Is your child unknowingly laundering money? The rise of gaming coins and financial crime

As parenting evolves in the digital age, one familiar phrase continues to echo through homes worldwide: "Can I please have this?"

The extravagant pleas for in-game items such as skins, weapons, or characters have become the norm, leading many parents to quietly concede and shell out hundreds of Rands for Fortnite V-Bucks or Roblox Robux, considering it a small price for maintaining peace.

However, in the seemingly innocent world of gaming, a shadowy financial underworld is thriving, processing billions of transactions annually, an unregulated environment ripe for exploitation by financial criminals.

In South Africa, banks and financial institutions have been ramping up their defences against money laundering, particularly under the looming pressures of the country's greylisting, which has only recently been resolved.

Yet, as these traditional financial systems fortify, online gaming platforms operate like a digital Wild West, providing the perfect breeding ground for illicit activities.

The digital wash cycle

To comprehend the risks involved, one must examine the money laundering process as it unfolds within gaming economies, which parallel traditional stages: placement, layering, and integration.

“Most multiplayer games today encourage players to 'level up' constantly by purchasing in-game currency and rare items," said Hawken McEwan, Director of Risk & Compliance at nCino KYC Africa.

"This ecosystem serves as an ideal hiding spot for money launderers.” The microtransaction market is currently valued at around $85 billion, indicating its widespread impact, this is not a niche sector confined to a few players.

The laundering process flows effortlessly through three core steps:

• Placement: Criminals acquire stolen credit card details to make bulk purchases of in-game currency or high-value items. To the gaming platform, these transactions appear as thousands of legitimate purchases of R500, seemingly innocent.
• Layering: The criminals convert their acquisitions into virtual assets, rare skins, limited-edition weapons, or even virtual real estate—items that are highly coveted by other players.
• Integration: Finally, these assets are sold on third-party marketplaces or in-game trading posts, making it look like a legitimate transaction where a gamer sold virtual items and received payment.

“To anyone outside, this looks entirely legitimate. The crime of credit card theft is now obscured several steps away, rendering it nearly invisible,” McEwan added. 

The "easy money" trap on Discord

The most alarming aspect of this troubling trend is the active recruitment of minors into these criminal schemes.

Sophisticated syndicates are well aware that children are often the easiest targets, less likely to identify scams, and even less inclined to report them to adults out of fear of losing gaming privileges.

Recruiters haunt gaming forums and Discord servers, making enticing offers to young players: "I’ll pay you R500 if you accept some items from me and sell them to others. You keep a commission.”

“To a teenager, this sounds like effortless pocket money from something they already enjoy,” McEwan said.

“They don’t realise they have become the final step in a laundering cycle, converting ill-gotten gains into clean money through their legitimate gaming accounts.”

The borderless nature of gaming adds another layer of complexity; a South African child's account could be used to launder funds from a credit card stolen in the UK, with items sold to players in the US. The fluidity of jurisdictions makes tracking such activities immensely difficult for law enforcement.

A regulatory blind spot

Why are criminals focusing efforts on gaming rather than traditional crypto exchanges or banks?

The answer pertains largely to regulatory inadequacies.

Despite handling significant financial flows, many gaming platforms do not classify as accountable institutions under the Financial Intelligence Centre Act (FICA) or similar international laws.

Consequently, these platforms are not required to perform rigorous Customer Due Diligence (CDD) or report suspicious activities, unlike banks and cryptocurrency exchanges.

“Establishing robust anti-money laundering controls is complex and costly,” McEwan said.

“Larger platforms might voluntarily adopt certain measures for reputation management, but currently, they have no legal obligation to do so, making them a prime target for exploitable criminal activity.”

The real-world cost of virtual crime

The implications for concerned parents extend far beyond fleeting repercussions. In South Africa, facilitating the movement of criminal proceeds is a serious offence under money laundering legislation.

While prosecutors might display leniency towards minors who have been misled, the financial ramifications can be severe. If a child’s bank account, or a parent’s account linked to their game, is flagged for receiving stolen funds, banks may respond by freezing funds or closing the account to manage risk.

“Beyond immediate implications, the terrifying reality that children could have been manipulated by criminals can induce deep feelings of guilt and fear, resulting in long-lasting consequences,” McEwan added.

What should parents do?

Vigilance does not necessitate banning video games outright but encourages a new kind of “digital street smarts”:

• Follow the money: Keep an eye out for sudden influxes of cash or in-game currency that cannot be explained by chores or allowances.
• Have the talk: Engage in explicit conversations about the value of digital items. Make it clear that if strangers offer free items or commissions for moving goods, it likely conceals a trap.
• Create safety, not fear: Ensure that your children understand they can come to you without fear of repercussions if they have already engaged in suspicious activities. The priority should be to halt the illicit activity and mitigate damage rather than enforcing strict discipline.

As financial crime continues to adapt, it finds the path of least resistance, currently, this path runs directly through the digital landscapes where our children find joy and connection.

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