Is Sri Lanka gradually becoming a haven for Chinese cyber criminals?

Sri Lanka and China's relationship stretches back centuries, and more recently, during the British colonial period, Sri Lankans virtually came across more Chinese traders engaged in many businesses, from textiles to producing dentures as dental mechanics and in the food industry. At the beginning, there was no suspicion cast upon them, and they built up a healthy relationship with almost all the communities living in Sri Lanka. This relationship has become even stronger in recent years with the signing of numerous bilateral agreements.

These agreements have opened the door to increased trade and investment, as well as the exchange of culture and knowledge between the two countries. With the increase in Chinese influx into the country, the old genre that worked as dental mechanics, traded in textiles, and engaged in the food industry gradually disappeared. This paved the way for a younger generation of Chinese with technological skills and many other talents hell-bent on making money to fill the vacuum created by the old Chinese community.

With all these bilateral agreements on building infrastructure came thousands of workers involved in many projects. Along with them came the confidence tricksters and con artists who are inclined to take people for a ride. The people started looking at them with suspicion, and most of the time they were trying to steer clear, but by this time the fraudsters had started their big business, sometimes in collaboration with the locals.

The fraudsters would often use the same tactics to take advantage of workers, such as claiming to have connections with important people, offering fake job opportunities, or even offering fake housing options. With the influx of workers in different projects, it was easy for these con artists to get away with their schemes and take advantage of unsuspecting victims. They have gained power and influence by taking advantage of others' mistakes and are becoming a major force to be reckoned with.

Chinese investments in Sri Lanka mainly took place during the Rajapaksa regime. The Chinese invested heavily in Sri Lanka because of their genuine interest in having a foothold in the Indian Ocean. This is strategically vital for them. The Chinese goodwill has brought with it tricksters and con artists, who are causing upheavals in Sri Lanka's social fabric from time to time.

China invests in Sri Lanka to make use of its strategic location and achieve its geopolitical ambitions. However, it is also true that with the influx of Chinese investments, fraud and exploitation of Sri Lankan citizens have increased.

Dozens of Chinese arrested recently in Aluthgama may have been linked to a major scam worldwide. They may also be linked to Chinese internet and telecom fraudsters operating throughout the world. These fraudsters cause mayhem using the internet, social media, and smartphones, according to the police. They target vulnerable people and often impersonate government representatives. Victims are tricked into transferring large sums of money to the fraudsters. The police are working hard to ensure that justice is served.

The pertinent question in this scenario is whether Sri Lanka is becoming a haven for Chinese fraudsters in the long run. The Central Bank of Sri Lanka (CBSL) has announced that it is mulling criminal action against a group that ran a crypto investment scheme dubbed Sports Chain. This is seven months after an Al Jazeera investigation exposed it as a scam.

In a notice published on March 21, the monetary authority declared that the investment venture was a pyramid scheme. This is prohibited under Sri Lanka’s Banking Act.

Sri Lankans and Chinese nationals have joined forces in a business alliance and amassed money through dubious means. Some of them have been rounded up by the Financial Crimes Investigation Department recently and sued. The Banking Act prohibits the practice of pyramid schemes, which involve paying existing members of the scheme with money from new members instead of generating profits from legitimate business activities. This type of scheme is unsustainable and can lead to significant financial losses for investors.

On April 1, the police swooped down on a villa in Kaluwamodera, Aluthgama, and arrested Chinese nationals allegedly involved in cybercrimes.

The police recovered 40 laptops, 150 phones, an unlicensed drone camera, 250 to 300 SIM cards, and 19 wooden tables. The arrests were made after a tip from the public that the suspects were running a fraudulent call center from the premises. Following the tip, police conducted a raid and confiscated the items they believed were used in the commission of the crimes. Laptops and mobile phones had Chinese scripts, making police investigations more difficult.

The items confiscated are believed to have been used to facilitate fraudulent activities like identity theft, money laundering, and phishing scams. The Chinese scripts on the laptops and mobile phones made the investigation more intricate, as the police had to rely on language experts to interpret the scripts. 39 people were arrested by the police on suspicion, including five women and a four-year-old child.

Some of them were produced before the Kalutara Magistrate’s Court for alleged cybercrime and remanded until April 6. On April 3, Chinese Embassy officials spoke to the police and secured the release of 14 suspects.

Only 25 Chinese were produced in court on April 6 and further remanded.

The police spokesman, Nihal Thalduwa, said the suspects could be linked to international online fraud involving Chinese nationals. "It has not been revealed yet, but the suspects had many electronic appliances, so we suspect. The police had gathered evidence that the suspects were engaged in online fraud, such as the presence of multiple electronic devices in their possession. They also had links to Chinese nationals, which further suggested their involvement in international online fraud.

The police handed over the electronic devices to the computer crimes division for an analytical report. They also objected to bail considering the possible risk of the database being wiped out by the suspects.

According to a news report in the Sunday Times, a complaint had been filed with the Sri Lankan Police through the Chinese Embassy. Two Chinese officials showed the location to the Aluthgama Police, who raided the site. One Chinese suspect attempted to scale a wall and escape but was arrested.

The Chinese Embassy received information from an anonymous source that two of their citizens were involved in illegal activity at a certain location in Aluthgama. The Embassy then filed a complaint with the police, and two Chinese officials were sent to show the location to the police.

The suspects had told police that they were working for a company in Aluthgama. They denied criminal activity. Their stay in Sri Lanka was legal, as they had work visas. It has been reported that they rented the villa for a year from the owner. However, they were arrested two to three months later.

It is assumed that they were arrested due to their activities while staying in the country, which violated their visa conditions. There had been some sort of dispute among the co-workers that led to their information being leaked.

Around the world, Chinese criminal groups scam people, making billions of dollars. China is just one of the numerous countries where they operate, including Taiwan, Hong Kong, Fiji, the Philippines, Spain, Vietnam, Cambodia, Laos, Myanmar, Thailand, Malaysia, Indonesia, Japan, Africa, Paraguay, and numerous others.

There are many cybercrimes committed by the Chinese (among others), including online extortion, stealing personal information, credit card fraud, romance fraud, lotteries, call center scams, real estate investment scams, posing as tech support, global money laundering, hacking social media, compromising business emails, investment scams, ransomware, phishing emails, malware, and more. The Chinese themselves have become victims. With the advancement of technology, Chinese cybercriminals have more sophisticated tools at their disposal, such as artificial intelligence (AI), block chain, and online payment systems. In addition, the Chinese government has not done enough to prevent these cybercrimes, leaving the public vulnerable to malicious actors.

 Meanwhile, Sri Lankan police introduced a special computer crime investigation branch under the criminal investigation department to solve cybercrimes.

To make it more effective, the cybercrime division maintains links with various social media platforms. This allows the division to track potential cybercriminal activity and quickly locate perpetrators. It also enables them to acquire evidence promptly to help prosecute criminal cases.

Before the COVID-19 pandemic, online fraud incidents involving Chinese nationals were reported in many parts of the country. This was because thousands of Chinese were engaged in China-funded development projects across the island. Many more arrive on tourist visas and work in the hospitality industry.

 In October last year, Sri Lanka’s Criminal Investigation Department arrested two Chinese and three Sri Lankans in connection with an alleged cryptocurrency scam. Police believe they defrauded Rs. 14 billion from more than 8,000 people.

Sports Chain, a Ponzi scheme allegedly operating in the country since 2020, has also been detected. The CID arrested the Chinese — a male and a female — at Bandaranaike International Airport while they attempted to leave the country.

The suspects had created a special application for the scheme that showed investors almost five times the profit of their cryptocurrency investments, but they could not enjoy the profits.

Under Sri Lankan law, running pyramid schemes can result in imprisonment for between three and five years. Offenders also have to pay a fine of 2 million Sri Lankan rupees ($6,222) or twice the amount received from the scheme participants, whichever is higher.