Money Laundering Through E-Gaming Assets

Do you ever wonder if money laundering is all around us? Think Skylar White’s car wash in Breaking Bad. Think strange strip mall shops that never go out of business even though you’ve never seen them with a single customer.

Money laundering could be anywhere.

There’s one area that you might not have thought of, though, and that’s online gaming. We’re talking about microtransactions, loot boxes, and in-game cosmetic purchases. Some games generate billions in revenue, while some games a more modest sum.

The rise of esports and work-from-home setups makes gaming money laundering more prevalent.

Read on to learn more about the facets of this issue and how you can use software to fight money laundering efforts in online games.

Basics of Money Laundering

Money laundering is a criminal activity that usually happens in three expert-identified stages.

1. Placement
2. Layering
3. Integration

The purpose of money laundering is to convert “dirty cash” (money acquired through illegal means) to legitimate financial sources. Below are descriptions of the three stages of money laundering.

Placement Stage

The placement stage is the most vulnerable for money launderers. They need to funnel large amounts of cash into the legal financial system. To do so without being suspected, they usually intermingle the dirty cash with more legitimate income sources.

Cybercriminals target businesses for their money laundering schemes. Online gaming is an area that is becoming increasingly harder to regulate.

Layering Stage

This stage is the most complex and often is where the funds cross borders. Criminals seek to divert the illegal cash sources from legitimate funds.

Criminals will layer financial activity and obscure the audit trail so that none of the money can be linked to the original crime.

Integration Stage

This is the final stage of many complex steps. The criminal receives the money from seemingly legitimate means. This money can be used legally as it has been fully “washed” and integrated into the existing financial system.

Many launderers will invest in illiquid assets like artwork, cars, or property so as not to draw attention to themselves.

Gaming Money Laundering

Perhaps you’re used to thinking of casinos as popular money laundering methods. Dirty money buys chips and enters the rest of the casino’s cash flow. This is then diverted back to the criminal.

This is all entirely possible with online gaming gambling as well, such as online poker. The same operator can simply create multiple accounts to purchase online currencies in order to move bulk amounts of cash.

This is much harder to track and regulate as you might guess. One person can anonymously create hundreds of email accounts; it is just as easy to create multiple accounts on a platform for online poker.

Examples of Money Laundering

There are several examples of money laundering in online games. In 2018, a report claimed that criminals were using the microtransactions in the online game Clash of Clans to launder their money. Amounts in the hundreds of thousands were reportedly flowing through free-to-play games like Clash of Clans and Clash Royale!

Free-to-play online games often have in-game incentives to rake in the cash, from offering premium skin upgrades to other pay-to-win options. Criminals stole thousands of credit cards that were used to purchase these bundles in-game using newly created accounts.

These accounts were then sold on third-party gaming marketplaces with no link to the original credit card information.

This was an easy way for them to make their money legitimate yet is a very hard bust due to the anonymous nature of online gaming and gaming transactions. It’s even harder yet as criminals can blend in with the rest of the player base making legitimate transactions with their own accounts.

In fact, it is so easy for criminals to create new and anonymous accounts with Apple that they were able to automate it.

Accounts do not require any other identity verification save for a date of birth and an email. The money earned is very difficult to trace back to the original criminal.

Anti-Money Laundering

If you are running an online gaming platform it is your responsibility to keep illegal money launderers off of your platform.

Compliance gambling AML can be achieved in a variety of ways, but one of the most effective is with AML software. This will be integrated with your product, whether that be a mobile game or an online site to play poker.

For example, DX Compliance Solutions uses artificial intelligence to monitor online transactions. The software can detect suspicious patterns of activity. For example, making several purchases on relatively new accounts.

Organizations must have more anti-money laundering regulations in place. They can use AML software or databases to cross-reference their customers and to monitor and report suspicious behavior.

One of the easiest ways to counter money laundering is to make it harder to pay with new accounts. Customers should volunteer more personal identification for due diligence purposes.

Use AML Software to Prevent Money Laundering

Anti-money laundering software is becoming increasingly sophisticated. They can combat money laundering schemes taking advantage of e-gambling assets.

The software might use AI to track suspicious transactions in real-time so that transactions are blocked and reported before they can be processed.

If your organization is using online microtransactions, it is important to stay up to date with your security measures to comply with national regulations and efforts to stop gaming money laundering.

To read more about how transaction monitoring works in AML software, click here!