Crypto Against Trafficking: Uniting to Disrupt Modern Slavery

Transcript

Okay. Well, hi everybody. Welcome for uh joining. We are waiting for our moderator, Maria Fedek. She has some problems connecting, but she will be here soon. But I'm really uh honored and happy to introduce you to our two speakers, Elsa Madrrol. Elsa Madrrol is the general manager at Very Vasp and Matthew Freeman, um the CEO of Meong Club. Uh Elsa, Matthew, can I ask you kindly to uh introduce yourself, tell us something about your company um so we can start up this webinar. Why don't you go ahead Elsa? Sure. Um hello everyone.

Uh thank you so much uh Crypto Valley Association for having us here today. My name is Elsa Madroll. I'm general manager um AMIA for Verify Vasp. I know it's a mouthful. Uh it's not always easy to get right. Um, Verify VASP is um a travel rule solution provider and we do exactly what it says on the tin. We verify VASPs. Um, I won't get into too much around what exactly that means today. Um, but uh we are a Singapore headquartered uh company that has been actively um uh providing travel rule compliance services to VASPs since 2022.

And um you will understand um as as the webinar evolves what our involvement is in this. Um we are very close to this issue of human trafficking particularly as it comes to scams. So it's a pleasure to be here. So my name is Matt Freriedman. I'm the CEO of an organization called the Mecon Club. We work with the private sector in a positive supportive non-naming and shaming way. We have an association model that has about 45 companies associated with it. It includes banks, manufacturers retailers the hospitality sector. Our community meets on a quarterly basis and during the time they meet, they debate and discuss and identify what needs to be done. And then we develop tools and processes and

procedures. We have a baseline to determine for each of these companies where they are in their journey in addressing human trafficking within their supply chains or within their networks or their business partnerships. And then based on that, we provide training, consultation, and anything that they need in order to get up to speed to take that vulnerability away. On the scamming side, we have uh been addressing the human trafficking, the scam center issue from Hong Kong for about three years, and I'll be talking about that in more detail in a few minutes.

Okay. Thank you so much. Um then I know we have you have both have prepared presentations for this webinar. So I wanted to kindly ask Matthew maybe you could start. Let me do that right now. Let me just pull my slides up. Share and you're able to see my slides are okay. Yep. Okay. So I'm going to start off by laying the groundwork for this concept of human trafficking into scam centers.

Now this is a topic that five years ago we wouldn't be having this conversation because it didn't exist. It's a new phenomena and in in its very essence it's about young professional people initially from Southeast Asia that have been tricked and deceived into going into scam centers in Cambodia, Lao, Myanmar and at present it's extending to other parts of the world. So let me give you kind of an a case example of this. Hong Kong University young person graduates. He knows that he's eventually going to get a job uh in Hong Kong, but he wants to have a little bit of adventure. So, he sees on Facebook that there's a job opportunity in Cambodia.

And so, he applies for it and they do a Zoom call and he gets the job and he's told that you're going to work in a casino and you're going to provide assistance and you're going to have a lot of fun. It's going to be a great opportunity. You're going to make $5,000 US a month. And so, he's very excited about this. They send him the ticket. He flies down to Cambodia. When he gets out of the airport, there's a sign. They they they say, "Okay, come with us." They put him in a van. The van goes off and instead of taking him to a casino, they take him to a scam center, which is a large facility that has literally thousands of young people who've been tricked and deceived into the same situation, who are forced to scam 14, 15 hours a day. Now, you imagine this,

okay? you've never experienced any kind of trauma in your life and uh all of a sudden you find yourself trapped in a situation. If you don't meet your targets at the end of the day, you get beaten, tortured, tasered, it has a devastating impact on a particular individual. And so what we have here is a situation where a person basically loses control of their life for a period of time. Sometimes they're let go, sometimes they're bought out of the situation, sometimes they just kill them afterwards. And I'll talk about that in in a few minutes. But what we're dealing with here is a scenario where young people from all across Asia and the world are now being trafficked into these situations. So let me describe how this all started. So during COVID, you

had a lot of infrastructure in places like Cambodia that was used for off-site gambling. And so you had a lot of people from uh Asia and Southeast Asia uh coming to these locations. They were thriving businesses. And then all of a sudden COVID hit and these facilities had nobody coming to them. So you had all this infrastructure, nobody was using it. These criminals, many of them who originally came from China, said, "Okay, well, let's see if we can pivot over to scamming." So they realized that every 10th person that they asked for money, they could basically trick them out of it. And so they said, "Okay, well, let's see whether or not we can use our infrastructure, draw people into this uh business and then have them basically help us to scam." So they

started going to Asian people and say, "Do you want to join our organization and be a part of this?" And a lot of Asian people said, "Well, we don't want to do that. We don't feel comfortable." So they said, "Oh, let's get them to the facility. Then we'll convince them to do it." So that's where the human trafficking started. And so as a result of this particular approach, what they would do is on Facebook is they would have attractive ads where if they were trying to lure young u professional men, they would use women, you know, attractively looking women. They would develop some type of relationship. She'd talk about, well, I'm going to go to Cambodia. I'm going to work there. I'm going to have a lot of fun. Maybe we can meet there. Maybe we can have an opportunity to become friends. And so

what you do is you draw people in thinking that there's this going to be this wonderful opportunity that is going to be uh super productive from the financial side but also is going to allow for them to to really have a good experience in another country other than where they are in. We also see ads that are put in place. This is a particular ad. If you look at it on the surface, you would think that this is a legitimate ad. But there are two tell signs that this is uh fraudulent. Number one, they had the advertisement that says buy and sell group, which you wouldn't have with a traditional ad. And the uh the email address is AOL, and that's another telltale sign that what we're dealing with here is uh a

situation where this ad isn't real, but they go through a legitimate process of interviewing and so forth. Everything about the process seems like it's real. Now when it comes to these scam centers, initially there were just uh about eight or 10 of them. And the reason why these scam centers were uh so lucrative is that they could according to the traffickers use the center to come up with a system and procedure of scamming people that could pickpocket somebody 8,000 miles away. And so if you get enough people and you have an assembly line of collecting data and identifying who the person is that you're going to go after and all of these types of things, eventually you can get to a point where you are getting many, many,

many people to give you large quantities of money because the scams that they're using, which are often related to crypto, is called the pig butchering scam. And that particular scam doesn't go after 20, 30, $50,000. They go after an a person's entire life savings. And you'll hear about that a little bit later. Uh the scam centers themselves look very much like a call center. This would be an example of one that we see in uh Cambodia. But these individuals are not there voluntarily. They can't leave. Um if they try to leave uh they will be uh punished and they will be punished in an extreme way. Um they have no life at all. They can't communicate with their family. They can't go outside. All they do is work and sleep

and then work and sleep. This is what their life is. And we're talking about according to the United Nations about 220,000 people in this situation. When we're talking about these centers, this is an example of a screenshot looking down from a satellite at one of these uh compounds in Cambodia. What you see there are 10, 12, 14tory buildings times 8 or 10 or 12 or 15. Some of these compounds have 25,000 victims in there. You would have high walls. You'll have u barb wire that goes all the way around it. Closed circuit television. You have uh security people and so forth. So once you're in there, the only way you're going to leave is whether or not they allow you to leave or in a body bag

sometimes. And so it's in a very extreme situation. Here is another example of one in Cambodia. This is in a more remote area. You can see that they have dormitories and you have large buildings that are there. Uh on the right you see that these buildings have bars across them and that's because uh they don't want people to try to escape or commit suicide and the walls are uh you know covered with barb wire sometimes electrified. There's really no way of getting out of these places because they're virtually prisons and that they hold people in place. This is one of the most notorious scam centers. This is called KK Park. It's in uh Myanmar and the line that you see there, the yellow

line is the river that separates Thailand and Myanmar. So on the uh the that northern side, the top of this, you can see Thailand. And then below this, this is a scam facility. Now, 3 years ago, this was nothing more than a fishing village. And now all of a sudden, you see all these high-rise businesses. You see construction that is continuous. They keep growing. There's probably 40,000 people in this facility alone. And it just the reason why it can thrive is it's in kind of a no man's land. It's in a revy held a rebel held location within Myanmar. The government doesn't have access to it. They have access to the facilities and the people coming in from Thailand. It's just the

perfect front for this type of uh business. Uh here's another picture that uh demonstrates the barb wire uh that you would see in the high walls uh around this particular facility. Um uh another thing that we see is that um on uh certain websites uh like Telegram uh in Mandarin, this is the English version of this, you can actually see the buying and selling of people. So you say we have six Bangladeshies and we they speak English and they've done this type of activity and they're working on this type of activity. Uh we have a Chinese-born person or whatever. So right out in the open you can see the buying and selling in people. Now some of you may have

remembered during um you know the time ISIS was in uh control of certain locations on Facebook they were buying and selling people and that was stopped pretty easily because it was in English and people saw it and stopped it. But this buying and selling of people aspect of it is something that has been going on for quite some time and uh nobody has really stopped it because nobody seems to really care about this particular issue. It hasn't gotten the coverage and the attention that it should for a particular uh uh issue like this. What you see here are examples of what happens to a person if they don't meet their targets. They are tasered. They're tortured. there. You see one person who

has a hammer that they're going against his fingers. U you see young women in here in this type of a situation. It's the standard practice that's done at the end of the day in order to convince them to wake up in the morning the next day to do whatever it is that they need to do in order to meet whatever target they need to meet. I have been associated with addressing human trafficking for 35 years. I have worked on addressing sex trafficking and forced labor. I've never seen violence like this. This is the type of violence that goes beyond anything that we have seen for a long time. And in fact, it's the type of violence that we saw in slavery 150 200 years ago. And so this new phenomena is something that is is quite shocking for

all of us. Um in fact a certain percentage of the people who are unable to meet their targets and they're unable to uh survive in this type of environment are actually tortured to death and then they are basically videotaped in this process and then they sell the videotapes to people who uh are interested in uh seeing this type of violence. There was one Telegram website that had about 15 of these torture videos and then they said, "If you want the really good stuff, the beheadings and the killings, give us 3,000 in crypto and we'll send you to the website so you can see this." So, every single part of this human being is is is basically used as part of this process.

And it's it's something that we we have not seen in any in the 35 years that of working on addressing this problem. I've never seen anything like this. Uh if a person is able to leave and sometimes they can because they are bought out of the situation, they uh that the person isn't able to achieve things and they know that the person's family has money and so they go to the family and say, "If you give us 30, 40, $50,000, we'll send your kid home." And in some cases when that happens uh when the kid comes home uh I've met them I've had conversation with some of them they they are so destroyed by the experience that you know that whatever kind of happygolucky type of individual they were prior to this they're not that

anymore. They're almost in a cat catonic state. Some of them um you know want to commit suicide. Some of them are actually jailed because part of uh the process of preventing themselves from being beaten and tortured is uh the process of going to neighbors and family members and scamming them. And so when they get back they've done criminal activities and as a result of that they get uh um put in jail. So here's a new phenomena that initially started in Cambodia, Myanmar and Lao. Now we're seeing it in Bangladesh, India, Nepal, Pakistan, the Middle East. We're seeing it in na in countries um in Africa, Latin America. So the model of human

trafficking and then doing the scamming come together is a very lucrative model. Uh in the United States, it's estimated that $65 billion worth of money was scammed using this pig butchering approach. It's a very particular type of scam that basically is a long scam where you're you're over a period of time developing a a trusting relationship with an individual and then after that you get them to do some some deals where they make money and they're asked to take the money out of it and then after that they do the big scam where they say, "Okay, well there's a new coin coming out. If you put a million dollars in you're going to get $3 million back."

They get the person to put that in and then all of a sudden they lose it. So as a result of the money that is being generated from these types of scams in this amount uh you're seeing these uh these centers proliferating. So what you're seeing now is within the banking world and within the financial transaction world and the crypto world and social media world is they're looking to identify typologies. These typologies would allow for the banks and these other facilities to have a better understanding of what it is that needs to be done in order to address these these particular aspects and then training will be provided to them in order to see that this doesn't happen.

My organization uh does a lot of prevention work. We've developed prevention videos that are used to in multiple languages to sensitize people in the form of e-learning on how to prevent yourself from being trafficked into a scam center. We have another one that is how to prevent yourself from being scammed. We have a TV commercial and uh we're using AI videos to develop bespoke aspects of this that can address particular populations of vulnerable people but in whatever language that they need. So, anything and everything that we develop is in multiple languages and those languages allow us to reach people. The last thing I'll say is that uh as I as I indicated, I've been

working on addressing human trafficking for for a long time. For me, this is one of the most concerning new developments because many of these crime agencies are so flush with money that they're beginning to link up with each other and they're beginning to have conversations with each other and as a result of that, they want to start franchising. I think they'll use the money for influencing governments and politics and bribery and and sex trafficking and drugs and any any number of other types of things. And so this is something that we should all be very concerned about and it's something that we have to raise awareness of and that's the reason why we do these types of videos. With that I'll stop. Uh thank you very much.

Thank you, Matt, so much for the amazing information and for giving us a an introduction to to the entire situation with human trafficking and for showing us the reality of it and the crude reality of human trafficking, how important it is to actually try to address it from all the sides and try to fight it from everywhere we can. Actually um it is there are several companies that have already addressed me crypto companies that asking if we had an option to offer them a human trafficking policy because now even banks are asking for crypto companies to offer a human trafficking policy. Um so I think this is a very

interesting issue and we should take it very seriously and this is why we're doing this today. Thank you so much for giving this update. now um to give it over to Elsa. Elsa has been working firstly on finding a way of getting all this information and tracking all the crypto that have been involved with human trafficking through travel rule which for me it's kind of amazing how she does it and amazing how how they do it and how with simple tools or well elaborated tools but for us simple tools to use as vasps um we and actually track this and find this out and help a way

and help in any way we can to actually stop this um a bit more every day. So, Elsa, up to you. Thank you. Sure. Um let me share my slides. Okay, great. Are you able to see the screen? Yes, we can. Okay, wonderful. So just to pick up where Matt left off. Um uh as thank you very much first of all um for a very sobering presentation. Um individuals are getting trafficked against their will into scam compounds and then forced um to scam. Um I am going to kick off with you know what is the scale of this proliferation

of scam centers. So looking at a couple of statistics, um I've lifted this from the United Nations Office on Drugs and Crime report that was published just a few days ago. It states that we are now at an inflection point. Um you know with scam centers, the UNODC talks about the industrialization of these centers where smallcale operations are now being replaced by larger consolidated criminal groups that are bringing in billions and billions of dollars of illicit capital inflows. So, we're talking about hundreds of thousands of trafficked individuals and they're targeting victims around the world. Um, they're now saying there is no jurisdiction left immune. As Matt mentioned, global crime syndicates are running operations and

even partnerships now being formed between the different crime syndicates um crossboarder, especially of course when it comes to moneyaundering because that's where the network, you know, they're not in competition. They're trying to help each other. Um, it is very difficult to estimate the actual amount of stolen assets that we're talking about because not everyone, particularly with pig butchering, not everyone who's the victim of a pig butcher and scam is going to report it. There's still a shame element um attached to it. So, a conservative estimate is that it's in the tens of billions of dollars. Um, reported cryptocurrency scams accounted for nearly 6 billion US in 2023, of which 4.4 four billion were

these romance scams um that the pig butchering that that that that we're um calling it. That same year in East and Southeast Asia combined um there was a loss of estimated $ 37 billion to cyber enabled fraud. So it gives you an idea about you know the scale of operations. I wouldn't be surprised if it's if it's upwards of of a hundred billion. um in terms of uh you know I I I've presented this topic in the past in the EU and I was immediately met with a comment that this is not a European problem. It actually is a European problem. It is a global problem. Um and that's for two reasons. This is a map of the origins of the people being trafficked into these regional scam compounds. And presumably they're using uh you know they're using these

individuals to scam anyone in any of the languages that they speak. And then of course with the arrival of AI, you have deep fake audio and video technology. The reality is that no nation is now safe from from scam attacks. Um so virtual assets are increasingly being used in social media scams. Um and that's for a number of reasons. First of all, the transaction is irreversible. It's not like a bank transfer. You can't reverse it. Um secondly, many victims are vulnerable and they are usually unfamiliar with crypto. um disproportionately around 30% of victims are over the age of 60.

They're specifically being targeted. The scams are usually crossborder so speed is an advantage and then of course the scammers can use um you know a series of of privacy tools depending on how sophisticated they are. Um there are different typologies as Matt mentioned for social media crypto scams. I will discuss probably the most common example these romance investment scams that we refer to as pig butchering. If the uh name sounds awful, it's because it is. It actually originated from the scammers themselves. They're the ones that call it this to describe their strategy. Um so the victim is the pig. They need to be fattened up before they get sent to the slaughter house. So through social engineering, the scammer slowly builds trust and emotionally fattens the

victim. Um and there are tactics, daily emotional connection, lovebombing, um usually over several weeks, you know, attention, affection, validation. And this is something we're all looking for. And then it switches over to status signaling, showing how well they've done, usually through photos or videos of a flashy lifestyle or phenomenal returns, proof of phenomenal returns on these investments. And then they move on to a small ask. Could be $50 followed by another $50, then maybe $300 followed by a fake success phase, right? Showing that these returns are working. So small transfers resulting in successful returns until finally they go for the kill. It could be one. It could be several large transfers and sometimes, yes, even emptying their complete

savings account, the the all of their life savings accounts. So, what happens next depends on the scam. Some disappear. Some return back to the victim to try to scam them again in promise that they're going to be able to recover their funds. Either way, the assets are long gone. So, in order to begin the small transfers, I'll switch now over to the crypto side of things. Here's what needs to happen on the crypto side. So after weeks of grooming, the scammer will encourage or instruct the victim to open an account at a well-known trusted exchange or VASP. Usually um that's that's what uh that's that's the motive brandy. The victim now has to complete KYC. Um ironically, this gives the victim a false sense of legitimacy

because they've had to prove who they are through identity papers, etc. Then they have to link their bank account or credit card to the exchange to the VASP. And then generally it's buy USDT, Bitcoin or Ether. Those are the three most common choices. Then of course the victim is instructed to send the funds to a wallet address. Um and of course this wallet address is controlled by the scammer or deposit the crypto into this investment platform which ends up being fraudulent. It looks real. It may have a front end but it's actually connected to the scammer's wallet or to a smart contract um trap that drains the tokens.

And then that's when you see a pattern of transactions. Like I said, $50, $50, $300 before you get to the$10,000, 100,000, whatever the number is. Now, what is the industry doing about it? Um, well, in a first instance, we're trying to build a regulated ecosystem. So, a regulated ecosystem means cutting out illicit actors and cutting out high-risisk venues to make sure that only regulated and low-risk exchanges can make and receive crypto asset transfers. Um the report um by the UNODC mentions that fake VASP services are being offered on the dark web that are either complete fraud with just an exchange facade or real so to speak exchanges established in very

high-risisk jurisdictions with no AML controls. So these market participants have got to be cut out of a regulated ecosystem that we're trying to build. So the travel rule, which is what verified fastpas, we're a travel rule service provider, is an AML CFT measure that requires the mandatory exchange of personal information when making a virtual asset transfer between two regulated venues. So in effect removing the anonymous nature of these transactions between two regulated exchanges and and it makes the exchanges accountable for who they choose to do business with at the institutional level. And the reason it was put in place is that sooner or later um these these scammers will need to come back on exchange to turn their crypto into fiat.

So that's really the regulators decided that that was the best place to either intercept them or block them. Um so regulated VASPs should only transact with other regulated VASPs. If on a case-by- case basis they want to allow transfers to unregulated VASPs that has a good reputation for example then they need to be accountable for that choice and they need to put in place risk mitigation measures to protect their users. One thing to note is that this diagram doesn't um highlight the difference you know in in illicit actors for example between unhosted wallets and hosted wallets. So unhosted wallets are those that are not on exchange. So it could be a scammer's individual wallet.

Right now, the regulatory landscape is very complicated for unhosted wallets. I know in Switzerland um it's very strict. There's a handful of other countries where it's very strict, but in many jurisdictions, it's still, you know, you're you're you're being asked to prove identity of your own wallet um ownership or your own wallet, but it doesn't really go much further than that because they're being treated differently around the world. I left it out of this presentation, but even if the scammer uses an unhosted wallet, um the reasoning as I said from the regulators is that sooner or later they will need to gain access to that fiat ramp back to the bank. And so that's where we need to be focusing our attention in a first instance. Um so what does in practice the travel rule actually mean for that

life cycle of a scam? So, it means that VASPs have a new responsibility to select their counterparties carefully. Um, not least because they're going to have to trust that counterparty VASP with their client's personal information. It means the days of these fake investment platforms posing as VASPs are over. So, you know, the reputable exchanges are not going to be able to provide blind access to some unknown VASP. And it means that scammers won't be able to use exchange-based wallets without verifying their identity, not just to their own exchange, but also to the sender's exchange and ideally uh before the transaction. It also means that any name that's been submitted will have been through a name screening process by the exchange. So if the name appears on any

red list, it will get flagged and the transaction won't be able to go through. So um we are one of the software providers that facilitates the secure exchange of that travel rule data, that personal information. We went into production in 2022 in jurisdictions that were early adopters of the travel rule. So mostly in Southeast Asia. So in aggregate, we've now completed over 15 million two-way verifications of compliant crypto asset transfers. So we've got some takeaways that that I want to discuss here. First, we're starting to see what can be achieved with the travel rule once you get past the growing pains. Um, one of our members in South Korea, for example, reported a near total elimination of impersonalation scams on their exchange,

basically because of the impossibility of making a transfer without verifying your identity. Secondly, um we are seeing wallet addresses identified as being linked to scams and they're being collected by our member VASPs and they're being identified because the users will report it back to the member VASP, right? So, if they're the victim of a scam, they're going to go to the VASP and say, "Hey, where did my assets go? I've been I think I've been scammed." The VAS will say, "Give me the wallet address." We can then of course um uh the vast can run it through blockchain analytics and kind of see see if the wallet address appears anywhere in countries that have implemented the travel rule. Um we have valuable information on both sides of the transfer right with our member VASPs

that can easily be shared amongst the members of our network and with regulators and law enforcement. And then the final takeaway is that small social media scams, right, the 30 30 50 that that I was talking about, they are under the radar of many many agencies. Um, we've learned from various reports that they feed into increasingly larger criminal organizations, potentially even terrorist organizations. Um, so we have got to start paying attention to the the quote unquote small-time scams, uh, because they're they tend to be perpetrated by the same, you know, the same groups. Um, so this is where things get interesting. Uh, just unpacking that a little bit. So why are these small-cale social media scams slipping under the radar? One of the components

of the travel rule is the requirement of name and wallet screening. Um, but we see that much of the illicit activity online is not captured by most screening tools, especially these smalltime scams, because they they just don't originate from a sanctioned country or are linked to a sanctioned individual. and and the majority of tools will screen for those exact things and and they're just not there. So with the travel rule though and specifically with a verified network, the members of that network, so the VASPs themselves are able to retrieve the identity of the individual behind the blockchain transaction and and that's meant you know the quasi elimination of impersonation. Now one take taking that one step further um with AI we're

currently working on developing several tools. One such tool will look at pattern recognition through what we call fingerprinting. So AI can help us to detect existing scam patterns and extrapolate them to detect high-risk real-time transfer patterns. So where we can spot as the software provider because we don't have access to the personal information but we can see the transfers. We can see that a member exchange might be getting used to fund a scam because we're seeing this pattern of $50, $50, $300. And if we can extrapolate that, we're able to notify the exchange that we've detected a pattern, a high-risisk pattern, they can then investigate it.

And if the exchange so chooses, they could potentially warn their user ahead of that scam actually being finalized, ahead of the going for the kill. So we're um you know, that's one of several tools that that we're utilizing AI for to kind of figure, okay, we we've the regulators have asked for all this data. It is helping certainly remove, you know, impersonation scams and some of the scams, but what else can we do with the data? There's really cool stuff. We should be able to, you know, start to beat the scammers at their own game because they're definitely using I. So, we need to start doing that as well.

Um, in terms of where does that leave us? So, uh, the report is very clear on the industrialization of, uh, these scam centers. So we need to industrialize our response as an industry um especially with regards to public private partnerships. So we held a hugely successful summit in Bangkok earlier this year. We had other specialists like blockchain analytics firms. We had a token recovery firm. Scam centers in Thailand were absolute top of the agenda. As as Matt said, they're just on the border of of um some of those large centers. And over half of the attendees in Thailand were from the public sector.

We had law enforcement, you know, we had the the cyber police, we had AML divisions, they all turned up in force. So, we need to be doing more of these as an industry and inviting the public sector in individual countries to really help educate and get the conversation going. Um, what I presented to you today about the travel rule is promising, but the caveat is that the travel rule only works if everyone is doing it. You know, it's a FATF standard. Um, so technically all 200 plus FATF countries should be aligned, but we're still several years behind. The the UNODC report highlights that these scam centers are geographically mobile. So we need to do whatever we can to accelerate that roll out of regulation before you know to to

to stop this jurisdictional arbitrage. And then finally, I wanted to point the audience to a website that we launched um where we invite anyone to register and report suspected crypto scams. Um and then we go and validate them and we hope to eventually plug in law enforcement into this website. Um it's a pro bono. It's early days. We're still working on several features, but you know, if anybody's interested in registering, it is cryptoscam.org. And that brings me to the end of my slides. Thank you very much for your attention. And I think we're happy to open it up to questions, comments. Thank you, Elsa, so much. Um, yeah, we're happy to open it now to several questions if there is someone that already has a question. Um, otherwise I

would have some questions for you. If there are no questions from the audience, I think we have no questions, right? Actually there was one statement about the Shamrock project. Um this is run by a woman named Aaron West. Uh many of us who work on this uh topic have had contact with her and her project aims to uh raise awareness and to come up with solutions to address the issue of uh human trafficking into scam centers and to address the scams as well. Um, I urge people to go and look up her

organization and look at what she's doing. And, uh, she she travels to Southeast Asia periodically and and the work that she's doing is is is excellent. She's also on LinkedIn a lot, uh, posting, uh, updates on what it is that she's doing. Wonderful. Thank you, Matt. So, everyone very welcome to check that out as well. Um, all right. Then I would have some questions for you guys. In your experience, what do you think are the most common red flags or patterns that should alert vasps of the presence um of pig butchering?

I'm going to have you take that, Elsa. Sure. Um so uh bizarrely um we are told by our members that sometimes the same wallet addresses are getting used. So you know the first thing is if a a wallet address gets reported. I know you know a lot of um a lot of VASPs are reluctant uh certainly when it comes to token recovery um uh to to block users unless there's been some kind of court order. I would urge VASPs to, you know, be more cautious than that. If if there's any kind of suspicion of of a wallet address given that we are hearing reports that sometimes the same address gets used over and over again, you know,

do something to block that. Um, in terms of patterns, I think I mentioned them, you know, you can kind of regress the the the reported patterns of of um the amounts of, you know, repeated small amounts to a brand new wallet address that they've never used before. and in increasing uh value. I think that's that's a red flag. Um I'm I'm not expressing it very well. I'm sure there's there's a a way to quantify that better. Uh but you know that 30 30 50 100 1,000 is to me probably a clear red flag at least to to to ask. And then um I know that some exchanges have started doing this. Um you know there are pop-up pop-up screens whenever you register a new wallet address kind of saying are

you sure this isn't a scam? You know just just like just like they do in banking. Actually, let me just add something to to that related to banking. Uh the banking community says, "Well, we don't really have to pay much attention to this because it's crypto and it doesn't have anything directly to do with us." But over time, what we've seen is that banks are seeing a percentage, a measurable percentage of people who never took money out of their account, had lots of money, and then all of a sudden they were taking it out in large quantities. That's obviously a red flag.

And what when they start asking questions about that, they're coming to realize that a certain percentage of these people are getting caught up in these pig butchering scams. Three other uh very simple indicators uh that the banks are teaching their uh investment people to watch out for. When somebody comes and says, "I may come into a lot of money very quickly. Can you help me to address this from my tax purpose, from my investment purpose, and could you tell me about crypto? All of those now have been perceived within the banking community as potential red flags for which they at least begin to ask questions. Could you tell me more about why you're asking that? Are you getting involved in some type of

a a relationship where you could potentially make a lot of money? And they once they get these questions answered, they offer kind of a a suggestion that uh you really need to stop what you're doing because it really sounds like you're about to be scammed, Matt. And um now taking that into account because mostly people when they're being scammed, they don't even realize that they're being scammed or they actually believe this is the opportunity of their life. Um yes. So how to do that from the other side? If you're for example working in a VAS and you see that this is happening that you're having this 30 30 50 1,000 um how

do you manage that? How do you in in your experience how have you helped um people working in banks or people working in VAS on how to address that with the person to actually make them realize like hey you're this close to being scammed or you're already being scammed. We don't want you to be scammed more. Well, part of the problem is the uh the way this particular uh scam plays out is that it has that emotional sense to it. So, for an entire month, all they're doing is lovebombing, as to use Elsa's term, where they're developing a relationship. And so, there's that sense of trust. And then when they get into the uh the small scams, it's not just about putting in

$100. It's about putting it in and then seeing it double and then getting them to physically take the money out. So they have the relationship and then they have a couple of these positive transactions. And so that trust element is there. And so, uh, I've spoken to people who are in the process of making decisions related to this and they know that I, uh, have a certain expertise on this and I'm trying to talk them out of it and they still don't listen because they are so convinced that the what they're dealing with is something real that no, this individual would never cheat me or, you know, I saw that it worked and, you know, these are legitimate things. I went online and I did all the, you know, you can make

money. I just want to be one of those people who makes money uh through this process. And so it's really difficult and it requires somebody to really be able to offer them evidence right in front of them that what they're about to do is is is a big mistake and they're going to lose everything. Um and and I met a banker and an accountant who are know the client type people. They are, you know, compliance people. They themselves have been scammed. These are individuals who are highly educated and they know what they should be doing, but they still get scammed because the sophistication of the scams is just so um clever and it and it addresses all the the answers to the questions that it

prevents a person from from really doing the due diligence and they get caught up in this situation. There's been um you know beyond pig butchering um I've had two LinkedIn messages from recruiters um one um one was McKenzie sorry sorry McKenzie but one promising an interview with McKenzie and you know I I went you know my my spidey hairs went up and and I did a little bit of of searching of of what that scam was and um it is you know they get you to answer a case study and you have to download something for the case study and then before you know it you've got malware and then and then it's usually ransomware and it's you

know so they're getting more and more sophisticated and more and more convincing and if I wasn't so deeply entrenched in in scam talks um I probably would have you know clicked on a case study and done the case study myself. Yeah. And then on the polar opposite of that is, you know, I have I think we all have stories, but um I have a a a dear friend who is um in her 80s who doesn't have a lot of money at all who has been telling me for years that she's been dialoguing with in dialogue with with Elon Musk on Facebook. And I've told her time and time again, you are not speaking to Elon Musk. It's not it's not him. It's not real. And she's like, well, I know everybody seems to want to believe that it's not him, but you know, maybe he is speaking to me. And in the

end, um, she did get scammed. Um, and her daughter told me, "We we just stopped it right before she was about to hand over, you know, her her small amount of life savings." And to this day, she comes back to me and tells me, "Well, you know, I don't really know what happened. I don't really know if it was a scam or not, but, you know, they stopped me." So, there's reluctance to even believe that that that you're getting scammed. Yeah, it's true. We have also here a question um from one of the attendees. Would that also mean that people setting up the scams are highly educated professionals? What do you believe on that? A couple of things related to that. I I know of one case where uh a scam operator talked about how they hired a MIT graduate to come in for a

month to set up some software and hardware applications. He was there for three weeks and they gave him a million dollars. So maybe this person was a regular guy and maybe he knew that he shouldn't be doing this. But if you dangle in front of somebody a million dollars and uh say to them like, you know, this is a one-time deal. It's taxfree. You're going to put it in your account. You know, there's a certain percentage of people who are going to take it. Many of the victims that I have met are college graduates. They're prolifer they they're proficient in all kinds of aspects of computers. They're social media people. They know how to use it. And so in my other part of my world where I deal with human

trafficking victims, most of them are uneducated migrants from lower socioeconomic circumstances that end up getting tricked and deceived and sent to another country and they're exploited. But in this particular case, they are specifically looking for educated people who understand how to communicate and write and send emails and so forth. The other aspect of this is AI is very much a part of the process. They on a regular basis will uh look at the scripts, update them and refine the scripts to ensure that they are able to answer whatever questions happen. And on Telegram, you can see these these uh scammers uh exchanging information about

this is something that we came up with. If a person is about to say no to something, try this particular approach. It's worked pretty effectively. And so this exchange of information is again something that you usually don't see because when it's drug trafficking, you have cartels that are, you know, competing with each other. In the scamming world, they collaborate with each other. Yeah, that's true. And it is it is amazing to see um how easy it is also to fall into that into that type of scams. And and if there are also people that studied in university or that are used to social media and as you say with with AI nowadays, I think putting it into

Chad GPT then saying like write it as if you were an MIT graduate from law school MIT graduate then there you go. You don't really need to go deep into it to be honest. Um but to go back on the on the other side of the coin, have you seen any successful industry or regulator um that you believe could serve as a model for joint efforts to tackle this issue? I'll I'll have Elsa do that one. Yeah, I mean um as a model um you know I can I can refer a lot of our member VASPs are um

from South Korea and uh South Korea has a very strict um you know regulatory environment. Um so I don't necessarily think that that's the model for other countries. Um I think Singapore is doing a very good job. Um in terms of you know pointing to one jurisdiction that's really got it nailed and they you know they've excluded scams. I don't think we're there yet. But I think we can take certain elements of um you know of of the roll out from each jurisdiction uh to to kind of be inspired.

What do you Okay then. Yeah, I think it's very interesting and it would be great to because I think mostly I mean from from my perspective usually when you hear about Singapore, you hear about um South Korea, it's usually that a lot of scams are going on there and that a lot of scammers are using those jurisdictions to to do the scams in. So it's interesting to hear that especially and and you also told me Elsa that South Korea also has the issue with the scams coming from North Korea and then using South Korean people or scamming South Korean people constantly.

Um so it is very interesting to see how you believe that um that we can learn something from the jurisdictions in South Korea. Yeah. My my my takeaway from actually both of those um both of those jurisdictions is really their openness to public private co- cooperation. I think that's that's really what it boils down to. We have to continue the dialogue because neither will succeed without full cooperation and by public sector I also mean law enforcement and you know every every aspect of the public sector involved in this. Yeah. and and the NGOs's because I'd like to go back to something that Elsa said earlier when it came to the um moneyaundering aspect of this. Um you

know, another front in the fight of this is to figure out again how the crypto goes to fiat and then where does it go to be laundered and so forth. You saw the sensational case for example in Singapore about a year ago when they initially thought it was a billion dollars in luxury cars and bags and money and and property and so forth and then eventually it was identified as being 3.8 billion and that was coming from Cambodia from the scam centers themselves. And so if you're dealing with multi multi-billion dollars then that money's got to go somewhere and it's got to be laundered someway. And so uh another kind of front in this would be law enforcement working with the banking communities to ensure that they

have systems and procedures and red flags and typologies in order to uh identify how that money is potentially making its way into legitimate banking uh uh networks. And and why this is a problem for them is that if any of that money is identified as being illegal, uh it's money laundering and the banks get fined and that's a big problem for the banks and so forth. And so this is an emerging area because it's kind of a new thing, but you're going to see a lot of attention associated with that as well. Yes, that is true. And it is um it is something that usually in Switzerland it's it's also um an issue that I think has not been addressed enough so far. So this is why I was really thankful for

for the crypto value association to open this space for us to actually talk about this. And this is um this is something that is getting slowly slowly um is getting more important and has gained importance and has gained visibility as well. And this is also one of the thing one of the themes we will have in the in the crypto valley conference where Ambrose is going also to to support and to to give a presentation here about about their experience as well with pigpuring and with with scams as such. Um so I agree with you Elsa that it has to be a joint

um we have to join forces from from the public sector and the private sector to actually find a good solution for this. I think there isn't a solution. I think we need to disrupt to the point of um making it you know not not viable is is ambitious but uncomfortable for for these scammers to continue to operate with as much ease as they h as they are. So we have to individually nobody can come come up with a solution but we have to wherever we can. So travel rule is one example of that make it increasingly uncomfortable for them to transact the way that they have been um such that they're they're growing very fast growing I think it's the fastest growing

criminal industry in the world uh criminal activ type of criminal activity in the world um so that you know it it it deters them we the best we can hope for is a deterrent we have some two additional questions um and I think we can end with that because we only have four Five minutes left, but how effective do you think are traditional banking institutions able to detect such issues? Do you think they're more effective than VAT? And and in your experience, how effective have you seen there are being able to detect it? Well, what's happening now is uh the banks along with our organization and a few others are developing the typologies

related to this. Um and so we're really kind of digging into it and trying to identify, you know, what are the various steps and then what are the uh transactions and uh what are considered to be red flags that they should be looking at. But I would describe them as being very blunt tools at present. Um it's kind of like where drug trafficking was 25 years ago where you were beginning to identify what the indicators were. uh and there was a lot of hit hit or miss when it came to the red flags and that's kind of where we are now. So part of the problem is we got to get all of the banks and the financial transaction and the crypto companies to come together collectively to share their respective uh steps

within this process so that everybody is a kind of on the same page and I think that united front is the approach that's needed in this particular case. Yeah. And I and I from from the crypto side of things, I think we can we can and should aspire to do better than the banks, right? that there are disadvantages to blockchain but there are also some very real advantages where we you know we can one of the tools that um we're also working on is you know kind of tracing transactions and and following the transaction such that the the minute that a flow hits one of the exchanges we're able to notify the exchange that we believe this came from illicit funding because we can we can

trace the transactions on on blockchain whereas obviously in fiat um the dollars disappear. That's true. Um, yeah, I think we have an advantage in crypto that we can actually use that in our favor to yeah to at least try to stop it a bit or as you said make it a more a bit more difficult. We um I would like to close with this last question. Is there any public database or any trustworthy database you would um suggest for kind of like finding more information about this and finding some information about the organizations or activities that have raised concern in

the past. So there are multiple initiatives. I think that's a good um off the top of my head, no, I I I'm I'm not going to be able to confidently give you a a trustworthy uh platform, but uh I've been approached a number of times in the last couple of months with that same question. Um maybe that's a nice followup uh to kind of compile a list of existing sources and existing initiatives as well. Right, I mentioned cryptoscam.org that we're still trying to populate, but there are other similar types of initiatives across the industry. and then maybe share it with this group. I'm happy to also collect from my side uh a list and then we can compile them and then uh you can perhaps share those uh uh items with the people

on this uh webinar. Yeah, I think that would be amazing. That would be a good close to the webinar and and yeah, that would be just like a small plus for everyone to have. Um all right. I just wanted to quickly um close the webinar with inviting everyone to our crypto conference where we will also talk about this um issue on the 6th and 7th of June in 2025. And other than that, thank you very much.