China, Scam Centers, and National Security in the Philippines

Chinese actions against Philippine ships in the West Philippines Sea are becoming increasingly aggressive, raising fears of an armed conflict between the two countries that could pull in the United States. As China escalates, Philippine authorities have scrutinized several suspicious incidents involving online gambling companies, scam centers, and Chinese criminal networks that they believe may be fronts for espionage. While these suspicions have not been proven, the incidents reveal a profound intersection between organized crime, corruption, and national security.

Turmoil at Sea, Subterfuge at Home

Over the past few months, Chinese government ships and maritime militias have threatened, intimidated, and attacked Philippine fishing and government vessels in the West Philippine Sea (the internationally recognized Philippine portion of the South China Sea). China effectively claims most of these waters, and its increasingly confrontational actions follow its long-term militarization of remote reefs. Observers worry that these confrontations could lead to an incident in which the Philippines would invoke its Mutual Defense Treaty with the US, requiring a military response against China. Seeing the risks, President Ferdinand Marcos Jr.’s administration wants de-escalation and diplomatic approaches to managing China.

China and the Philippines aren’t normally adversaries. The two countries share a cultural and economic relationship that predates American and even Spanish colonization. Chinese migrants and traders have settled and thrived in the Philippines for centuries; some of the Philippines’ most prominent business and political families are of Chinese ancestry. Millions of Filipinos can claim some Chinese heritage, and many would argue that both countries have more to gain through cooperation than confrontation. 

Two recent police raids in central Luzon, the Philippines’ main northern island, revealed that some POGOs are fronts for online scam centers. The first raid took place in a small town called Bamban in Tarlac Province in March, while the second took place in nearby Porac, Pampanga Province in June. Both raids freed hundreds of human trafficking victims (some of whom showed signs of torture) who were apparently forced to facilitate romance and cryptocurrency scams. Both POGOs were purportedly managed by Chinese nationals. 

Details about the POGOs raised espionage concerns. They were situated close to Clark International Airport (a former US military base that is still used by the Philippine Air Force) and Basa Air Base (which the US has access to under a base-sharing agreement). A senator alleged that the Bamban operation launched surveillance and hacking attempts against government websites. The Porac POGO also yielded authentic Chinese military uniforms and badges (the authorities believe they were props for scamming or souvenirs kept by ex-military staff). 

Both were also allegedly linked to Bamban’s then-mayor, Alice Guo, who is now a fugitive. In June, authorities revealed that her real name is Guo Hua Ping. She is a native of Fujian and had seemingly used a fake identity and backstory when she was elected mayor in 2022. She also allegedly used the names of Bamban residents to fraudulently incorporate another POGO that was also shuttered for scams and human trafficking last year. Senators publicly questioned her obscure origins as well as her unexplained assets (which included a helicopter) in an ongoing probe. Guo has denied all allegations of involvement in the POGOs, but she nevertheless fled the country sometime in July. She was arrested in Indonesia in early September.

Identity theft came up in another incident involving a Philippine navy officer. The officer testified before the senate in July that Chinese criminals allegedly stole her identity to fraudulently register almost 200 companies, including two that were raided by the authorities for illegal gambling. She only discovered the fraud after learning that tax authorities were investigating her for these companies’ financial violations. Curiously, one of the companies had an identical name to an entity owned by Duterte’s controversial former advisor, Michael Yang, a Chinese national said to have “a good network with top Chinese economic officials.” Even more curious, Yang’s brother allegedly helped finance the POGO operation in Bamban.

Another incident occurred in late May when police arrested an armed Chinese national in Manila. They seized sophisticated hacking equipment that the suspect allegedly intended to place near “vital installations” to hack into mobile networks. The Armed Forces of the Philippines (AFP) said it was investigating the seized devices and the suspect’s activities, while the police said they were looking into the possibility that the suspect was “a spy.” The suspect denied this, claiming he was a POGO employee. 

Scamming, Human Trafficking, and Corruption

Online scamming has become a major global criminal economy, and is estimated to have affected over 350 million victims worldwide in 2023. In the US alone, victims lost over $10 billion as a result of fraud, including online scams, in 2022. Southeast Asia has become a major hub for scam centers since 2021, which often involve online gambling, dating, cryptocurrencies, and financial investment schemes. 

The US Institute of Peace recently estimated that Southeast Asian scamming operations generate over $43 billion annually. Such operations are especially rampant in Cambodia and Myanmar, where the state and illicit economies are often intertwined. Scam centers are also thought to be a major driver of human trafficking as young, tech-savvy job aspirants are recruited through false job offers and coerced into facilitating scams. The UN estimated in 2023 that the scam industry holds 220,000 human trafficking victims in Cambodia and Myanmar alone. 

The raids in Bamban and Porac demonstrate how such operations are driven by transnational human trafficking. Rappler reported that the Bamban raid led to the release of 678 workers, including hundreds of Filipino and Chinese nationals, along with dozens of Vietnamese, Malaysian, Rwandan, Taiwanese, and Kyrgyz citizens. Many were likely victims of trafficking; police found assorted foreign passports when they forced open safes seized from the facility, which are often kept by traffickers to ensure their victims cannot escape. In fact, the operation only took place because a trafficked Vietnamese worker with signs of torture on his body managed to flee the facility and alert the authorities. He had come to the Philippines for a false job offer to be a chef. 

The cases also illustrate how such operations apparently relied on local corruption. Rappler documented how Mayor Guo was linked to the Bamban POGO, having apparently paid its utility fees and contractor invoices. She was also a shareholder in the company that owned the scam center’s property — directly behind the mayor’s office (she claimed she sold her stake in 2022). Given these financial connections, Rappler alleged that Guo used her position as mayor to “[approve] permits for her own businesses,” while also seemingly misdeclaring her assets in financial disclosure forms (she claimed these were mistakes). Senators are investigating whether scam money from the POGOs helped finance Guo’s 2022 campaign.

As mayor, Guo may have also influenced local police to protect her alleged illicit business. In the Philippines, town, municipal, and provincial executives have substantial control over local police departments, and can place cronies within units or influence security operations. Before she became mayor, Guo donated “fixtures and furniture” to the local police department. One police officer allegedly moonlighted as a private security escort for the POGO operators. When police raided the compound, the water and electricity had been cut, suggesting an advance tipoff about the operation. The Philippine National Police fired provincial and municipal police officials as well as the entire Bamban police force based on reports that they failed to investigate several killings linked to the POGO.

The case has also drawn attention to the fact that foreigners can purchase birth certificates and other sensitive identity documents relatively easily — implicitly from corrupt government officials. These documents can be used to register front companies, purchase property, or, evidently, run for public office. Guo’s case also reveals that the government does little to scrutinize incorporation records or the backgrounds and assets of political candidates. These weaknesses create a permissive environment for illicit wealth to influence elections and politicians, including in regions with sensitive military sites.

Chinese Intelligence Operations or Domestic Politics?

On July 4, AFP Chief General Romeo Brawner Jr. alleged that China is using POGOs to infiltrate the country; several considerations lend both credibility and skepticism to the claim. Scam centers are a logical front for espionage; the scam industry is built on deception, manipulation, and gaining unauthorized access. Its massive scale can be leveraged to target particular interest groups en masse, such as government employees, academics and researchers, journalists, civil society, or political dissidents. Such operations can also cultivate corruption networks among local officials in countries like the Philippines, which is invaluable intelligence on its own. 

China, Russia, and North Korea have all allegedly used cyber criminals as proxies for espionage-related activities in the recent past. Given the scale of scamming operations, centers could easily conceal espionage efforts amid a constant stream of “genuine” scamming. They could also be hands-off; professional criminals could cultivate and even sell information about high-value targets among their scamming victims to intelligence handlers. In any case, such operations certainly exist independent of a state sponsor and provide an air of plausible deniability.

Given the scale of scamming operations, centers could easily conceal espionage efforts amid a constant stream of ‘genuine’ scamming.

On some level, the Chinese government appears to have a fluid and flexible relationship with organized crime. Chinese criminal networks — Triads — facilitate much of Southeast Asia’s online scamming, targeting Chinese citizens. Triads are secret societies premised on mutual aid between initiated members, pervading Chinese institutions and communities around the world. Journalist Bertil Lintner has shown that these groups fuse licit businesses, interest groups, and criminal economies. He alleges that the Chinese government has tolerated and even co-opted these groups for its own purposes on various occasions. 

A recent Reuters investigation provides a useful example of this interplay. The investigation found that Chinese scam centers in Myanmar laundered millions of dollars through cryptocurrency accounts registered to the leader of an influential Bangkok-based Chinese trade association. This association, which shared an office with a cultural center raided by Thai authorities for possible Triad connections, had strong ties with Thai police officials (including a cybercrime division chief). The group gave lavish gifts to Thai officials, awarded honorary positions to police generals, and funded a police shooting range. The trade group also helped facilitate meetings between Thai and Chinese officials (there’s no evidence that either government was aware of the group’s connection to scam centers). 

Yet at the same time, China’s relationship with scam centers, such as those across the border in Myanmar’s Shan State, is complex and intertwined with its strategic interests. Until recently, China tolerated these centers because they provided leverage over Myanmar’s armed factions (which use them for funding) and had alleged triad connections with the Chinese Communist Party. However, China’s stance shifted as their operations grew increasingly uncontrollable and detrimental to Chinese citizens. In late 2023, a coalition of rebel groups with ties to China launched an offensive in Kokang, Shan State, targeting scam centers associated with the junta. By November, approximately 31,000 scam center workers were handed over to Chinese authorities, though many were soon released.

Back in the Philippines, the accusations of Chinese espionage may also be rooted in domestic politics. A feud between the Marcos and Duterte camps over broken promises and constitutional revisions spilled into the open in early 2024. Parliamentary discourse about the POGOs has become increasingly targeted against the former Duterte administration, particularly against Michael Yang, who is thought to have used his position to facilitate other criminal activities (he denies all allegations). The Marcos administration suggested Guo could become a state witness if she implicated “principals higher than her.” For the Marcos camp, playing up Duterte’s connections to shady business as well as the Chinese threat undermines his standing.

An Opportunity for Cooperation and Development

President Marcos Jr. announced that he would ban POGOs during his State of the Nation address in July. While well-received, this decision may further complicate the POGO issue as it will drive an already poorly-governed industry fully underground (the Philippine gaming authority estimated before the ban that most POGOs were already operating illegally). A government investigator told a local news outlet that since the ban, illicit POGOs have moved from established facilities to residences, complicating efforts to track them down. To ensure the ban has a positive impact, the Philippine government should pursue a more holistic approach that includes international cooperation against transnational crime, and domestic progress against corruption.

Online scamming is a transnational threat that demands a transnational response. This means working with all major stakeholders, including (and perhaps especially) China due to its jurisdiction over Chinese nationals who facilitate scams or are scamming victims. China has stated that it is willing to cooperate with the Philippines in combating scam operations linked to Chinese criminals. According to Rappler, China helped the Philippines shutdown five POGOs and repatriate citizens in the past year. Given the dangerous confrontations occurring in the West Philippine Sea, pragmatic cooperation with China on fighting organized crime could be a welcome opportunity to lower the temperature. 

Within the Philippines, heightened awareness of these threats should galvanize social action. The alleged involvement of elected officials like Alice Guo and others demonstrates that criminal enterprises frequently receive services and protection from corrupt politicians and officials. As the risk of conflict increases, national security strategies should include meaningful anti-corruption initiatives in order to protect vital government agencies and installations.

Guo’s case demonstrates the importance of rigorously scrutinizing background checks and asset disclosures for politicians. The government should regularly audit whether elected officials have used their office to benefit their business interests or those of their families and close associates. While such initiatives may draw pushback from vested interests, finding political will is possible: Thailand recently conducted a probe into politically influential “mafias” after a corrupt local leader killed a police officer who refused to promote his nephew.

Such initiatives should not be limited to local officials. The alleged connections between the Bamban and Porac POGOs and Michael Yang deserves scrutiny. Yet, the Philippine congress should also scrutinize the conditions that allow foreigners to purchase sensitive identity documents. It’s easy to demonize Guo and blame POGOs for criminality, but national security would be better served by addressing the root causes of corruption in the civil service that allow criminal networks to brazenly operate.

Editor’s note: This article was updated on Sept. 5 to reflect that Alice Guo’s arrest was announced shortly after publication.