Money Laundering Using Online Gaming: New Report on Popular Use of Web Games Like World of Warcraft and Second Life to Launder Money

A French researcher named Jean-Loup Richet has published a report for the United Nations’ Office on Drugs and Crime that is available for free online (here).  It’s a great source of information on how money is being laundered by drug cartels and other criminals around the world right now.

One reason many might view Richet’s report as reliable is that the researcher went to the source: he spent time online in web forums filled with hackers discussing their trade and got the scoop from the hackers themselves (no one using their real names here, obviously) about how today’s money laundering experts viewed as the best places to clean up cash today.  The report even includes screenshots from hacker forums where hackers share their take on things.

For many, the news from Richet’s report that online gaming can be a vehicle for money laundering isn’t news. There’s been discussions about how games like World of Warcraft could be exploited to funnel illegal money through the game in order to launder money for several years now.

Businesses are aware of this growing trend. For example, this 2010 article in CSO Magazine entitled, “Money laundering techniques: Tips for protecting your business.”) Law enforcement has also known about the use of online gaming to launder money for awhile now, too. (See, e.g., the December 2010 article in PoliceOne.com, “Online games are new choice for money laundering.”)

New Report: Online Gaming Is “Growth Area” for Money Laundering

However, the 2013 Richet report reveals that online gaming has become quite popular among money launderers as a method of cleaning money revenue from illegal sources. In fact, he writes that “… by analyzing forums, we have identified two growth areas in money laundering”, which are identified as (1) online gaming and (2) micro-laundering (where job advertising sites or sites like PayPal are used to make lots and lots of small amount transactions).

Not only is online gaming very popular around the world, more and more games are being developed and introduced all the time. This means more that much more opportunity to use online games to launder money. No wonder online gaming is being labeled a “growth area” for money laundering.

Why Is Online Gaming Good For Money Laundering?

In many online games, you take real money and purchase virtual currency to use in the online game – or perhaps you buy other things to use in the game’s environment. Everything you’ve purchased in the online game can be converted back into real money, of course. And there you have it: a method for exchanging “dirty money” for “clean money” or “money laundering.”

Add to this the ability of someone to create several different accounts in a number of different games, and the viability of using online games, particularly role-playing games like World of Warcraft, makes for a great environment for money laundering to operate.

As explained in Richet’s report:

Citizens from dozens of different countries come online to play these online games. Using the virtual currency systems in these games criminals in one country can send virtual money to associates in another country. Then, the virtual money can be transferred into real money, with the criminals leaving no trace of evidence authorities could follow back to them. (p. 12)

Recent years have seen the emergence of virtual communities and online gaming: scams related to MMORPGs [Massively Multiplayer Online Role Playing Games] will rise with these virtual worlds. (p. 13)

How Virtual Worlds like World of Warcraft and Second Life Work – Role Playing Games Are Fun and Popular – and Profitable

World of Warcraft is a Massively Multiplayer Online Role Playing Game (MMORPG) where players enter a virtual world to go on a virtual quest, fighting monsters and building relationships (or not) with other virtual beings as well as characters that are not fellow play-for-pay participants. Here, you must pay for a subscription to the online game for a certain amount of playing time and you buy virtual “gold” as your currency in the Warcraft World.

Second Life is another MMORPG. Second Life offers its online players the ability to buy its own Second Life “currency”, known as the “Linden Dollar.”   On October 23, 2013, you could buy 230 Linden Dollars for one U.S. dollar ($1.00).

In 2009, the total size of the Second Life economy was $567,000,000.00.  That’s bigger than some countries.

In their virtual world, Second Life players use their Linden Dollars to build their virtual lives: they buy clothes, for example, or condos. They can make money, as well: Ailin Graef using her Second Life alter-ego “Anshe Chung” has made millions in personal profits just by playing this online virtual game and her success has been profiled in publications like Business Week. See her “virtual exchange” here.

However, criminals looking to profit in different avenues than Ailin Graef can turn their dirty money into game currency through things like prepaid cards (bought with cash) or transfers from other online accounts and then trade their Linden Dollars or WOW gold for real cash that’s clean.

Easy peasy, apparently.

For more on money laundering, check out our web resources page and our other blog posts on money laundering.