Laukkai’s transformation from gambling city to scam hub

The Kokang capital of Laukkai on the China-Myanmar border was unknown to most of the world until it became an international online scam den and the site of intense armed conflict that has displaced thousands. However, the governments of China, Vietnam, Thailand, Malaysia and Laos have turned their attention to the small town as evidence emerged that citizens of those countries had fallen prey to gangs running fraud and human trafficking operations from the small town. As most of the world was preoccupied by Russia’s invasion of Ukraine and the intensifying conflict in Israel and Palestine, an insidious web of criminal operations materialised in Laukkai, with consequences on a massive scale extending far beyond the local setting. Already burdened with the effort to free Thai citizens taken hostage by Hamas in Gaza, the Thai government is now bearing the added responsibility of freeing and helping hundreds of their citizens trapped or stranded in Laukkai, northern Shan State. The government sent Police General Surachate Hakparn, the deputy commander-in-chief of the Thai police, to Myanmar for an emergency meeting with the junta regarding this matter on November 6. The Vietnamese government is making efforts to rescue over 100 Vietnamese citizens from Laukkai, with the Chinese government and Vietnamese embassy in Yangon serving as intermediaries, and has set up hotlines to convey information to its citizens in Myanmar. Thousands of Chinese citizens in Laukkai have fallen victim to the fraudulent call centres, to the extent that the Chinese government has declared the issue a “nationwide problem” and a “national security problem.” The launch of Operation 1027 in October by the three ethnic armed groups of the Brotherhood Alliance–which is primarily active in northern Shan State–has only added to the complications in Myanmar-China relations caused by the criminal operations in Myanmar. The anti-junta forces leading the operation have surrounded Laukkai and a battle for control of the town seems imminent. The Brotherhood Alliance comprises three member groups: the Arakan Army, the Ta’ang National Liberation Army, and the Myanmar National Democratic Alliance Army, an ethnically Kokang armed organisation. Shifting control Portrait of Peng Jiasheng (The Kokang) Laukkai is the capital of the Kokang region, which is now nominally governed as an autonomous territory within Myanmar–the Kokang Self-Administered Zone (SAZ)–in accordance with the 2008 constitution. The Kokang people–and over 90 percent of the population of Laukkai–have predominantly Chinese ancestry and speak Mandarin. It is commonplace to refer to the Kokang people as “the Kokang Chinese.” The region’s cultural ties to China remain strong today, with many in Kokang even using Chinese yuan as currency and subscribing to Chinese telecommunications networks. For decades, the region was under the control of the Communist Party of Burma (CPB), which for most of its history was ideologically and politically aligned with the Chinese Communist Party. An archenemy of the Myanmar military since the country achieved independence in 1948, the CPB always included a large Kokang membership. In March of 1989, a group of Kokang CPB members led by Peng Jiasheng mutinied against the mostly ethnically Burmese leadership, reached a truce with the ruling military dictatorship, and succeeded in securing special status for the Kokang region, with Laukkai operating as an administrative seat at the district level despite its small size. Under the premiership of Thein Sein, a section of the 2008 Constitution designating Laukkai and Konkyan townships as the autonomous Kokang SAZ went into effect. Throughout its recent history, gambling has flourished in the Kokang region, driven largely by Chinese nationals crossing the border from Yunnan Province. Laukkai at night (Hanley Hotel) Casinos are illegal everywhere in China except Macau, which has become the “gambling capital of the world” with casino revenues rivalling those in Las Vegas due mostly to tourism from the Chinese mainland. The same prodigious demand helped fuel Laukkai’s transformation into a casino city in its own right. Myanmar enacted a gambling law in 2019 with the aim of modernising the rules and legalising gambling with certain restrictions. The law only allowed gambling for foreigners, but was ambiguous as to whether Myanmar nationals could invest in casino businesses or how foreign investors’ revenues from gambling would be repatriated to Myanmar. More clearly, the new legislation effectively legalised casinos in Myanmar that had already been operating for years on the borders with China and Thailand. Within Laukkai Township, the urban centre comprises only three wards and covers an area of just over four square miles. However, there are more than 150 hotels within this area, a clear sign of the explosive proliferation of casinos given a requirement in the 2019 law that casinos operate within a certain distance from hotels. In this setting, which escaped oversight from both the Chinese and Myanmar governments, the casino city of Laukkai deteriorated rapidly into a den of criminal organisations perpetrating internet fraud on a massive scale. Recent crackdowns In August of this year, a Chinese studio released the blockbuster film No More Bets about gangs in Myanmar luring people to the casino cities with promises of high-paying jobs, only to force them to participate in online fraud operations. Kyaw Soe Thein, the Myanmar junta-appointed consul-general in Nanning, China, complained in September to Chinese foreign affairs officials that the film’s depiction of trafficking by scam gangs tarnished Myanmar’s image, and expressed concern that it would deter Chinese tourists from coming to the country. In October, Chinese police arrested 11 Kokang businesspeople in a group led by Myint Swe–then chair of the governing body of the Kokang SAZ who has since been removed from office–during their visit to a trade fair in China’s Yunnan Province. The police accused the detainees of involvement in the scam operations. Police also arrested the deputy commander-in-chief of the United Wa State Army (UWSA), an ethnic armed organisation active in another self-administered area of Shan State, in Yunnan Province at the beginning of October. Later that month, the Chinese government issued arrest warrants for other UWSA leaders and several wealthy businesspeople as well as their relatives and associates in Laukkai. Most Myanmar citizens within the country heard about the internet scam centres for the first time as a result of these warrants and arrests. In an October interview with Chinese media republished in regime-run newspapers, junta spokesperson Zaw Min Tun said the criminal scam operations “started in Cambodia and Vietnam in 2020 and 2021, then arrived in Myanmar between 2021 and 2022.” Junta armoured vehicle seized by the Brotherhood Alliance during Operation 1027 (The Kokang) The launch of Operation 1027 in the last week of October was another blow to the prospects for cooperation between the Myanmar regime and the Chinese government in cracking down on the criminal organisations. The MNDAA and their fellow members of the anti-junta Brotherhood Alliance have made clear that the eradication of the internet scam operations is one of their priorities in carrying out the offensive. Min Aung Hlaing called an emergency defence and security council meeting on November 8, admitting during the meeting that more than 7,000 Chinese nationals, nearly 200 Vietnamese nationals, around 160 Thai nationals, as well as Malaysian and Laotian nationals had been “found” in hotels in Laukkai. However, he did not disclose when these people arrived in Myanmar or comment on any connection with online scams, trafficking, or other criminal operations. The Kokang SAZ has a population of around 130,000 according to data released in 2022 by the junta-run general administration office under the home affairs ministry. While the junta has now admitted the number of foreign nationals is greater than 7,000 in Laukkai alone, there was no indication in the available data that there were foreign nationals in Kokang. While online scams have existed for as long as the internet has provided a platform, their proliferation on a mass scale seems to have accelerated with the wide adoption of digital payment systems. China has been a pioneer in the global transition to an increasingly cashless economy. As with most influential new technologies, the use of convenient digital payments has come at a price, helping to fuel online scam operations that have been a growing issue in China for more than a decade. Fraud cases investigated by the Chinese police (Financial Times/Ministry of Public Security of China) A December 2021 article in the Financial Times, published with the headline “China Fights a Financial Fraud Explosion”, detailed how internet scams spread on a mass scale even before the start of the Covid-19 pandemic. The article recounted how a retirement savings service launched by the Ant Group, the owners of China’s largest digital payment platform AliPay, became a favourite hunting ground for online fraudsters as it allowed them to defraud victims without meeting them in person. Over 1.4 million people had been arrested by Chinese authorities for suspected involvement in the criminal operations, according to the Financial Times article. As authorities took aim at these criminals within China, some migrated to nearby countries like Laos, Cambodia, Myanmar and Vietnam. On November 16, prominent businessman and former politician Ming Xuechang, 69, reportedly committed suicide at his home in Laukkai after authorities issued arrest warrants for him and several of his family members. Ming Xuechang’s family is among the four wealthiest Kokang families in Laukkai, and the warrants were connected with their suspected involvement in the scam operations. The Chinese government had issued arrest warrants for Ming Xuechang–who holds Chinese citizenship–and his family on November 12. Ming Xuechang’s son Ming Kaoping, the 42-year-old leader of the Kokang militia group, and his grandchild, 24, were detained by junta-affiliated police and handed over to the Chinese authorities, according to a statement issued by the Myanmar military council. Regime-run newspapers reported on October 28 that 95 members of online fraud gangs led by Chinese nationals had been arrested. Not to be outdone by the Brotherhood Alliance, during his interview with Chinese media, Zaw Min Tun said the military council promised to eradicate all online fraud gangs at the China-Myanmar border by the end of 2023. Ming Xuechang’s grandchild Ming Qin Qin and son Ming Kaoping being handed over to Chinese authorities on November 16 (Supplied)

Laukkai’s transformation from gambling city to scam hub

Laukkai was a casino city with strong cultural ties to China before deteriorating into a lawless breeding ground for massive internet fraud operations

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