Cambodian Tycoon Sanctioned for Forced Cyber Labor, Trafficking

Cambodian business tycoon and senator Ly Yong Phat, along with the business conglomerate he runs and O‑Smach Resort, have been sanctioned for using forced labor to run a center perpetuating cryptocurrency scams.

According to a report from the US Treasury Department's Office of Foreign Assets Control (OFAC), workers from countries including China, India, Thailand, and Vietnam have been lured to the O-Smach resort under the pretense of legitimate work.

Upon arrival, their passports are confiscated, and victims are forced to work up to 15-hour days perpetuating online scams.

"People who called for help reported being beaten, abused with electric shocks, made to pay a hefty ransom, or threatened with being sold to other online scam gangs," the report noted. "There have been two reports of victims jumping to their death from buildings within O‑Smach Resort." 

As a result of the sanctions, which designate the L.Y.P. Group conglomerate, O-Smach, and three other hotels as being "directly or indirectly engaged in, serious human rights abuse," Ly's properties and interests are blocked and any transactions must be reported to OFAC.

US citizens, financial institutions, and businesses that deal with L.Y.P. could themselves face sanctions.

Cyber Scam Forced-Labor Rings Difficult to Root Out

Stephen Kowski, field chief technology officer at SlashNext Email Security+, says sanctions send a "strong message" that the international community is acting against human trafficking and forced labor in cybersecurity scams.

"However, their effectiveness will ultimately depend on rigorous enforcement and cooperation from other countries and financial institutions, particularly given the endemic corruption that has hindered previous investigations," he says.

He added that the phenomenon is challenging to combat due to its transnational nature, the use of sophisticated technology, and the involvement of corrupt officials.

"Cyber-scam operations often exploit jurisdictional gaps and rapidly evolve their tactics to evade detection, while victims are isolated and coerced, making it difficult for authorities to identify and rescue them," Kowski explains.

Robert Duncan, security strategist at Netcraft, says that while the US sanctions will affect Ly's business dealings in the US, it is unlikely to turn the tide by itself on the problem of scams emanating from that corner of the world.

From his perspective, cross-border cooperation is truly essential — the victim is often in the developed world, and the scammer is not.

"However, others throughout the world are often involved in these scams, including those enabling money laundering through cryptocurrencies or mule bank accounts in the same jurisdiction as the victim — not just in Southeast Asia," Duncan adds.

Southeast Asia Teeming With Cyber Trafficking

Southeast Asia is a global hotspot for forced-labor camps running cyber scams akin to the ones run by L.Y.P.

It's an issue that has also caught the attention of the United Nations, which estimates that 100,000 people in Cambodia alone are being forced to work for cybercrime syndicates.

International law enforcement agencies including Interpol have been working on multiple cases involving human trafficking run by cyber-fraud operators, with a recent five-month investigation leading to the arrest of 281 perpetrators.

The scale of the problem prompted the FBI to issue a warning in May 2023 to US citizens traveling or living in Southeast Asia to be aware of scam advertisements posing as legitimate work offers.

In February, Myanmar authorities handed over 10 suspects to China who were accused of running cyber-fraud and money-laundering operations in Myanmar.

John Bambenek, president at Bambenek Consulting, notes that while sanctions might seem toothless overall, for someone with the level of assets that Ly has, they can be very problematic.

"There are only a few places that handle that kind of wealth, and if any mistakes are made, the assets can be frozen or seized by regulators," he explains. "That said, it's a consolation prize from the sanction that really needs to be levied — a jail cell."