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Video games are easy channel for money launderers

Games industry

Video games are easy channel for money launderers

Publisher of ‘Counter-Strike’ admits in-game items sold are part of massive fraud

© James MacDonald/Bloomberg

In Counter-Strike: Global Offensive, a popular video game developed and published by Seattle-based Valve, players can choose to become terrorists — planting bombs and holding hostages — or counter-terrorist fighters who take on the bad guys. 

But in October, Valve itself had to step up against the criminals. In a blog post, it abruptly announced that players of CS: GO would no longer be allowed to trade the “container keys” that are used to obtain in-game items, such as guns, rare knives or limited-edition stickers.

“Worldwide fraud networks have recently shifted to using CS: GO keys to liquidate their gains,” Valve wrote. “At this point, nearly all key purchases that end up being traded or sold on the marketplace are believed to be fraud-sourced.”

Coming from one of the world’s largest video games companies, the admission that money-laundering and fraud had become so widespread that it accounted for “nearly all” of a particular trading activity on the game’s marketplace was startling.

“It was shocking to me to see the language they were using,” said Kayla Izenman, a research analyst at RUSI, the defence and security think-tank, who co-authored a recent study on money-laundering in online games. 

Valve’s discovery highlighted a vulnerability in online gaming marketplaces that criminals have now been able to exploit for more than a decade, by cashing in stolen credit card details or liquidating larger gains from other kinds of illegal activities. 

Fraudsters can use the proceeds of crime to buy virtual currency or a particular item, then sell it — often at an apparent discount — to an unwitting gamer, through a variety of online marketplaces. 

A year ago, an investigation into the hit game Fortnite by Sixgill, a cyber security researcher, found that discounted V-bucks — Fortnite’s in-game currency — were being sold on the dark web. Hundreds of thousands of dollars’ worth of Fortnite items were trading on eBay, Sixgill also found. 

Virtual items have become a bigger business — and therefore a larger target for fraudsters — as their importance to gamers has grown. While some virtual weapons give an advantage, most “skins” simply provide a way for players to express themselves in online communities through personalised avatars. 

Yet the multibillion-dollar companies behind online multiplayer games like Fortnite and CS: GO have largely avoided burdensome “know your customer” requirements or other anti-money-laundering regulations that apply to payment processors. 

Even as high-profile digital currency proposals such as Facebook’s Libra face intense regulatory scrutiny, many games developers routinely mint their own in-game currencies and create digital assets worth thousands of dollars without facing the same oversight. 

“While our legal system essentially revolves around physical property, to a consumer the value of something is not about its atoms, it’s about self-expression,” said Nicholas Lovell, game director at developer Electric Square, who has written extensively about the free-to-play games that often rely on virtual items for revenues. 

Self-expression is particularly relevant in a game like Fortnite, he said, where players pay V-bucks for a new “emote” or victory dance that a vanquished enemy is forced to watch immediately after they are killed. 

Players are prepared to pay real money for these virtual goods — sometimes just a few cents, sometimes much more. The Steam Community Market, on which players can still trade items for Valve’s games, lists hundreds of weapons for CS: GO that cost hundreds of dollars each. The most expensive — a “Bright Water” flip knife or a “Souvenir” Army Universal Gun — start at $1,800 each. 

The perceived value of such virtual items has created several secondary marketplaces where gamers can go to trade them, even if particular games developers prohibit buying and selling in their terms of service. Such sites include G2G, PlayerAuctions and PlayerUp. 

But Mr Lovell believes that Valve’s games, which have often relied more on in-game marketplaces than other publishers’, offer a particularly compelling target for money launderers. 

“Valve is at the core of this problem because so many of their games have a tradeable economy at the heart of them,” he said. “To me, Valve is a cautionary tale of what happens when you let people do whatever they like within a free-market economy. It turns out bad guys take it over.”

Valve did not respond to emailed questions about money laundering in CS: GO and its other games. Epic Games, Fortnite’s creator, declined to comment on the issue. 

“Providing a positive gameplay experience is core to our industry’s commitment to the players we serve and disingenuous third parties undermine this when they abuse in-game systems for unauthorised and illegal purposes,” said a spokesperson for the Entertainment Software Association, which represents games developers in the US. 

“ESA’s members are vigilant in responding to illegal activity detected on their games or network and take a number of steps to address unauthorised activities,” the spokesperson added, such as banning offenders’ accounts, working with payment providers and co-operating with law enforcement. 

Nonetheless, Valve’s shutdown of key trading in CS: GO suggests games developers themselves could be doing more to police their networks, RUSI’s Ms Izenman said. 

“So much data is being given to these platforms” by gamers, she said. It is impossible to trade digital assets without creating a player account and items can be traced as they move from one individual to another. That kind of information would be valuable to law enforcement investigating money laundering. 

“[Games companies] should be able to see when weird things are going on, in general,” Ms Izenman said. “More than anything, Valve’s admission was a sign to us that it was possible [to spot money-laundering]. It puts a bit of the responsibility back on the games developer.”

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