Online video games have become a popular pastime for people of all ages. However, the rise of virtual economies and the increasing value of in-game items and currencies have also made them a target for money launderers. Money laundering is the process of disguising the proceeds of illegal activities as legitimate funds, and criminals are using virtual currencies and in-game items in online video games to launder their illegal funds. The anonymity and global reach of the internet make it an attractive option for money launderers, as it allows them to move money across borders and through different financial systems with relative ease. In this blog post, we will explore the issue of money laundering in online video games and the measures that are being taken to combat it.
Why Is Money Laundering Expanding To Video Games?
Money laundering is the process of disguising the proceeds of illegal activities as legitimate funds. This is done in order to make it difficult for law enforcement agencies to trace the origin of the money and to make it appear as though the money has been obtained through legitimate means.
One way that criminals can launder money is by using virtual currencies or in-game items in online video games. These virtual assets can be bought and sold on third-party marketplaces and can be converted into cash or other forms of currency. The anonymity and global reach of the internet make it an attractive option for money launderers, as it allows them to move money across borders and through different financial systems with relative ease.
The popularity of online video games also makes them a large pool of potential victims for money launderers. The rise of virtual economies, and the increasing value of in-game items and currencies, has made it more appealing for criminals to use video games as a means of money laundering.
Additionally, the lack of regulation and oversight on virtual currencies and in-game items in video games can make it easy for money launderers to operate in these environments. They can also use virtual currencies and in-game items to purchase real-world assets, such as weapons, drugs, and other illicit goods.
How to Money Laundering in Online Video Games?
For money launderers, traditional methods of money laundering are hardly used anymore. Regulations on financial institutions, including the Anti-Money Laundering (AML) and Ultimate Beneficial Owner (UBO) requirements, do not allow criminals to launder money in traditional ways. That's why cybercriminals are looking for new ways. The video game industry is one of these new ways. The video game industry carries money laundering risks due to in-game trades. Although not every game, some video games have game materials that can be purchased with real money, such as weapons and unique clothes. When people play, they get these materials by paying real money.
The use of convertible and non-convertible virtual currencies in the video game industry and the anonymity provided to players created an environment for criminal activities. When purchases are made for the game in online video games, 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, Cybercriminals usually log into accounts without two-factor authentication and use stolen credit card information to purchase in-app money. These in-game materials and the currency they buy can then be sold at a lower price in an online marketplace. Game owners may only find a solution if they are aware of this event.
Some common methods include:
- Purchasing virtual currency or in-game items with illicit funds and then selling them on third-party marketplaces for a profit.
- Using virtual currency or in-game items to purchase real-world goods or services, such as weapons, drugs, or other illicit items.
- Creating multiple accounts in a game and using them to transfer virtual currency or in-game items between them.
- Gambling with virtual currency or in-game items in online games.
- Creating fake virtual items in a game and selling them to other players.
Reasons Why Cyber Criminals Choose Video Game Industry For Money Laundering
This industry has been a potential target for criminals in online video games since actual in-game purchases appeared. Due to the strict AML Regulations found in financial institutions such as banks, these institutions now find it challenging to launder money. However, contrary to this situation, this sector is attractive for criminals because there is no regulation in the online video games sector to prevent money laundering. In the online video games industry, money laundering has become more accessible because of a lack of customer identification and due diligence, virtually no monitoring of financial activities, and a lack of reports on reports such as Suspicious Activity Reports (SARs).
On the other hand, Whether virtual currencies cannot be converted can not really be recycled is an issue that frequently generates a great deal of heated debate. Non-convertible virtual currencies can be used to purchase in-game objects or maps that cannot be exchanged for any other currency. Although the Financial Action Task Force (FATF) has reported that a non-convertible virtual currency cannot be replaced with a fiat currency, In a report FATF published, she stated that criminals can create a secondary black market to change this currency and can convert this currency into a virtual currency.
Striking Notable Examples
The Counter-Strike video game series had CS: GO container keys purchased in-game, and these purchased items could be sold and exchanged on the Steam Community Market. However, with a sudden decision made by the Counter-Strike video game series in 2019, CS: GO container keys can no longer be bought and traded. Counter-Strike posted this notice on a blog and reported it to its users. According to the Counter-Strike blog, they made this decision because worldwide fraud networks switched to using CS: GO keys to liquidate their earnings. In addition, they noted that almost all significant purchases traded on the market are believed to be fraudulent.
Another important example is Fortnite, the popular online game, turning into a money-laundering paradise. This is stated in Sixgill's Carding and The Digital Gaming Industry report. Fortnite, with monthly revenues of hundreds of millions of dollars, is a battle royale game. The game's digital currency is V-Bucks, and in-game weapons are used to purchase accessories. Criminals sign up for Fortnite, create a profile, and buy many V-Bucks or accessories with illegal or illegal credit cards. Afterward, they earn clean money by selling these inventories, which they purchased, to lower prices. They carry out this sale on black exchanges. Criminals announce the black market from their social media accounts and attract customers. Generally, these payments are processed through bitcoin. As a precaution, Epic Games with Fortnite reported that players should protect their accounts and not share their account information with others.
Money Laundering Measures in the Online Video Gaming Industry
Money laundering is a growing concern in the online video gaming industry, as criminals are using virtual currencies and in-game items to launder illegal funds. To combat this issue, several measures have been implemented by game developers and regulatory agencies.
Although there are few 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, approaches to the regulation and supervision of virtual asset service providers (VASP) have been introduced. The money laundering activities in this sector will decrease as regulators bring new regulations to the Online Video Games sector.
One measure is to implement stricter controls on virtual currencies and in-game items. This includes requiring players to provide identification and proof of address when purchasing virtual currencies and in-game items and monitoring transactions for suspicious activity. Game developers can also put limits on the amount of virtual currency that can be purchased or traded and put a threshold on the transactions.
Additionally, many game developers have implemented fraud detection and prevention systems to detect and prevent suspicious transactions. These systems use machine learning algorithms to analyze transactions and identify patterns that may indicate money laundering.
To further combat money laundering in the online video gaming industry, some game developers have also introduced know your customer (KYC) and AML procedures to identify and verify the identity of players and monitor their in-game transactions. These procedures are designed to prevent illegal activities such as money laundering and to comply with the legal regulations and laws of the countries they operate in.
Overall, to combat money laundering in the online video gaming industry, game developers and law enforcement agencies need to work together, using a combination of technology and regulations, to identify, track and prevent illegal activities.