As law enforcement intensifies efforts to dismantle organized crime within a particular country, criminals seldom cease their activities; rather, they relocate their operations. This premise is currently influencing the dynamics of Asia’s online fraud industry, leading to significant shifts in its geographic landscape. As Cambodia – under sustained pressure from Beijing and Washington – begins to dismantle the fortified compounds that made it a byword for cyber-scams, the networks behind them are looking for somewhere new to work. Recent reporting suggests one of their chosen testing grounds is Sri Lanka. The numbers are already striking. Since the start of 2026, Sri Lankan police have arrested more than a thousand foreign nationals for suspected involvement in cyber fraud – up from around 430 in all of 2024 – many of them Chinese, Vietnamese and Indian.

The raids have a revealing geography: not remote jungle camps, but beach towns and ordinary apartment blocks. In May, officers detained 192 Indians and 29 Nepalis in the southern towns of Galle and Matara, and a separate sweep brought in 221 foreigners in a single operation. This is as much a South Asian story as a Sri Lankan one: the workforce drawn into these operations increasingly includes citizens of Sri Lanka’s own neighbours. Criminologists refer to the phenomenon of displacement as the ‘balloon effect,’ in which pressure in one area causes an increase in illicit activity elsewhere. This highlights the need for regional cooperation among law enforcement to improve their effectiveness.

Sri Lanka offers an attractive combination of conditions. It offers relaxed entry for visitors from many countries and aims to expand visa-free travel to revive tourism; it has fast, reliable internet; and it has plentiful rental property in its cities and along its coast. Crucially, the country is still recovering from the worst economic crisis since its independence, so landlords want tenants and few intermediaries ask challenging questions of a group of foreigners who pay well and on time. Because the state controls its whole territory, the operators cannot build the walled compounds seen in Myanmar; instead, they hide in plain sight, wiring an apartment for a few weeks and abandoning it when the police draw near.

One significant concern for policymakers is the prevalence of an informal money-transfer system known as undiyal and commonly referred to as hawala in other contexts. This system facilitates the transfer of value outside of the formal banking framework based solely on mutual trust. It addresses entirely legitimate needs, particularly those related to remittances on which numerous families rely for financial support. Its recent history also shows how quickly it can absorb new demand: when the central bank defended an artificially fixed exchange rate during the 2022 crisis, expatriate workers deserted the banks almost overnight, and remittances through formal channels fell to 3.8 billion dollars before rebounding by 57 per cent the following year, once........

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