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Smackdown on O’Smach: Cambodia’s Path Out of Tier 3?

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Smackdown on O’Smach: Cambodia’s Path Out of Tier 3?

There may yet be a chance for the country’s new government to charm itself into a human trafficking upgrade.

Smackdown on O’Smach: Cambodia’s Path Out of Tier 3?

A screenshot of images of the O’Smach Resort in Oddar Meanchey province, Cambodia, as seen on the website of the local LYP Group.

Credit: LYP Group

Each year, the U.S. State Department publishes its Trafficking in Persons (TIP) Report which ranks every country on a descending 1-3 scale in terms of demonstrated commitment to combatting human trafficking. The review period for the 2024 report is now well underway. Despite the continued flourishing of a state-facilitated industry of human trafficking-enabled scamming and money laundering in Cambodia, sources within U.S. Embassy Phnom Penh are signaling publicly and privately their desire to see the “Kingdom of Wonder” upgraded.

Certainly, this is not due to any legitimate or tangible reform. Reports of trafficking into Cambodia’s massive scam industry are on the rise with instability rocking Myanmar’s adjacent industry, and criminal investors seeking a more stable operating environment. Police are re-trafficking “rescued” victims en masse. The National Committee for Counter-Trafficking has devolved into an ineffectual spin shop – alternately denying the scale of the issue and petitioning donors for money to combat it.

Rather, assuming for a moment some modicum of U.S. policy coherence toward Cambodia, overtures from the Embassy seem to flow from a desire to repair the bilateral relationship. The dominant narrative from sources within the Embassy and elsewhere in the State Department is that we are entering a moment primed for legitimate reform (and of course, a perceived chance to pull Cambodia out of China’s all-encompassing orbit). This moment, according to State Department analysts, is the accession of Hun Manet’s new government earlier this year.

The argument supporting this optimism is flimsy. Manet’s new government rose to power in a tremendously flawed election. The new prime minister and the majority of his cabinet won their positions out of pure nepotism and a coordinated exercise in dynastic succession. Moreover, the Royal Government of Cambodia operates as little more than a paper façade covering a thick web of elite criminal interests to which the formal institutions long ago ceded sovereignty.

All of this is beside the point, however. The State Department wants reconciliation, and the timing is right for the Cambodian People’s Party (CPP) – one of the world’s most egregious sovereign perpetrators of human trafficking and other malign activities – to charm themselves into a TIP Report upgrade.

Cambodia was downgraded to the Tier 3 basement in July 2022, in part because of the meteoric rise in human trafficking cases related to Cambodia’s state-protected online scam industry. Long unaddressed parallel crises of bonded labor in the brick and construction industries, rampant sex trafficking within entertainment venues, and endemic child labor across multiple industries, were also key precipitating factors. Underlying this mountain of depravity was a key observation (featuring prominently in each report dating back at least to 2014): that “corruption and official complicity in trafficking crimes, including by high-level senior officials” was “widespread and endemic.”

As the world’s second most corrupt country (nestled between the DRC and Cameroon), Cambodia’s human trafficking crisis is driven at its core by elite participation, and Washington has not shied away from highlighting this fact over the years. Ostensibly, this implies that CPP higher-ups will need to sacrifice some of the billions they are generating from online fraud and modern slavery to get off the naughty list. Doing so will be difficult as revenue from the scam industrial complex is likely now a key economic driver.

Amidst this backdrop, a low-hanging fruit policy recommendation has emerged for CPP playmakers: shutter the notorious compound in O’Smach run by the domestically feared and well-connected tycoon Ly Yong Phat, or LYP, as he is known. Located in the north of Cambodia, LYP’s casino development project has been implicated in scam operations involving a range of egregious human rights abuses. The utter impunity of O’Smach’s operations to-date amounts to a particularly glaring mark on a national counter-trafficking resume which offers few bright spots. This necessitates immediate intervention from Cambodian authorities if they hope to cast their efforts in a more favorable light.

Of course, one could close their eyes, point to any one of Cambodia’s protected class of  okhna tycoons and likely snag an egregious facilitator of rights abuses. Even then, LYP is special. Given his status as a CPP senator and head of Cambodia’s Okhna Association, action against an LYP property would send a strong message of “commitment to meet the minimum standards necessary to combat human trafficking” even if, in reality, this remains well out of reach for a corrupted CPP elite.

O’Smach Resort, too, is special. Situated in the town of the same name near the Thai border, O’Smach become synonymous in 2021 with a variety of illicit operations, including human trafficking, online scams, and other criminal endeavors. While there are thousands of similar compounds operating within Cambodia’s borders, O’Smach Resort appears to be one of the worst. Moreover, few others have their ownership explicitly advertised on a prominent tycoon’s corporate website. Connecting the dots here to “high-level official complicity” doesn’t take much effort and may prove difficult for Washington’s report writers to ignore.

Beyond his own efforts to publicly advertise his scam/slavery compound, there exists a mountain of evidence linking LYP and O’Smach to human trafficking, torture, murder, child labor, etc. in media and civil society reports. It is important to note, however, that these reports do not finger Ly Yong Phat as a direct perpetrator of the violence.

Similar to his corporate exploits developing sugar plantations out of land grabbed from poor villagers or his forays into Cambodia’s thriving illegal logging sector, LYP is a forced scamming kingpin, not the guy wielding the electric baton. Yet, the volume of reports, the extended time period, and the wide dissemination of information render any plea of his ignorance laughable.

Several of these reports, including a damning exposé in The New York Times, point directly to official complicity and the misuse of Ly Yong Phat’s position within the CPP to create a hedge of protection for his abusive and criminal business interests.

As the U.S. government contemplates Cambodia’s potential upgrade on the TIP Report, it is imperative for observers to recognize that the key to genuine progress lies, as it has for many years, in addressing the core of the issue – nearly ubiquitous high-level official complicity by Cambodian elite. It is doubtful that Hun Manet’s government has the power or will to quash this status quo given how lucrative and widespread the problem has become. Indeed, revenues from this criminal industry have now become almost foundational to the Cambodian political economy.

Nonetheless, dealing with LYP’s O’Smach Casino seems to be the least that Phnom Penh can do to signal to the U.S. government that it is interested in being brought back into the fold. Beyond the symbolic quid pro quo gesture this would certainly amount to, the cessation of operations at this notorious site would help real people – potentially thousands of vulnerable foreign nationals who face unthinkable abuse at the bottom of Cambodia’s largest industry.