According to the UN, VASPs are key to criminal operations in Southeast Asia

A new report from the United Nations Office on Drugs and Crime (UNODC) has revealed the crucial role of unlicensed Virtual Asset Service Providers (VASPs) in fueling cybercrime and money laundering in Southeast Asia. The report, which provides a comprehensive analysis of the region’s crime landscape, has sparked calls for tougher regulations and international cooperation to address these growing threats.

Southeast Asia has become a cybercrime hotspot in recent years, with a rise in online scams, ransomware attacks and other illegal activities. The region’s rapid economic growth and increasing internet penetration have made it an attractive target for cybercriminals.

VASPs facilitate the use of cryptocurrencies in the illicit economy by processing large volumes of cryptocurrency transactions, including those directly related to drug trafficking, human trafficking, cybercrime, and online child sexual abuse materials. The report highlights the role of stablecoins, particularly USDT on TRON, as a preferred method for Asian crime syndicates involved in cyber fraud and money laundering.

According to the UNODC, many VASPs in the region operate without appropriate licenses or oversight, allowing them to be exploited by criminals for illegal activities. These unlicensed VASPs are used to process transactions for scam companies, high-risk gambling sites, and other criminal enterprises.

The report highlights several examples of unlicensed VASPs involved in facilitating cybercrime. An unidentified company engaged in “at least hundreds of millions of dollars” in transactions involving criminal activity, including groups associated with drug trafficking, human trafficking and child sexual abuse materials.

Significant regulatory gaps in the region, particularly in terms of awareness, framework robustness and enforcement capacity, are being exploited by high-risk VASPs. Many of these companies pose as legitimate businesses while conducting unauthorized cryptocurrency activities, further complicating enforcement efforts, the report said.

The UNODC has called on Southeast Asian countries to take decisive action to address the problem of unlicensed VASPs. The agency recommends that governments in the region adopt stricter regulations for VASPs, including licensing requirements, reporting requirements and penalties for non-compliance.

In addition to stricter regulations, UNODC is calling for greater international cooperation to combat the use of VASPs for illegal activities. The agency recommends that governments work together to share information, investigate cross-border crimes and coordinate enforcement efforts.