Back in October, Valve closed down the trading of container keys in Counter-Strike: Global Offensive. Container keys are normally used to unlock rare items such as firearms and knives. Keys used to be tradeable on the Steam marketplace, but Valve observed a recent shift in fraudulent markets that started using container keys to liquidate profit. Valve claimed that near all the keys being traded were being used for fraud. People can still buy keys, but the keys remain in their own inventories.
Research analyst Kayla Izenman and Research Fellow Anton Moiseienko from the Centre for Financial Crime and Security Studies at Royal United Services Institute (RUSI) co-authored a recent study on money laundering in video games. RUSI’s study mentions that investigations into money laundering started as early as 2013, when cybercrime analyst Jean-Loup Richet wrote a report after investigating various hacker forums. By using virtual currencies in games, people were able to send money to other people, typically over international borders.
One could hardly think of a better demonstration of ‘the displacement effect.’
“If criminal money has indeed poured into online gaming worlds, one could hardly think of a better demonstration of ‘the displacement effect’: the notion that as some parts of the economy become ever more tightly regulated, tainted money goes elsewhere, like the air in a squeezed balloon,” reads RUSI’s article on money laundering in video games. The displacement effect in this case refers to illegal money being moved from a tightly regulated markets to less regulated ones. This happens as in-game items, such as weapons or in-game currency, have value outside the game. A lot of games offer in-game purchases but some also allow the sale of items for legal tender such as the US Dollar or the Pound Sterling. Entropia Universe and Second Life are examples of these games that RUSI provides, and the study explains that online markets often receive little to no governmental regulation.
RUSI’s study explains that historically game markets were exploited by a method called “gold farming” where players acquire rare items, often depending on constant play, to sell on third party forums. Unofficial sales of in-game items run contrary to game rules and have resulted in several lawsuits as well as to eBay regulating sales of digital items. Recently, fraud has seen a resurgence in digital gaming markets as people began purchasing items with stolen bank cards. This trend started as early as January of 2019 with Fortnite’s V-Bucks being purchased illegally with stolen bank card details.
According to a report from Trend Micro’s Forward-Looking Threat Research (FTR) Team titled “The Cybercriminal Roots of Selling Online Gaming Currency,” cybercrime for video games has been well documented but is mostly relegated to the theft of login details of accounts. Ultimately the responsibility falls on the of the company that processed the payment made using the stolen credit card information, but the game company possesses valuable details that are needed to prove theft and reveal the thief. Without the assistance of the game company in question, once a purchase is made and the money is turned into virtual currency it becomes nearly untraceable. The virtual currency can then be used to make more in-game purchases or exchanged for fiat money, making it ideal for money launderers.
In 2019, the international government initiative Financial Action Task Force (FAFT) published the recommendation that states begin regulating virtual transactions and require licenses for virtual asset service providers (VASPs). In this case, a game company that sells virtual currencies is a VASP. FAFT published guidelines along with the US Financial Crimes Enforcement Network (FinCEN) which provided details on what is considered a virtual asset.
According to the Financial Times, the discovery of the fraud in CS:GO only highlights the exploitability of online game markets. As most laws relating to purchasing and fraud involve the use of physical goods, it is unclear what is allowed in virtual marketplaces. Most of the responsibility falls to the game companies to self-police their markets, with some assistance from the Entertainment Software Association (ESA), an organization that represents game developers and publishers.