Laundering through video games is new trend in financial crimes

Video Game as Money Laundering Method

For money launderers, traditional methods of money laundering are becoming absolute. Regulations on financial institutions, including the Anti-Money Laundering (AML) requirements, have ceased the criminals to launder money in traditional ways. That’s why cyber criminals are looking for new ways and new methods to launder the money. The video game industry is one of these new ways. The video game industry carries money laundering risks due to in-game trades. Many Android and IOS games have in-game purchases. These purchases are made through real money for example, weapons, in-game currencies and special clothes etc. When people play, they get these materials by paying real money.

There is a use of both convertible and non-convertible virtual currencies in the video game industry. The anonymity provided to players is a reason for criminal activities. Research published by Indiaforensic in 2013, defined the video games as the future of digital currency laundering.

Identity Theft through payment details saved for In-app purchases

In online video games, when purchases are made for the game, users enter their credit card information into the system. Criminals can steal this credit card information and perform money laundering activities through these accounts. Moreover, Cyber-criminals usually log into accounts without two-factor authentication and use stolen credit card information to purchase in-app money. These in-game materials and currency they buy can then be sold at a lower price in an online marketplace. Game owners may not find any solution even if they are aware of this event.

Trade of Non-convertible virtual currencies

On the other hand, conversion of Non-convertible virtual currencies through illegal means is an issue. It frequently generates a great deal of heated debate. Non-convertible virtual currencies can be used to purchase in-game objects or maps that are non-exchangeable for any other currency. The Financial Action Task Force (FATF) has reported that a non-convertible virtual currency cannot be replaced with a fiat currency. But in a report FATF published, it stated that criminals can create a secondary black market to change this currency. They will use these markets to exchange these currencies with fiat currency in smaller amounts.

Laundering through community markets

Many FPS games like Counter Strike has container keys which are included in in-game purchases. These purchased items could be sold and exchanged on the Steam Community Market. The items can be used by fraudsters to liquidate their earnings. One of the Gaming Company blogged this market as they believed that almost all major purchases traded on the market were fraudulent.

Similarly type of selling is done in black markets. In one of the battle royal games Criminals signed up, created a profile and bought lots of the in-game accessories and virtual currencies with illegal or illegal credit cards. Afterward, they earned clean money by selling these inventories, which they bought, to cheaper prices. They carried out this sale on black exchanges. Criminals announced the black market from their social media accounts and attracted customers. Most of these payments were processed through bitcoin.

Popularity of Video Game Industry to launder money

In the online video game, due to real in-game purchases it has been a potential target for criminals. The strict AML Regulations are found in financial institutions such as banks. Hence to launder money through these institutions is a challenge. However, contrary to this situation, Online gaming is attractive for criminals because this industry is regulation free. Therefore money laundering has become swifter in this industry. There is a lack of customer identification and due diligence. There is no virtual monitoring of financial activities and lack of reports for Suspicious Transactions Activity (STA/STR).

Measures to prevent video game laundering

Although there are not many regulations to prevent money laundering in the online video game industry, FATF added a note to the 15th Money Laundering Recommendation in 2019. According to this note, perspectives to the regulation and supervision of virtual asset service providers (VASP) have been introduced. It is believed that the money laundering in gaming sector will get curbed by introducing new regulations. Till then, criminals will continue laundering activities by taking advantage of the absence of regulations. If there were regulations such as banks, RegTech, and gambling, money laundering risks in this sector could be reduced.