Treasury Sanctions Cambodian Tycoon and Businesses Linked to Human Trafficking and Forced Labor in Furtherance of Cyber and Virtual Currency Scams
September 12, 2024 / Source: Treasury
WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is sanctioning Cambodian businessman Ly Yong Phat (Ly), his conglomerate L.Y.P. Group Co., LTD (L.Y.P. Group), and O‑Smach Resort for their role in serious human rights abuse related to the treatment of trafficked workers subjected to forced labor in online scam centers. OFAC is also designating Cambodia-based Garden City Hotel, Koh Kong Resort, and Phnom Penh Hotel for being owned or controlled by Ly.
“Today’s action underscores our commitment to hold accountable those involved in human trafficking and other abuses, while also disrupting their ability to operate investment fraud schemes that target countless unsuspecting individuals, including Americans,” said Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence Bradley T. Smith. “Treasury will continue to shine a light on the criminal networks operating these illicit schemes and those who seek to perpetrate these abuses.”
According to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and its September 2023 alert to U.S. financial institutions and the broader public, confidence scammers leverage fictitious identities and elaborate narratives to develop trusted relationships and deceive the victim. In many cases, this involves convincing victims to invest in virtual currency, or in some cases, over-the-counter foreign exchange schemes, all with the intent of defrauding them of their funds. These scams are largely perpetrated by criminal organizations based in Southeast Asia. The FBI Internet Crime Complaint Center (IC3) has warned of a spike in cryptocurrency investment schemes. IC3 reported that in 2023, losses from investment scams became the most of any crime type they tracked. Investment fraud losses rose from $3.31 billion in 2022 to $4.57 billion in 2023, a 38 percent increase. Within these numbers, investment fraud with a reference to cryptocurrency rose from $2.57 billion in 2022 to $3.96 billion in 2023, an increase of 53 percent.
Often, the frontline scammers in virtual currency confidence schemes are themselves often victims of trafficking, including forced labor, and are subjected to physical and mental abuse. On June 24, 2024, the Department of State’s Office to Monitor and Combat Trafficking in Persons published its annual Trafficking in Persons Report (TIP Report), which highlights abuses in Cambodia, including in the towns of O’Smach and Ko Kong, in particular. The TIP Report noted ongoing corruption and official complicity in trafficking crimes remained widespread and endemic, resulting in selective and often politically motivated enforcement of laws, inhibiting effective law enforcement action against trafficking crimes, including forced labor in online scam operations. Traffickers force victims to work up to 15 hours a day and, in some cases, “resell” victims to other scam operations or subject them to sex trafficking.
serious human rights abuse at o-smach resort
O-Smach Resort is owned by L.Y.P. Group, which is owned by Cambodian senator and tycoon Ly Yong Phat (Ly). For more than two years, from 2022 to 2024, O-Smach Resort has been investigated by police and publicly reported on for extensive and systemic serious human rights abuse. Victims reported being lured to O-Smach Resort with false employment opportunities, having their phones and passports confiscated upon arrival, and being forced to work scam operations. 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. There have been two reports of victims jumping to their death from buildings within O‑Smach Resort.
Local authorities have conducted repeated rescue missions at O-Smach Resort, including in October 2022 and March 2024, freeing victims of various nationalities, including Chinese, Indian, Indonesian, Malaysian, Singaporean, Thai, and Vietnamese.
OFAC is designating Ly, L.Y.P. Group, and O-Smach Resort pursuant to Executive Order (E.O.) 13818 for being foreign persons who are responsible for or complicit in, or have directly or indirectly engaged in, serious human rights abuse.
OFAC is also designating Garden City Hotel, Koh Kong Resort, and Phnom Penh Hotel for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Ly, an individual concurrently designated pursuant to E.O. 13818.
SANCTIONS IMPLICATIONS
As a result of today’s action, all property and interests in property of the designated persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. U.S. persons may face civil or criminal penalties for violations of E.O. 13818. Non-U.S. persons are also prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as engaging in conduct that evades U.S. sanctions. OFAC’s Economic Sanctions Enforcement Guidelines provide more information regarding OFAC’s enforcement of U.S. sanctions, including the factors that OFAC generally considers when determining an appropriate response to an apparent violation.
Financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action. The prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any designated person, or the receipt of any contribution or provision of funds, goods, or services from any such person.
The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior.
For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897 here. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.
GLOBAL MAGNITSKY
Building upon the Global Magnitsky Human Rights Accountability Act, E.O. 13818 was issued on December 20, 2017, in recognition that the prevalence of human rights abuse and corruption that have their source, in whole or in substantial part, outside the United States, had reached such scope and gravity as to threaten the stability of international political and economic systems. Human rights abuse and corruption undermine the values that form an essential foundation of stable, secure, and functioning societies; have devastating impacts on individuals; weaken democratic institutions; degrade the rule of law; perpetuate violent conflicts; facilitate the activities of dangerous persons; and undermine economic markets. The United States seeks to impose tangible and significant consequences on those who commit serious human rights abuse or engage in corruption, as well as to protect the financial system of the United States from abuse by these same persons.
Click here for more information on the individuals and entities designated today.
If you believe you have been the victim of an Internet crime or if you want to file on behalf of another person you believe has been such a victim, you may file a complaint with the Internet Crime Complaint Center (IC3).
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