimed to reduce illegal operations, it drove many operators underground or shifted them towards more covert operations, intertwining with cyber fraud and organized crime networks.
Rise of Cyber Fraud and Money Laundering
Many Cambodian casinos, especially those around Sihanoukville, were hit hard by the pandemic. With physical operations restricted, operators shifted to online platforms, many continuing to operate illegally. These online casinos have become vehicles for complex money-laundering schemes, often involving cryptocurrencies.
Operators use digital platforms to accept anonymous payments, convert them into virtual chips, and cash out in foreign currency, effectively “cleaning” the money for further use. Cryptocurrencies like Tether (USDT) have become the preferred method due to their stability and low transaction fees, enabling underground operators to bypass traditional banking systems easily.
Beyond just the financial implications, these online gambling hubs have fueled the rise of “cyber fraud as a service,” involving local and foreign workers who are often lured under false pretenses and then forced into scam operations. Recent reports indicate that human trafficking victims are employed to carry out “pig butchering” scams—highly organized romance fraud schemes that target vulnerable individuals online.
The Role of Organized Crime
Cambodia's gambling industry has attracted organized crime networks due to its weak regulatory framework. Criminal syndicates use casinos for cross-border financial transactions and as fronts for human trafficking. Interpol has highlighted a disturbing trend where trafficking victims are coerced into working in scam compounds, often under extreme duress.
Once a thriving tourist destination, Sihanoukville has become infamous as a center for these underground activities. Organized crime groups use casinos as laundering sites for global fraud schemes, sometimes involving illicit cryptocurrencies, human trafficking, and forced labor.
Government Crackdowns and Limitations
While Cambodian authorities have taken steps to curb illegal gambling, including high-profile raids and arrests, the underground market remains resilient. In early 2023 alone, over a thousand arrests were made related to illegal gambling operations. However, efforts are hampered by entrenched corruption, powerful foreign interests, and the lure of immense profits. This situation has created an environment where illegal gambling and associated activities thrive, often with little accountability.
To tackle these issues, Cambodian authorities and international organizations like Interpol have started collaborations to dismantle underground gambling and cyber fraud operations. However, as these networks adapt to enforcement measures, they increasingly relocate to areas with weaker oversight, creating a continual game of “jurisdiction shopping.”
Social and Environmental Impacts
The rise of casinos, especially in Sihanoukville, has significantly altered the social and environmental landscape. Once known for pristine beaches, casino-driven urban sprawl has transformed areas, leading to environmental degradation and displacement of local communities. The social impacts are also pronounced, with rising crime, a spike in human trafficking, and the exploitation of workers both in casinos and in scam centers.
Moreover, Cambodia's underground gambling scene has limited the country's long-term economic prospects. While initially seen as a source of foreign direct investment, these activities have drawn criticism for creating a transient economy that needs sustainability. Local communities seldom benefit from the revenue generated, as profits flow back to foreign stakeholders, predominantly Chinese investors. Furthermore, disputes over layoffs and labor rights have fueled social unrest, which is evident in the ongoing strikes and protests by casino workers in Phnom Penh.
Betting Against the Odds: Cambodia's Path Forward
Cambodia's underground gambling sector reflects broader trends in Southeast Asia, where loose regulations attract illicit operations that are challenging to eliminate. While the government's recent steps indicate a willingness to address the situation, sustained progress may require stricter enforcement, international cooperation, and transparency to curb the influx of criminal activities associated with the sector.
Without structural changes, the underground gambling scene is likely to persist, posing risks not only to Cambodia's economy but also to the broader Southeast Asian region. The nexus of casinos, cyber fraud, and organized crime highlights the urgent need for comprehensive policy reform, including international regulatory cooperation and monitoring of financial activities across borders.
