Myanmar has once again become a magnet for transnational criminal groups. Conditions that make legitimate business nearly impossible — economic collapse, deteriorating rule of law and spreading chaos — are fertile ground for organized criminals, and they are returning to Myanmar in force after a brief crackdown by the country’s now-deposed civilian government. In the two months since the military reestablished its tumultuous rule, criminal activities in Myanmar have widened dramatically, posing new challenges to the region’s efforts and ability to control cross-border crime.

The police take arrested protesters to a prison truck in Yangon, Myanmar, March 3, 2021. (The New York Times)
The police take arrested protesters to a prison truck in Yangon, Myanmar, March 3, 2021. (The New York Times)

As ever, China and transnational Chinese gangs are at the center of the ramped-up activity in various — and sometimes seemingly contradictory — ways. And, again, they are in league with Myanmar’s Border Guard Forces (BGF) and other militia groups under military oversight, as well as armed organizations in the China border area, all of which have emerged from the coup strengthened and with new opportunities to generate illicit income.

Myanmar’s economic situation alone has helped pave the way for illicit activity. Banks are barely operating, retail business and manufacturing are in tatters, and chaos is engulfing towns and cities across the nation. Key investors in Asia and beyond have cancelled billions of dollars in planned investments and many small and medium-sized foreign investors are also likely to shut operations or divest. As the international manager of a small capital fund weighing options in Myanmar told USIP, “It is hard to picture how we can continue given lack of access to the internet, the extreme security situation and the need to shift to cash-based operations.” The World Bank forecasts Myanmar’s economy will shrink 10 percent in 2021; some private analysts project a 20 percent contraction.

Crime City in Shwe Kokko Ramps up Activity

Before the coup, the elected civilian government, led by Aung San Suu Kyi, had sought to check the spread of Chinese transnational criminal activity in the Thai-Myanmar borderlands.

A critical first step was setting up a commission in June of 2020 to investigate illegal gambling and money laundering in Karen State’s Shwe Kokko township. A deeply corrupt BGF under military control there had partnered with Chinese fugitive investor She Zhijiang and his Yatai Company to build a multi-billion-dollar industrial development from profits on illegal gaming. Using Thailand as a base, the Yatai Company in 2017 began introducing illegal online gambling into Shwe Kokko and, in conjunction with Singaporean company GBCI, launched a digital application called Fincy to facilitate illegal financial transactions.

The government’s efforts showed initial signs of success. The Singaporean company formally announced its withdrawal, while pressure from Myanmar forced the Chinese government to cut connections with the project and offer support for a crackdown on criminal activity. In fact, in November 2020 — just two months before the coup — Chinese courts began hearing cases related to Chinese criminal pursuits and Shwe Kokko.

But as rumors of a pending coup started to spread in late January, pressure on the BGF in Shwe Kokko suddenly eased, and on February 1, Facebook posts announced the crime city’s reopening. Its most notorious night club began hosting large-scale events, charging a 20,000 Thai Baht (around $670) minimum, indicating that business as usual had resumed.

Meanwhile, Facebook and WeChat groups began recruiting labor again for Shwe Kokko after several months of quiet. The new jobs in Shwe Kokko included transportation from the Kokang territories along the Chinese border. Also featured are sales of phone cards and advertisements for foreign exchange services and money transfer applications. Posts in an online group called “Shwe Kokko Yatai City” are even less subtle, showing poker chips, dice and a casino floor.

A New Chinese Triad Organization Emerges in Myanmar

As detailed in previous USIP publications, even more sinister figures from the Chinese underworld have become deeply involved in Karen State since 2017, partnering with the Karen BGF to propagate entire cities hosting illegal gambling, fraud, money laundering and other criminal ventures.

Chief among them is former 14K Triad cartel leader Wan Kuok-kui, the mastermind of a criminal enclave in Karen State known as Saixigang, Chinese for “Surpass Sihanoukville” — a reference to its links to the Chinese criminal hub that emerged earlier in Cambodia.

After serving time in prison for murder, arms-smuggling and other crimes in Macao, Wan established an illicit transnational network known as the World Hongmen Historical and Cultural Association in Cambodia. In addition to bitcoin fraud in Cambodia, Thailand and Malaysia, the network also operates casinos in territory controlled by the United Wa State Army (UWSA). This activity led the U.S. Treasury Department to sanction Wan as a threat to “the stability of the international political and economic system” in December 2020, noting also that Wan had “papered over illegal criminal activities by framing their actions in terms of China’s Belt and Road Initiative.”

Just a day after the coup, Wan’s World Hongmen Association registered a new entity in China’s Fujian Province with a WeChat public account called “Hongmen Myanmar.” According to promotional materials on this site, Hongmen Myanmar aims to bolster key Chinese foreign policy objectives: “Support Chinese reunification, advance relations between China and Myanmar, promote Myanmar’s economic development, and promote the Belt and Road Initiative.”

Wan Kuok-kui is described as a “patriotic Chinese investor” who entered the Myanmar market on a trial basis in 2020. The site also discusses Hongmen’s plans to “provide protection to Chinese assets” in Myanmar, introducing Wan’s planned cooperation with the Baisheng Company, controlled by the leadership of the Kokang Border Guard Force. The account fails to mention that Wan’s partners are the largest players in the illicit casino business in the Kokang Special Autonomous Region.

“On the basis of Wan Kuok-kui’s influence … [Hongmen] can definitely advance economic development in Kokang … and open up the Myanmar market thereby entering the Myanmar heartland,” the website promised.

Is China Serious About Cracking Down?

Despite reports that the Thai-Myanmar border has been shut tight to refugees fleeing the brutality of the Tatmadaw, as the Myanmar military is known, Chinese are apparently able to enter Myanmar illegally across both the Chinese and Thai borders. On February 21 and 24, Chinese police captured two groups of Chinese criminals bound for the Myanmar casino cities, while countless others managed to make the long trek into the casino zones.

Over the past five years, Beijing has launched numerous high-level campaigns to eradicate illegal online gambling, fraud and other cross-border criminal activities. But while arrests continue to increase, Wan Kuok-kui seems miraculously exempt. His operations in mainland China and across the region seem to have only expanded during the same period. In addition to numerous cryptocurrency schemes, Wan has established a chain of “Hongmen” Hotpot restaurants across China and marketed his own line of alcoholic beverages.

While media reports have Wan absconding from law enforcement in Malaysia, that does not seem to be the case in China. He continued to hold events with senior Chinese government and corporate officials throughout the past year. In late March, Wan met in Beijing with officials from the Overseas United Working Committee of the China Association for Promoting International Economic and Technical Cooperation (CAPC). Its chair, Zheng Shuai, presented Wan with an honorary title and award for his “patriotic spirit” and contributions overseas.

This is significant.

The CAPC is a government sponsored, non-governmental organization directly managed by the China Association for Science and Technology, which is under the direct leadership of Wan Gang, the vice chair of the Chinese People’s Political Consultative Conference (CPPCC). The CPPCC is a key political advisory body that functions to shape Communist Party and government policies. Such a high-profile association with a known criminal actor raises serious questions — especially after law enforcement authorities in Malaysia issued a warrant for his arrest in February. While it could be that CAPC failed in due diligence before associating with Wan Kuok-kui, it could also be that CAPC seeks to benefit from Wan’s ability to “influence” elites across the region. Alternatively, there may be gaps in communication between police agencies in Southeast Asia and China.

Implications for ASEAN Countries Struggling with Chinese Transnational Crime

As criminal networks move into the vacuum created by the Tatmadaw’s violent assault on governance and the rule of law, the risk grows of increased collaboration with corrupt elements of the military, as began to happen earlier in Karen State. The ambitious Hongmen Association, for instance, may succeed in sinking Myanmar roots under the implicit protection of the military — particularly in regions on the China border — and consolidating a base for operating throughout the Southeast Asia and China.

With rapidly degrading governance in Myanmar, Association of Southeast Asian Nations (ASEAN) countries face growing risks from spreading Chinese criminal networks. In Thailand, for example, a local branch of the Hongmen Association has recently intensified its activities, including the promotion of new payment applications and e-commerce platforms likely designed to facilitate illegal cross-border transactions. Meanwhile, in Malaysia, a close associate of Wan Kuok-kui was arrested for his role in a bitcoin fraud scheme that saw investors fleeced of millions of dollars in assets.

Regional governments should recognize that the chaos set off by the military coup in Myanmar is bound to have a destabilizing effect beyond its borders. The opportunities created for Chinese transnational criminal networks may be only the most immediate manifestation of the challenges that a lawless Myanmar poses to the region’s financial institutions and any efforts to curb corrupting influences on governance.

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