In 2024, the European Commission reported that video games and other online platforms facilitate the laundering of over one billion dollars every year.
From Play to Pay: How Criminals Use Video Games to Launder Money
Estimated reading time: 5 minutes
Short Summary: Gaming-related money laundering is a growing threat. Effective AML compliance and industry collaboration are key to safeguarding virtual economies from exploitation.
Ever been curious about how a $159.3 billion global gaming market can serve illegal activities? With the advancement of their virtual extended reality, video games have become one of the fastest-broadening vaults for criminal cash. As players fight to gather in-game items and level up a far darker side is developing, in which illicit funds move through the virtual world to be ‘cleaned.’ This emerging phenomenon of gaming-related money laundering has become a major headache for both regulators and game developers.
We are about to discuss money laundering schemes employed by criminal enterprises across online game networks.
Money Laundering in Video Games
A key element of money laundering is a multi-stage process used to conceal the origins of wealth derived from illegal activities. Criminals take their money from one country to another or between international companies for it to look legal. In the past several years, money laundering through video games has demonstrated its utility. This fusion of virtual currencies with in-game markets and digital assets made it easier for criminals to hide and move their illicit money.
In 2024, the European Commission reported that video games and other online platforms facilitate the laundering of over one billion dollars every year. Today, there is a growing number of global players, and money laundering in this area is a serious security threat for law enforcement organizations.
Also Read: How Dollars are Made? Journey of American Currency.
How Does Money Laundering Work in Video Games?
Video gaming money laundering generally consists of three stages: the direct purchase of in-game items, their sale or exchange, and the use of a digital currency. Let’s break down the process:
Loot Boxes and Microtransactions
Game players can buy randomized virtual items through loot boxes as well as microtransactions that may require real-world payments to unlock specific features within the game. The loot box system offers criminals an opportunity to cleanse money by using illegal funds to buy virtual content which leads to exchangeable in-game assets and items. Through massive loot box and item acquisitions people manage to create assets which they transform into lawful cash flows. The normal gameplay behavior associated with loot box purchases creates an obstructed trail of money origins since these purchases do not raise suspicions. The practice provides criminals with an approach through loot box-based games that permit gamers to deal their box contents to achieve financial benefits.
Creating Multiple Accounts
Using Smurfing allows users to set up many accounts that help transfer funds and assets through interconnected profiles. The launderer involves low-level accounts to execute illegal game trades which transfer virtual assets to accounts with higher level and value. Banked funds become challenging to detect because they are dispersed across various accounts over time. The laundered funds stored inside the final account allow it to be withdrawn as cash and purchase valuable items which protect the origin of unlawful funds. Numerous games with virtual economies operate through this method specifically in their multiplayer online versions.
In-game items
The illegal money ends up being used by criminals to acquire valuables, weapons, or other overtly virtual goods in the game. This action is typically done in cash, through credit cards, or other online payments, which makes them difficult to track. (For instance, in 2024 alone, Fortnite’s V-bucks made more than $2 billion on their own, although much of that is suspected to be money laundering.
Gaming Currencies and Valuables
Selling currencies and assets (in-game) for real money inside games (e.g., Fortnite, CS: GO, WoW). However, virtual goods, rare skins, characters, etc., are often bought and sold across multiple different platforms. These digital assets have enormous value outside the digital sphere.
Criminal Use
Criminals purchase in-game items or currencies with dirty money, only to sell them off on third-party sites, loot them out on virtual casinos, or sell the accounts. The last stage of this money laundering in games is converting dirty money into legitimate money.
According to data released by FATF, up to 20% of virtual currency transactions are linked to crime, like money laundering.
Also Read: eSports and Gaming: Rising Opportunities and Trends.
Regulatory and Compliance Challenges
How is there viable evidence that video gaming is a clear threat to the fight against money laundering, but the industry is very resistant to the idea of effective AMLs?
AML Compliance in Gaming
Gaming companies do not have strict AML compliance, unlike banks and financial institutions. Therefore, criminals taking advantage of virtual currencies for the purpose of committing illegal acts are not yet effectively covered by the regulation of virtual currencies.
A 2024 report from the International Monetary Fund (IMF) found that 30% of major gaming companies lack a dedicated anti-money laundering (AML) program, representing a prime opportunity for exploitation.
Gaming Compliance Issues
Online gaming is decentralized and done through a third-party marketplace. Hence, it is almost impossible for developers to trace and monitor transactions. Games typically run in multiple regions, each with its own set of standards and policies to follow, making operating within the lines difficult. This discrepancy in gaming sector regulation adds only further complexity to fighting money laundering within the industry itself.
AML Screening Role And How it’s Developing in Gaming
Since gaming is a booming industry, an extensive anti-money laundering strategy is needed, and it is growing hand in hand with the gaming industry.
AML Screening
Gaming companies are employing their AML screening to a certain extent to track the transactions of games and identify any questionable behavior. This very high-level system monitors player behavior and detects outlier acts based on the volume of data it collects, settlements with suspicious values of currency acquisition amounts, or unconventional selling practices.
In 2024, the Financial Action Task Force (FATF) reported that money laundering transactions using gaming generally involve deposits of more than $100,000 per transaction.
Emerging Technologies
Emerging technologies like AI and machine learning are greatly transforming AML strategies. Gaming companies can use these technologies to verify data directly in record time for money laundering activities. In addition, blockchain technology might be used to allow in-game transactions to be transparent and traceable to spot any illegal action.
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