Online gaming covers a wide variety of markets, including multiplayer video games, online gambling and eSports gaming. All of these have surged in popularity during the pandemic as consumers have sought sources of entertainment at home. Online gaming has exploded globally and is expected to be worth an estimated $196 billion in revenue by next year.
Driven by the need for social interaction, the multiplayer online gaming industry has risen during lockdowns and now exceeds $300 billion, more than movie and music markets combined. Research found that the online gaming industry has 2.7 billion players globally, an increase of half a billion players in the last three years.
While online gaming of all stripes continues to boom, it brings increased cybercrime threats, including fraud, money laundering and identity theft. Corrupt activity in the multiplayer online gaming space has increased due to the easy transfer of in-game currency, allowing criminal transactions to get lost among legitimate ones.
This month’s Deep Dive examines the upsurge in the gaming industry across several channels, including multiplayer video games and online gambling. It also explores how online threats such as fraud and money laundering impact the gaming space and the anti-money laundering (AML) and know your customer (KYC) tools online gaming operators can leverage to defend against online threats.
Money Laundering via Microtransactions and Anonymous Payment
Microtransactions have become pervasive in the past 10 years with the rise of popular online multiplayer games such as Fortnite, Grand Theft Auto V and Overwatch. Microtransactions, such as selling “gold” or virtual goods and digital currency, are how money laundering occurs on gaming platforms.
These in-game purchases unlock parts or features of the game that would have required hours of gaming or “grinding” to unlock otherwise, which has spawned online marketplaces for such in-game items. In an attempt to boost the popularity of these online marketplaces, operators now sell “gold” within their games, but this has further enabled criminals to launder illegally earned money.
Setting up a criminal enterprise on a gaming platform is not difficult. Criminals download a game and create an avatar or hack an existing account, which is more likely the case. They then can convert money from illegal activities or stolen credit cards into the game’s virtual currency. Once inside the game, fraudsters purchase weapons or level up characters through microtransactions. The fraudsters then sell the leveled-up characters or in-game virtual currency on websites such as eBay, PlayerAuctions or iGVault.
Money laundering is not limited to multiplayer online gaming and can be found in online gambling, too. Laundering money through online gambling means ensuring the origin of the money remains unknown, and there are several ways to do so. These methods generally entail players opening one or more gambling accounts and moving money through them under the guise of redeeming their gambling profits.
How AML/KYC Efforts Mitigate Online Gaming Fraud
Online gambling and gaming operators are obligated to verify users to protect from cybercrime. If operators fail to perform proper KYC checks, cybercriminals can leverage platforms to launder money and pass funds to nefarious organizations. Many regulations aim to prevent such practices, and gaming companies are monitored by regulatory authorities and handed penalties if found to be non-compliant.
Gaming platforms are particularly vulnerable to fraud, so mitigating risk requires preventing crimes as early as possible with solid authentication at onboarding. Online gamers, meanwhile, know the requirements for the best gaming account creation experience and recognize that these platforms are not currently meeting their expectations. In a Trulioo report, 80% of online gamers said they are intolerant of a poor account creation process, while 77% said it can “make-or-break” whether they will engage with a brand in the future.
With consumers more apt to engage with service providers that offer an easy onboarding process, the study found that real-time identity verification was especially crucial. Nearly 80% of online gamers said they would be willing to share more personal data with service providers that use real-time identity verification to further enhance the account opening experience, for example.
Digital ID adoption can improve the effectiveness of cybercrime prevention as well, a study found. When asked to identify the key benefits of digital ID, 34% of participants said KYC processes were the biggest benefit, 20% cited lower operational costs and efficiency and 14% cited more robust verification processes.
According to a banking survey, 41% of North American consumers said they are more likely to open a financial account online today than they were a year ago. In fact, half of these respondents would rather go through digital onboarding using biometrics for KYC authentication than open a bank account in person. Seventy-five percent said they would provide biometric data to secure their bank accounts, such as fingerprints, images of their face and voice recordings.
These findings indicate that to attract and retain customers, reputable gaming operators must prioritize trust, not just by providing their customers with a secure and fair gaming environment but by ensuring all personal information collected is handled appropriately and kept safe.